Buchheit, Gulati, & Thompson: The Dilemma of Odious Debts

Lee C. Buchheit (Cleary Gottlieb Steen & Hamilton), G. Mitu Gulati (Duke - Law), & Robert B. Thompson (Vanderbilt - Law & Management) have published The Dilemma of Odious Debts (Duke L.J., Vol. 56, no. 5, Mar. 2007). Here's the abstract:

When a corrupt governmental regime borrows money in the name of the state, and then steals or squanders the proceeds, must the future citizens of that country repay the loan? The law says yes, but the moral instinct of most people says no.

The odious debt controversy is, at base, a struggle to find a workable legal doctrine that will avoid a morally repugnant result (visiting the sins of corrupt governors on innocent citizens), without undermining the legal basis of all sovereign borrowing. No counterparty, at least no commercial counterparty, would lend money to a sovereign believing that the loan was personal to the administration that contracted it, and could legally be disavowed following the next election, the next revolution or the next coup d'etat. One possible solution is to craft a doctrine of public international law that would relieve successor regimes from the legal obligation to repay the debts incurred by their odious predecessors. This would be a formidable task and there are others who have already set out on it. We propose a less dramatic step - asking whether a successor regime, if sued on an "odious" loan, might have available defenses founded in existing doctrines of domestic law.