The urgent need to repudiate debt

6 April by Eric Toussaint , Anaïs Carton

Jean Louis Mazieres, Pierre Soulages. 1919 162x 240 1972. Montpellier Musée Fabre, CC, Flickr,

According to the International Monetary Fund and the World Bank, at the end of 2022, approximately 60% of low-income developing countries were already in debt distress or were at high risk of being so. Debt payment suspensions have multiplied in recent years. Since 2020, nine countries have defaulted: Argentina, Ecuador, Lebanon, Suriname, Zambia, Belize, Sri Lanka, Russia and Ghana. Several other countries are close to defaulting, such as El Salvador, Peru, Tunisia, Egypt, Kenya, Ethiopia, Malawi, Pakistan and Turkey. The IMF has signed credit agreements with approximately one hundred governments over the past three years.

It is now time to react concerning the issue of debt cancellations and repudiations. States, facing today a multidimensional climate and health crisis, with its dramatic economic and social consequences, should invoke the 1983 Vienna Convention and the “fundamental change of circumstances” to stop repaying their creditors in order to aid their people. Because, ultimately, human rights must effectively prevail over creditors’ rights.

 The 1983 Convention, the foundation of a new international economic order

The principle of continuity of debt obligations in the event of State or government succession is at the heart of sovereign debt Sovereign debt Government debts or debts guaranteed by the government. disputes. History shows very clearly that this is by no means an intangible principle and that there is no automatic continuity of debt obligations in the event of State or government succession. Indeed, on numerous occasions, governments – with very different political characteristics – have repudiated debts. And even in the absence of a change of government or regime, a State can impose debt reduction on its creditors.

On 7 April 2023, the Vienna Convention on Succession of States in respect of State Property, Archives and Debts celebrates its 40th anniversary. It was adopted in 1983, at the United Nations Conference on Succession of States in Respect of State Property, Archives and Debts [1], convened by the United Nations General Assembly. This convention opposed, on the one hand, the movements for independence and decolonisation, which refused to assume debts from the predecessor States, and, on the other, the defence of the dominant colonial and post-colonial order, supported by the major creditor States. The latter have defended a conservative approach, stating that universal succession entails a complete and automatic absorption of the rights and obligations of the predecessor State by the successor State.

Conversely, another approach was based on the idea that the successor State is not bound by the debts of the predecessor State because “the obligations of the former colony (including debts) are extinguished upon the independence of the new State” (“clean slate doctrine”). This approach was defended in particular by Mohamed Bedjaoui, at the time judge at the International Court of Justice in The Hague (1982-2001), former member of theUnited Nations International Law Commission (ILC) (1965-1982) and Special Rapporteur on “Succession of States in respect of Matters Other than Treaties” (1968–1974, 1976–1981). Mohamed Bedjaoui led the fight, within the ILC, in favour of the emancipation of decolonised States from the economic tutelage of the Western powers. One of the objectives of this fight was to provide these newly independent States with legal tools to legitimise unilateral acts and in particular the repudiation of debts, through international law.

The 1983 Vienna Convention, which reflects this approach, was adopted by 54 States in 1983. But Mohamed Bedjaoui and the non-aligned movement Non-Aligned Movement
The Non-Aligned Movement is a group of countries who, beginning in the 1950s, promoted a policy of neutrality towards the blocs led by the two superpowers – the USA and the Soviet Union –, who were by then fully engaged in the Cold War. In April 1955, a conference of Asian and African countries was held in Bandoeng (Indonesia) to promote unity and independence for the Third World, decolonization and an end to racial segregation. The initiators were Tito (Yugoslavia), Nasser (Egypt), Nehru (India) and Sukarno (Indonesia). The actual birth of the Non-Aligned Movement occurred in Belgrade in 1961. Other conferences would follow in Cairo (1964), Lusaka (1970), Algiers (1973) and Colombo (1976).
The work of the Non-Aligned Movement, which includes 120 countries, has had limited impact in recent years.
failed to gain support from creditor States. Ratified by only seven States and signed by seven others [2], it has therefore still not entered into force today. A formal declaration of principle without binding force, it has become a reference today in international law [3], its content bearing the legitimacy of a resolution adopted by the United Nations General Assembly.

 The long history of debt repudiation

Many acts of unilateral debt repudiation have been taken in the 19th and 20th centuries

Yet the Vienna Convention can refer to a significant succession of unilateral acts of debt repudiation in the 19th and 20th centuries (including countries that voted against this Convention!): Portugal in 1837, Mexico in 1861 and in 1867, the United States in 1865, in the 1870s and in 1898, Costa Rica after a change of regime in 1919. In February 1918, the Soviet government repudiated all the debt contracted by the tsarist regime and by the provisional government which succeeded it from February to October 1917. In 1933-1934, the United States, under the presidency of Franklin D. Roosevelt, repudiated in all existing debt contracts the possibility for creditors to be reimbursed in gold [4]. And it did not stop during the 20th century: repudiation of debts by revolutionary China in 1949-1952, by Indonesia in 1956 (debts claimed by the Netherlands which had colonised the archipelago until 1949), refusal of Guinea Conakry to pay the French colonial debt in 1958, repudiation of debts by Cuba in 1959-1960, refusal of Congolese prime minister Lumumba to pay the Belgian colonial debt in 1960, repudiation of colonial debts by Algeria in 1962, repudiation by Iran in 1979 of the debts contracted by the Shah to buy armaments [5].

Even more recently, of the 15 republics which gained their independence after the implosion of the USSR in 1991, the three Baltic States clearly challenged the principle of debt succession, two States assumed no responsibility vis-à-vis the debt of the former USSR (Azerbaijan and Uzbekistan), while the other States have not paid their part of the debt when expected.

