Will an international doctrine of odious debt ever be established, and if so, to what extent would it be beneficial for the nations involved?

Odious Debt

Abstract

Questions surrounding odious debt emerge when despotic regimes incur loans that serve oppressive purposes, leaving successor governments and populations burdened with illegitimate obligations. This study examines whether an international doctrine of odious debt, first introduced by Alexander Sack in 1927, could mitigate this injustice by invalidating such debts, deterring creditors from lending to despotic regimes and protecting populations from financial exploitation. The hypothesis posits that such a framework could reduce despotic borrowing while minimizing harm to democratic transitions. Through case studies of South Africa, Iraq and Haiti, the legal, financial and ethical challenges of implementing an odious debt doctrine were investigated. Event studies on economic impacts, particularly on exchange rates and reputational effects, provide critical insights on the doctrine's implications. Findings highlight significant obstacles, including ambiguous definitions of odiousness, fears of reputational damage in international markets, and the difficulty of integrating the doctrine into international law.