Análisis de empresas competidoras

Moderator: Mr. Heiner Flassbeck, Director, Division on Globalization and Development Strategies,

UNCTAD

Panelists: Mr. Christoph G. Paulus, Professor of Law, Humboldt University, Berlin, Germany

Ms. Gail Hurley, Policy Officer, EURODAD

Mr. Arturo González de Aragón, C.P.A., Auditor General of Mexico

Mr Robert Howse, Professor of Law, University of Michigan Law School, USA

There is a wide disagreement on what “odious” debt really is. The United States first introduced the term “odious” debt as a reason for not honoring the Spanish claims on Cuba in connection with the Paris peace treaty of 1898. The debt, said the Americans, had benefited the Spanish colonizers rather than Cuba. They did not, however, provide a formal definition of the term. A range of proposed definitions have been put forward since Alexander Sack made the first attempt in 1927. In the process, the term “illegitimate” debt has been introduced. The question is therefore; what is “odious” debt and how does it relate to national and international law?

Professor Paulus began the panel discussion by describing some of the historical background to the notion of odious debt and to the difficulties of agreeing on a legal definition of it that would be covered under public international law. So far, he said the concept of odious debt has defied any exact definition and was not a legal concept at all. In many ways, it remains an expression with a somewhat elusive content, bordering on the line between law and politics and between law and morals. For this reason, there are different ways of looking at the concept of odious debt. Making reference to private consumer law as being more developed in dealing with more complicated scenarios including ethical issues, he suggested that international public law should draw on the private law example in order for the international community to better address problematic debt scenarios and protect the more vulnerable.

He referred to the coining of the term "odious" debt by Alexander Sack in the 1920s to describe several case studies for which terms such as war debt, subjugation debts and regime debts had previously been used. Academically, however, he reproached Mr. Sack for having neglected to point out the commonalities of these cases, which would be necessary for legal practicability. For this reason, Sack is never mentioned in legal writings, only non-legal. In fact in legal literature, the only reference to the concept can be found within the context of a draft treaty prepared by the UN International Law Commission in the 1950's on the succession of states. This treaty, however, never became public law, and even within the draft treaty, the two initial sections on odious debt were scrapped.

Looking at the challenges that lie ahead, Paulus pointed out that the issue of co-responsibility of lending would most likely be the key issue with the question being how to help this co-responsibility. He referred to the current period in which we are living as one where international law is moralized and one in which much of private law is actually deducted from global concepts. In this globalisation, he said, some are more adapted to the needs and intricacies of this living together than others. In the case of HIPC countries, for example, these countries can be seen as the equivalent of consumers in private law who might be in desperate need of consumer protection. In line with the concept of co-responsibility, one in cases where contracted debt might be contested, whether the debt be nullified or reduced should be considered on a case by case basis, but a legal mechanism such as the IMF's previously initiated sovereign debt restructuring mechanism should be put in place to deal with such cases.

Ms. Hurley focused her presentation on lender and borrower responsibility from a civil society perspective. Referring to her recent experience as one of the independent auditors of the Ecuadorian debt commission set up by the Government of Ecuador in July 2007, she said that she had been shocked by the

Unofficial and unedited compilation of presentations made during UNCTAD’s sixth Debt Management Conference

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grossly unfair terms and conditions of some of the historic bilateral loan agreements that she had come across in this country case example. Not only had she been surprised that such unfair loan contracts as some she had examined could be drawn up by lender countries and be called ‘concessional development assistance’, she had been equally surprised that a borrower Government would even have agreed to the signing of such contracts when it was clear that the loans would not be to their benefit. In particular, she referred to loans that were 100% tied aid and linked to the purchasing of goods and services from lenders often at vastly inflated prices. In many cases, she added, the money from the loans would not even enter the borrower country, but stay within the creditor nation, with the debtor country merely responsible for servicing the payment of the loan agreement. Whether these were examples of illegitimate debt she said was maybe not clear, but what was evident in her opinion was that they were morally highly questionable and certainly did not in the favour of economic development.

