The Concept of Odious Debt : Some Considerations

Despite the popularity of the term among advocates of debt forgiveness, there is little agreement on a workable definition of "odious" debts and there are but few examples where the concept has been invoked in law to justify non-payment of sovereign debts. Most often, these have been cases when a successor state or government has refused to honor certain debts contracted by its predecessor state or government. Repudiating sovereign debts on broader grounds - such as that money may have been misused by the borrower or that results were not as hoped for at the outset of lending - would create real risks not only of reduced financial flows to poorer countries as a result of the danger of ex post challenges to lenders' claims, but also of moral hazard and lack of project ownership. This paper presents a discussion of the extant legal and financial environment facing developing country sovereign borrowers and develops a proposed approach within this environment to address issues of concern underlying the concept of odious or illegitimate debt. The authors make the case for focusing attention on codes of conduct along the lines of the Equator Principles and on refining forward-looking attempts to increase aid effectiveness and recover stolen assets.

Bibliographic Details

Main Authors:	Nehru, Vikram, Thomas, Mark
Language:	English
Published:	2008-07
Subjects:	ADVISORY SERVICES, AID EFFECTIVENESS, APPROVAL PROCESS, ARBITRAL AWARD, ARBITRAL AWARDS, ARBITRAL DECISIONS, ARBITRAL TRIBUNALS, ARBITRATION, ARREARS, BALANCE SHEETS, BANKRUPTCY, BANKRUPTCY LAWS, BASIC NEEDS, BENEFICIARIES, BOND, BOND FINANCING, BONDHOLDERS, BORROWER, BORROWER GOVERNMENTS, BORROWING, BRIBES, CANCELLATION OF DEBT, CLAIM, CLASS OF DEBTS, COMMERCIAL BANK, COMMERCIAL BANK LOANS, COMMERCIAL BANKING, COMMERCIAL CREDITORS, COMMERCIAL LENDING, CONTRIBUTION, CORRUPTION, COST OF LOAN, COURT OF JUSTICE, CREDITOR, CREDITORS, DEBT CONTRACTS, DEBT CRISIS, DEBT FORGIVENESS, DEBT MANAGEMENT, DEBT OBLIGATIONS, DEBT PROBLEM, DEBT PROBLEMS, DEBT REDUCTION, DEBT RELIEF, DEBT RELIEF INITIATIVE, DEBT REPAYMENTS, DEBT REPUDIATION, DEBT RESTRUCTURING, DEBT STOCKS, DEBT SUSTAINABILITY, DEBT TRAP, DEBTORS, DEBTS, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPMENT ASSISTANCE, DEVELOPMENT FINANCE, DISCRIMINATION, DISPUTE RESOLUTION, DUE DILIGENCE, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMIC MANAGEMENT, ECONOMIC POLICY, ENFORCEABILITY, EQUITY PARTICIPATION, EQUITY STAKES, EXPATRIATE, EXPENDITURE, EXTERNAL DEBT, FIDUCIARY RESPONSIBILITIES, FINANCE CORPORATION, FINANCIAL AGENCIES, FINANCIAL ASSISTANCE, FINANCIAL CONTRACTS, FINANCIAL ENVIRONMENT, FINANCIAL FLOWS, FINANCIAL INSTITUTIONS, FINANCIAL LAWS, FINANCIAL MANAGEMENT, FINANCIAL SUPPORT, FINANCIAL SYSTEMS, FINANCIAL TRANSACTION, FINANCIAL TRANSACTIONS, FINANCIER, FINANCIERS, FISCAL BURDEN, FLOW OF CAPITAL, FRAUD, GLOBALIZATION, GOOD FAITH, GOVERNANCE STANDARDS, GOVERNMENT ASSETS, GOVERNMENT BUREAUCRACY, GOVERNMENT FAILURES, HEAVILY INDEBTED COUNTRIES, HIGH INTEREST RATES, HUMAN RIGHTS, ILLEGITIMATE DEBT, INDEBTED, INDEBTED COUNTRIES, INDEBTED POOR COUNTRIES, INDIVIDUAL LOAN, INDIVIDUAL LOANS, INFORMATION ASYMMETRY, INTEREST RATES, INTERNATIONAL BANK, INTERNATIONAL CAPITAL, INTERNATIONAL CAPITAL MARKETS, INTERNATIONAL COURT, INTERNATIONAL COURTS, INTERNATIONAL DEBT, INTERNATIONAL FINANCE, INTERNATIONAL FINANCIAL SYSTEM, INTERNATIONAL LAW, INTERNATIONAL LAWS, INTERNATIONAL LENDING, INTERNATIONAL STANDARDS, INVESTMENT CLIMATE, JUDGMENT, JUDGMENTS, JURISDICTION, JURISDICTIONS, LAW ENFORCEMENT, LEGAL AGREEMENTS, LEGAL NORM, LEGAL OBLIGATION, LEGAL PROCEDURES, LEGAL SYSTEM, LEGAL SYSTEMS, LENDER, LENDERS, LENDING POLICIES, LEVERAGE, LIABILITY, LOAN, LOAN AGREEMENT, LOAN AGREEMENTS, LOAN PROCEEDS, LOAN REPAYMENTS, LOSSES TO CREDITORS, MONIES, MORAL HAZARD, MULTILATERAL CREDITORS, MULTILATERAL DEBT, MULTILATERAL DEBT RELIEF, MULTINATIONAL, NATIONAL BUDGET, NATURAL DISASTERS, NEGOTIATION, NEGOTIATIONS, ODIOUS DEBT, ODIOUS DEBTS, PRIVATE BORROWERS, PROBABILITY, PUBLIC DEBT, PUBLIC DEBTS, PUBLIC POLICY, RECIPIENT COUNTRIES, REMEDIES, REMEDY, REPATRIATION, REPAYMENT, REPAYMENT CAPACITY, REPUDIATION OF DEBT, REPUDIATION OF DEBTS, RESERVE, RISK OF DEFAULT, SETTLEMENT, SHAREHOLDERS, SOCIAL DEVELOPMENT, SOVEREIGN BORROWER, SOVEREIGN BORROWERS, SOVEREIGN DEBT, SOVEREIGN DEBTORS, SOVEREIGN DEBTS, SOVEREIGN LENDING, STATE DEBTS, TECHNICAL ASSISTANCE, THIRD WORLD DEBT, TITLES, TRANSACTION, TRANSPARENCY, TREATIES, TREATMENT OF DEBT, TREATY, USE OF LOAN PROCEEDS, WORTH,
Online Access:	http://documents.worldbank.org/curated/en/2008/07/9698381/concept-odious-debt-some-considerations https://hdl.handle.net/10986/6825
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