In 1993, Eritrea gained independence from Ethiopia following a war of liberation. The new republic refused to assume any part of the Ethiopian debts [6], a decision which was subsequently confirmed. In 1994 the post-apartheid government of Nelson Mandela cancelled the debt claimed by South Africa from Namibia [7].

The emblematic cases of the beginning of the 21st century are that of Timor Leste (East Timor) which, on its independence in May 2002, became a new State without debt [8], and that of South Sudan which, following a self-determination referendum, seceded from the Republic of Sudan on 9 July 2011. In September 2012, the two countries signed an agreement under which Sudan retained all external assets and debts [9].

In Europe, independence tendencies are also questioning this principle of continuity of debt obligations. The independence referendums that took place in Scotland (2014) and Catalonia (2017) were preceded by debates on the issue of debt. The UK said it expects an independent Scottish state to take on a fair share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. of the debt, while the Scottish government argued that Scotland would achieve independence with a “clean slate” [10]. In Spain, already in 2014, the former vice-president of Catalonia, Oriol Junqueras, had suggested that Catalonia would assume part of Spain’s national debt if Spain was prepared to negotiate the transfer of its assets to Catalonia [11].

 On the primacy of human rights and reparations

Even in the absence of a change of government or regime, a State can impose debt reduction on its creditors

Even if a transfer of debt obligations is far from automatic, ratification of the 1983 Convention is still an important issue for formerly-colonised countries, especially since it includes articles that open the door to reparations from former colonising countries. These reparations could also take the form of cancellation of debts or nationalisations without compensation, as planned by Mohamed Bedjaoui.

And even in the absence of a change of government or regime, a State can impose debt reduction on its creditors. This was confirmed by a judgement delivered by the Court of Justice of the European Union on 23 May 2019. It stipulates that under international law, a state can unilaterally modify its debt obligations in order to aid its population [12], rightly invoking the principle of rebus sic stantibus [13] (change of circumstances). The law passed by Greece in 2012, which imposed a forced exchange of titles of its debt against new titles with a reduction in value of more than 50%, was therefore not a violation of its obligations towards its creditors. [14]

States, faced today with the international economic crisis articulated with the consequences of the climate and health crises, should invoke the “fundamental change of circumstances” to stop reimbursing their creditors in order to come to the aid of their populations. Because, ultimately, human rights must effectively prevail over creditors’ rights.

The co-authors would like to thank Tijana Okić, Maxime Perriot, Jeanne Planche, Ana Podvršič and Andreja Zivkovic for their proofreading and their help in updating the data. The co-authors are responsible for any errors in this article.


[1Jean Monnier, “The Vienna Convention on Succession of States in respect of State Property, Archives and Debts”, Annuaire français de droit international, volume 30, 1984, pp. 221-229.

[2Signatory States: Algeria, Argentina, Egypt, Montenegro, Niger, Peru, Serbia. Ratifying States: Croatia, Estonia, Georgia, Liberia, North Macedonia, Slovenia and Ukraine. Article 50 reads as follows: “1. The present Convention shall enter into force on the thirtieth day following the date of deposit of the fifteenth instrument of ratification or accession.”

[3Anthony Aust, “Vienna Convention on Succession of States in respect of State Property, Archives and Debts” Introductory Note, United Nations Audiovisual Library of International Law, 2009.

[4Sebastian Edwards, American Default: The Untold Story of FDR, the Supreme Court, and the Battle over Gold, Princeton University Press, 2018.

[5Éric Toussaint, “Un livre qui remet la dette odieuse à l’ordre du jour“ (A book that brings odious debt into the limelight), 14 January 2022, and “La doctrine de la Dette Odieuse dans le contexte de l’Afrique aujourd’hui” (The Doctrine of Odious Debt in the Context of Africa Today), published on 7 November 2022, presented at the ”African Economic and Monetary Sovereignty Initiative” Conference in Dakar in October 2022.

[6Jeff King, The Doctrine of Odious Debt in International Law. A restatement. Cambridge University Press, 2016, p.106.

[7Idem, p. 107.

[8Éric Toussaint, “La Banque mondiale et le FMI ont jeté leur dévolu sur Timor Oriental, un État né officiellement en mai 2002” (The World Bank and IMF have set their sights on East Timor, a state officially born in May 2002), published on 2 November 2021.

[9Agreement on Certain Economic Matters: Division of Assets and Liabilities, Arrears and Claims and Joint Approach to the International Community, Addis Ababa, Ethiopia, 27 September 2012 and Jasmine Moussa, “The Independence of South Sudan and the Vienna Convention on State Succession in Law of Treaties”, in G. Distefano, G. Gaggioli, A. Hêche (eds.), The 1978 Vienna Convention on Succession of States in Respect of Treaties. Commentaries article by article and thematic studies, Brussels, Bruylant, 2016.

[10On 18 September 2014, the “no” to Scottish independence won with 55.3% of the vote cast. A new referendum should be organised in 2023.

[11Maiol Roger, “Si España No Acepta Negociar, Cataluña No Pagará Su Deuda”, El País, 1 November 2014.

[12Court of justice of the European Union (CJEU) Judgement of the Court (Third Chamber), 23 May 2019

[14Éric Toussaint,”Le principe de droit selon lequel un État doit respecter les obligations qu’il a contractées n’est pas absolu” (The principle of law that a State must respect the obligations it has undertaken is not absolute), published in Le Monde on 22 January 2021.

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Greece 2015: there was an alternative. London: Resistance Books / IIRE / CADTM, 2020 , Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012, etc.
See his bibliography:
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

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