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Applied Legal History: Demystifying the Doctrine of Odious Debts

37 Pages Posted: 21 Mar 2009 Last revised: 23 Jul 2009

Sarah Ludington

Campbell University Norman Andrian Wiggins School of Law

G. Mitu Gulati

Duke University School of Law

Alfred L. Brophy

University of Alabama - School of Law

Date Written: March 17, 2009

Abstract

"Odious debts" have been the subject of debate in academic, activist, and policy circles in recent years. The term refers to the debts of a nation that a despotic leader incurs against the interests of the populace. When the despot is overthrown, the new government-understandably-does not wish to repay creditors who helped prop up the despot. One argument has focused on whether customary international law supports a "doctrine" of odious debts that justifies non-payment of sovereign debts when three conditions are met: (1) the debts were incurred by a despotic ruler (without the consent of the populace); (2) the funds were used in ways that did not benefit the populace; and (3) the creditors were aware of the likely illegality of the loans. Advocates of this doctrine, which was synthesized by Alexander Sack in 1927, typically cite two examples of U.S. state practice for support: the negotiations between the United States and Spain following the Spanish-American War, in which the United States repudiated Cuba's colonial debt, and the Tinoco Arbitration, which repudiated certain debts of the deposed Costa Rican dictator, Frederico Tinoco. Those historical precedents do not support the first condition of Sack's doctrine of odious debts, but do support the second two requirements. In addition to these two instances, United States history is rich with examples of debt repudiation by states. Those examples suggest a doctrine of odious debts that is broader and more flexible than the one written by Sack. Indeed, it may be appropriate to speak of the doctrines (not just doctrine) of odious debts.

Keywords: odious debts, international law, Alexander Sack

Suggested Citation

Ludington, Sarah and Gulati, G. Mitu and Brophy, Alfred L., Applied Legal History: Demystifying the Doctrine of Odious Debts (March 17, 2009). Duke Law School Public Law & Legal Theory Paper No. 236. Available at SSRN: https://ssrn.com/abstract=1366028 or http://dx.doi.org/10.2139/ssrn.1366028

Sarah Ludington

Campbell University Norman Andrian Wiggins School of Law ( email )

United States
919-865-4678 (Phone)

Gaurang Mitu Gulati (Contact Author)

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

Alfred L. Brophy

University of Alabama - School of Law ( email )

P.O. Box 870382
Tuscaloosa, AL 35487
United States
405-209-5781 (Phone)

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