Vol 3 (2006) - Issue 5

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Can Debts Be Odious and, thus, Be Void?

I. Introduction
Consider the following: there is a ‘bad guy’ head of a state who borrows money in the name of the state he is representing from another state or a bank. Is the debt resulting from this credit void? Or: is it legal to have a state pay back loans which had been taken by such a bad guy and been used by him to buy, inter alia, weapons
with which he had killed, inter alia, members of the families the survivors of which are now bound to repay those loans through their taxes? Very emotional questions, indeed. But they are not fictitious or hypothetical – they are posed in fact, and claim legal validity under the term ‘odious debts’. What might appear to many lawyers almost as a parody of ‘law and economics’ or ‘law and literature’ – namely ‘law and emotions’ – is referred to by many NGOs as binding law, and not without some serious argument. The implications, to be sure, are enormous. If there exists a legal doctrine called ‘odious debts’ states like Iraq1 are likely to be debt-free – not because the lender states should display grace after liberation from Saddam Hussein, but because of legal consequences! ‘Odious debts’ are understood as a legal institution which, by force of law, makes certain debts automatically null and void.2
The doctrine of ‘odious debts’ dates back little more than a hundred years. Because it has been topical only sporadically over this period, it is unclear whether or not it already has the precision or ‘marginal sharpness’ that would be necessary if it were to be used as a legal instrument. This uncertainty, in turn, makes the term ‘odious debts’ appear very versatile in the way it can be used and instrumentalised. In particular, the value statement already inherent in the terminology tends to mislead one into exploiting this doctrine to attempt to render morally repugnant facts legally null and void. In view of these facts, it is the (thankless) task of the legal scholar to call for caution to be exercised in drawing conclusions of this sort (however understandable they may be in human terms), and to point out the distinction between law and morality,3 which is a hard-won victory in legal history, and which requires recognition by the legal community.
This exhortation naturally does not negate the option of developing legally practicable contours, with the help of which certain debts can be termed ‘odious’, and can be dealt with accordingly on a legal level. It is only an attempt to clarify the fact that moral indignation, however justified, cannot automatically produce the desired legal consequences by using a purportedly legal concept. For this, the term must be defined more precisely in legal terms. This paper will look at the extent to which this appears feasible at the present time.