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Odious Debts: A New Book

posted by Mitu Gulati

Classes are over, which means that I get to finally open some of the fun books that I've been meaning to read. Most of what I read is too low brow for me to have the courage to mention here. Plus, Mark tells me that the books in question have to have at least a distant relationship to credit and law.

A couple of days ago, Mark and I talked about Barak Richman's wonderful "Stateless Commerce".

Here is my next recommendation: Jeff King, The Doctrine of Odious Debt in International Law: A Restatement.

Jeff, who teaches at University College in London, was one of the pioneers in the rejuvenation of the Odious Debt literature in 2003-04, when Saddam's government in Iraq was overthrown.  Indeed, it was his co authored article for a Canadian think tank - the Center for International Sustainable Development Law, that jump-started the literature.  Now, thanks to Jeff and his co authors (and to Saddam too, I guess), there is a large and robust modern literature on the topic.  Along the way, in the years that have followed, Correa in Ecuador and Maduro in Venezuela have helped keep interest in the Odious Debt idea alive through their shenanigans. Indeed, Mr Maduro may end up rivaling Saddam in his contributions to the revival of this doctrine whose origins go back to the days of the Czarist regime in Russia in the early 1900s. As an illustration, sovereign debt gurus Ugo Panizza and Ricardo Hausmann have a nice recent piece in Project Syndicate on the relevance of Odious Debt concepts in the context of Venezuelan debt (they have an idea for an Odiousness rating system).

Slipsters are familiar with the Odious Debt debate, I suspect, since Anna G was one of its pioneers.  Plus, it is fascinating.  Basically, it is a doctrine of international law that says that the debts of "odious" regimes that are utilized for the private illicit purposes of the rulers (and where the creditors almost surely knew this was the case), do not have to be repaid by successor governments. The problem with this doctrine though -- to my mind, and to that of many others like Andrew Yianni, Anna, Mark W, Anupam Chander, Adam Feibelman, Sarah Ludington, Lee Buchheit, Eric Posner, Paul Stephan  -- is that it simply does not exist anywhere in international law (or that the basis for it is very very thin). There are some bits and pieces of historical precedent that one could arguably cobble together; but it strikes me as implausible that any modern court would accept the existence of a doctrine of Odious Debt today -- it is just too outlandish for them to do so without a more solid signal from the international community. At least, that was my view until Jeff's book showed up.

Jeff, in his superb book, argues otherwise -- he thinks there is much more of a basis for a doctrine of Odious Debt (and he very politely calls me out for having my head up my backside).  And while I can't quite bring myself to go over completely to his side, I found myself nodding in agreement with a great deal of his analysis. It is nuanced, careful and thoughtful.  Darn it! I don't think I've changed my mind, but that might simply be because I'm too stubborn.

There is a different angle to this, which relates to something that Steve Choi frequently emphasizes to me in our arguments over customary international law and specifically, in terms of making predictions about the future of the Odious Debt doctrine (we wrote an article about this some years ago, but the ideas in there were all from Steve, as is always the case in our joint work).  The point was that, as an empirical/historical matter, we know that courts around the world (and particularly the leading international law tribunals) have frequently created new doctrines of customary international law with very little actual evidence of state practice and opinio juris.   (In theory, one needs well established state practice and opinio juris for a court to recognize a new doctrine of customary international law -- but Steve's point is that the theory seems to be utterly unconnected to the empirical reality of what actually courts do and that the empirics are perhaps more predictive of Jeff's position). So, maybe Jeff's book will be the key to persuading the next judge who has to tackle this that it is time to recognize an international law doctrine of Odious Debts.  It is indeed the kind of careful treatment of the topic that would perhaps persuade me if I were a judge seeking to push international law in a more progressive direction.

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