Committee for the Abolition of Illegitimate Debt

The working group reviewed the various definitions of the terms as used by various scholars, debt relief campaigners and others and proposed some definitions which were subsequently discussed and adopted by the Committee. These definitions, which provided the framework for the assessment of the debt undertaken by the Committee over the last month or so, are the following:

 “Illegitimate debt”

Debt that the borrower cannot be required to repay because the loan, security or guarantee, or the terms and conditions attached to that loan, security or guarantee infringed the law (both national and international) or public policy, or because such terms or conditions were grossly unfair, unreasonable, unconscionable or otherwise objectionable, or because the conditions attached to the loan, security or guarantee included policy prescriptions that violate national laws or human rights standards, or because the loan, security or guarantee was not used for the benefit of the population or the debt was converted from private (commercial) to public debt under pressure to bailout creditors.

 “Illegal debt”

Debt in respect of which proper legal procedures (including those relating to authority to sign loans or approval of loans, securities or guarantees Guarantees Acts that provide a creditor with security in complement to the debtor’s commitment. A distinction is made between real guarantees (lien, pledge, mortgage, prior charge) and personal guarantees (surety, aval, letter of intent, independent guarantee). by the representative branch or branches of Government of the borrower State) were not followed, or which involved clear misconduct by the lender (including bribery, coercion and undue influence), as well as debt contracted in violation of domestic and international law or had conditions attached thereto that contravened the law or public policy..

 “Odious debt Odious Debt According to the doctrine, for a debt to be odious it must meet two conditions:
1) It must have been contracted against the interests of the Nation, or against the interests of the People, or against the interests of the State.
2) Creditors cannot prove they they were unaware of how the borrowed money would be used.

We must underline that according to the doctrine of odious debt, the nature of the borrowing regime or government does not signify, since what matters is what the debt is used for. If a democratic government gets into debt against the interests of its population, the contracted debt can be called odious if it also meets the second condition. Consequently, contrary to a misleading version of the doctrine, odious debt is not only about dictatorial regimes.

(See Éric Toussaint, The Doctrine of Odious Debt : from Alexander Sack to the CADTM).

The father of the odious debt doctrine, Alexander Nahum Sack, clearly says that odious debts can be contracted by any regular government. Sack considers that a debt that is regularly incurred by a regular government can be branded as odious if the two above-mentioned conditions are met.
He adds, “once these two points are established, the burden of proof that the funds were used for the general or special needs of the State and were not of an odious character, would be upon the creditors.”

Sack defines a regular government as follows: “By a regular government is to be understood the supreme power that effectively exists within the limits of a given territory. Whether that government be monarchical (absolute or limited) or republican; whether it functions by “the grace of God” or “the will of the people”; whether it express “the will of the people” or not, of all the people or only of some; whether it be legally established or not, etc., none of that is relevant to the problem we are concerned with.”

So clearly for Sack, all regular governments, whether despotic or democratic, in one guise or another, can incur odious debts. ”

Debt, which the lender knew or ought to have known, was incurred in violation of democratic principles (including consent, participation, transparency and accountability), and used against the best interests of the population of the borrower State, or is unconscionable and whose effect is to deny people their fundamental civil, political, economic, social and cultural rights.

 “Unsustainable debt”

Debt that cannot be serviced without seriously impairing the ability or capacity of the Government of the borrower State to fulfil its basic human rights obligations, such as those relating to healthcare, education, water and sanitation and adequate housing, or to invest in public infrastructure and programmes necessary for economic and social development, or without harmful consequences for the population of the borrower State (including a deterioration in the living standards). Such debt is payable Payable A sum of money that one person (debtor) or group of people owes to another (creditor). but its payment ought to be suspended in order to allow the state to fulfil its human rights commitments.

In closing, I would like to underscore three points:

First, there are historical precedents for invocation of one or more of these principles to relieve a country of the burden of repaying debts incurred in questionable circumstances. For example, after the Spanish-American War of 1898, the United States contended that neither Cuba nor the United States should be held responsible for the debt incurred by the Spanish colonial government in Cuba if it had been contracted without the consent of the Cuban people and had been not been used for their benefit. Although Spain never accepted this argument, it assumed responsibility for the Cuban debt under the Treaty of Paris signed between the United States and Spain on 10 December 1898. In the Tinoco Arbitration of 1923, the arbitrator (United States Supreme Court Chief Justice William Taft) ruled that credits knowingly extended to a country for a dictator who used the money for his personal purposes should not be recoverable. More recently, the odious debt doctrine has been invoked to support calls for debt cancellation in Rwanda, Iraq and Nigeria.

Second, the need to uphold social and economic justice is central to all of these definitions. In this regard, it should be recalled that the Universal Declaration of Human Rights proclaims that “[e]veryone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care Care Le concept de « care work » (travail de soin) fait référence à un ensemble de pratiques matérielles et psychologiques destinées à apporter une réponse concrète aux besoins des autres et d’une communauté (dont des écosystèmes). On préfère le concept de care à celui de travail « domestique » ou de « reproduction » car il intègre les dimensions émotionnelles et psychologiques (charge mentale, affection, soutien), et il ne se limite pas aux aspects « privés » et gratuit en englobant également les activités rémunérées nécessaires à la reproduction de la vie humaine. and necessary social services, and the right to security in the event of unemployment … or other lack of livelihood in circumstances beyond his control” (Article 25) and that “[e]veryone is entitled to a social and international order in which the rights and freedoms set forth in (the) Declaration can be fully realized” (Article 28). In my view, the lack of transparency and accountability in lending and borrowing decisions makes it difficult for States to establish the conditions within which these ideals can be fully realized.

Third, the definitions employed by the Committee should be seen as an essential element of the quest for an equitable and enduring solution to the debt problem that is consistent with the broadly accepted principle of the shared responsibility of creditors and debtors for preventing and resolving unsustainable debt situations.