She then referred to the current international policy debate on how to avoid new rounds of unsustainable and irresponsible debt build-up, in the post-HIPC and MDRI initiative era. She warned of confusion regarding the concepts of sustainable lending and responsible lending, which she argued were not the same thing. Sustainable lending she argued was only a part of responsible lending with the latter being more comprehensive. By focusing on sustainable lending only, she said, one misses the point as to why nations can accumulate so much unsustainable and unpayable debt in the first place, which she pointed out was largely due to the poor use of development finance by investors and borrowers. ‘Responsible’ lending, on the other hand, covers the financial position of the borrower and repayment ability but also such issues as the purpose and viability of the loan itself and the project activities financed, as well as the terms and conditions of the loan, public consent to it being contracted, its social and environmental impact, and so forth.

Referring to the principle of pacta sunt servanda – which asserts that if the borrower is a sovereign state, creditor claims are universally valid and upheld – Ms. Hurley argued very strongly that this principle should be challenged. The only way to ensure responsible lending and borrowing, she said, would be to ensure that both creditors and borrowers are held fully accountable and liable for their decisions. Example should be taken from those domestic legal systems where contracts can no longer be enforced (e.g. due to changed circumstances such as bankruptcy or insolvency) if enforced repayment would result in inhumane distress or a violation of human rights, or where it is proven that the lender did not exercise due diligence or where the terms or conditions of the loan were proven unfair.

Referring to the definition of Odious Debt itself, she said that EURODAD would disagree with the argument of Professor Paulus that no universally agreed definition exists. As the recent example of Norway clearly shows (where it took a decision to cancel 80 Million US Dollars of bilateral historic debt in recognition of its shared responsibility of ‘odious’ lending), if pressure from the civil society on political parties is strong enough, defining Odious Debt in particular contexts is actually possible. She, therefore, urged other governments to take Norway’s example in cancelling odious loans. She also encouraged to take Ecuador’s example in setting up debt audit commissions.

From the non-governmental side, and in light of the so-far insufficient international response to such issues as odious debt as well as to the general treatment of debts where repayment difficulties or disputes arise, including the absence of an agreed international insolvency procedure, Ms. Hurley said that EURODAD was now involved in developing its own responsible lending charter which will aim at guiding responsible behaviour by both lenders and borrowers, and which proposes a series of contractual changes to loan contracts issued to sovereign states. .

Mr. de Aragón saw the essence of the debate on odious debt as one residing in the encouragement of a culture of better debt management, transparency and accountability, and the promotion among governments of a responsible and committed attitude regarding future generations. Within this context, he also promoted the mission of Supreme Audit Institutions as having a stronger role to play in overseeing and assessing the correct and honest allocation of public debt resources.

Until now, he said audits on public debt management have been limited to verify the compliance with the legal and regulatory dispositions, accounting records and payments revision, balance conciliation, and assessment of internal control mechanisms. However, these revisions have turned out to be insufficient, due to a number of factors including the inadequate disclosure of the debt’s structure; in terms of contracting, evolution, sources and financing; scarce and unreliable information regarding amortization and interests payment; discretional decisions regarding debt purposes (expenditure or investment); insufficient regulation and lack of supervision and control, regarding financial institutions; lack of transparency and accountability on public debt, and limited control and auditing, and an historical or short-term approach.

Mr. Howse started his presentation by strongly disagreeing with Professor Paulus in his claim that there existed no clear legal basis for the odious debt doctrine. Referring to the paper he recently wrote for UNCTAD on The Concept of odious debt in public international law, he argued that he finds a sound legal basis for the concept of odious debt in public international law. There is no rule or doctrine of public international law to which there is not an exception, he said, and it is in the nature of exceptions or limitations on doctrines that they are contextual. That to apply them one needs to look at individual circumstances and different sets of facts. And therefore even though rules themselves are often stated in fairly straightforward or absolute terms, exceptions or limitations can’t be stated in such simple or absolute terms. They are inherently contextual and therefore if one is looking for an odious debt doctrine that is a bright line rule one will not find it. The concept of odious debt is in fact an exception or limitation on a rule of public international law that suggests that the principle of pacta sunt servanda applies to state debt obligations. One must interpret this principle, however, in light of broader considerations such as those of human rights and equity. In situations of political transitions, for example, equitable limitations on pacta sunt servanda may be of considerable importance in negotiating justice with respect to the crimes of the past.

The concept of “odious debts”: a historical survey