Lending Revisited: International Conference on Illegitimate Debts (Odious Debts), Bern, 3-4 October 2007¶
Aktion Finanzplatz Schweiz-Dritte Schweiz (organiser); Kaiser, Jürgen; Keene, Beverly; Michalowski, Sabine; Gulati, Mitu; Abrahams, Charles (2008). Lending Revisited: International Conference on Illegitimate Debts (Odious Debts), Bern, 3-4 October 2007. Conference proceedings. Aktion Finanzplatz Schweiz, Basel.
| Type | conference paper |
| Scope | Wider apartheid literature |
| Method | mixed |
| Period studied | 1976–2007 |
| Regions | Argentina, Azerbaijan, Democratic Republic of Congo, Pakistan, Indonesia, Switzerland, South Africa (marginal) |
| Themes | sanctions divestment, macro fiscal finance debt, comparative theory, resistance social movements, transition post apartheid |
| Citation key | organiser2008 |
Argument¶
The proceedings record a conference bringing NGO campaigners and legal scholars together to ask whether sovereign debts incurred by dictatorships or contracted irregularly can be repudiated. The speakers hold that Sack's 1927 odious-debt doctrine is legally vague and not firmly part of international law. Alternatives are explored: ius cogens violations, lack of agency or constitutional authority, private-law defences, and tort claims. Kaiser argues that cancellation is ultimately a political question. South Africa appears only as a short case: Abrahams explains why the Khulumani apartheid-debt litigation under the US Alien Tort Claims Act was chosen over an odious-debt claim. The volume is mostly case presentations and workshop minutes on other countries, not an analysis of South African economic history.
Evidence and method¶
Conference papers and verbal presentations by NGO activists, lawyers and a Swiss official, plus panel and workshop minutes. Country case material for Argentina, Azerbaijan, DRC, Pakistan and Indonesia. Legal sources discussed include Sack's doctrine, the ILC and Vienna Conventions, the World Bank and UNCTAD reports, and the Olmos ruling. No archival or statistical dataset for South Africa.
Place in the debates¶
- Legal viability of the odious-debt doctrine (Sack) versus alternative legal routes (see Finance, capital flight, the 1985 debt crisis and banking). The conference is sceptical of the traditional doctrine and favours ius cogens, agency/constitutional authority and tort routes. The apartheid case is cited as one where the traditional doctrine was set aside for ATCA litigation.
- Legal versus political settlement of illegitimate debts (see Finance, capital flight, the 1985 debt crisis and banking). Kaiser and Tariq argue that decisions will be made in parliaments and ministries, not courts, and that campaigns matter more than litigation.
- Creditor responsibility and the apartheid debt as private bank debt (see Finance, capital flight, the 1985 debt crisis and banking). Abrahams notes that apartheid debt was owed to private Swiss, German, US and British banks, which made odious-debt claims hard to bring. The Khulumani suit therefore rested on constructive knowledge and aiding and abetting.
Findings¶
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Abrahams clarifies that the Khulumani suit was a damages claim under the Alien Tort Claims Act, not an odious-debt action, because apartheid debt was owed to private creditors. (p. 8)
unlike other forms of odious debts, the South African apartheid debt was owed to private creditors such as German, Swiss, US and British banks and other corporations as well.
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The Khulumani claim had been dismissed by the New York District Court at the time of the conference. (p. 8)
the suit was brought for a case that was quite clear, but that has been dismissed by the District Court in New York.
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The South African post-apartheid government did not support litigation on apartheid debt and denied or minimised it, so civil society took the lead. (p. 59)
it denied that an Apartheid debt even existed, or meant that it was too small to be of any significance.
-
The apartheid-debt litigation was framed as a human-rights and ius cogens case, not an odious-debt claim. (p. 59)
This is a compromise, not based on the odious debt doctrine, but based on human rights violation, ius cogens violations.
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In the banks' case, plaintiffs could only plead constructive knowledge, since proof that lenders knew of the use of loans for abuses was unavailable. (p. 65)
So we restricted the argument that there was some constructive knowledge that the banks should have known about the odiousness of the loan.
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Michalowski notes that her proposed ius cogens approach would be rejected by those who regarded trade with apartheid South Africa as acceptable or desirable. (p. 50)
including those that were as blatant and as widely and strongly condemned as those of the apartheid regime, as acceptable or even desirable.
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The conference reports that the apartheid campaign began in 1998, targeting mainly Swiss, German and British banks. (p. 59)
In 1998, when the campaign started, the new South Africa was crippled by Apartheid debts, and we targeted mostly Swiss, German and British banks
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The chosen legal route avoids the contract and attacks its consequences, as claimants were not parties to the loans. (p. 64)
So it seems to be better to concentrate on the consequences, on the potential harm, and the tort claim itself is based on ius cogens.
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Kaiser argues that illegitimate-debt outcomes are decided politically, not judicially. (p. 7)
They will most likely be made in parliaments and ministries, and not in any court of law.
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The workshop notes that some loans to apartheid South Africa may have benefited the population, complicating a blanket 'no loans' view. (p. 63)
Even in the case of South Africa one might argue that certain loans were for the benefit of the population.
Evidence ledger¶
Sources used¶
| Source | Kind | Period | How used |
|---|---|---|---|
| World Bank study on odious debts (paper funded by Norway) | commission or official report | c. 2007 | Quoted by Kaiser as the creditor-side position that no usable concept of odious debts exists, which frames the NGO agenda. |
| UNCTAD paper by Professor Howse on creditor shared responsibility / Norwegian debt cancellation | commission or official report | c. 2007 | Cited as a second policy paper in which political interests advance different criteria of illegitimacy. |
| Eurodad, 'Skeletons in the Cupboard' (case studies from each G7 country) | secondary literature compilation | 2007 | Cited as a brief case-study collection used for parliamentary pressure and lobbying on illegitimate debts. |
| Jubilee South casebook on dubious claims (multilateral lenders in Asia) | secondary literature compilation | c. 2007 | Cited as a source of cases on dubious multilateral claims. |
| Federal Criminal Court ruling in the Olmos Case (Argentina), July 2000, and Case No. 17.718 | state archives | 1982-2000, ongoing | The judicial finding on arbitrary debt build-up 1976-83 and IMF complicity is the main evidence for the Argentine illegitimacy claim. |
| Argentine official statistics on debt, income distribution and federal budget (Guía del Mundo 2005/2006 - INDEK; 2008 Federal Budget proposal) | official statistical series | 1974-2008 | Supplies the country-profile figures on debt stocks, creditor composition, inequality and interest burden. |
| Azerbaijan public debt statistics (Ministry of Finance data as of 1 July 2007; debt structure charts) | official statistical series | 1995-July 2007 | Charts and figures describe foreign debt by creditor, maturity, sector and ratio to GDP. |
| Azerbaijan Law 'Public Debt' (2007) | legislation gazette | 2007 | Cited as the legal framework governing foreign borrowing limits and institutional responsibilities. |
| Pakistan Ministry of Finance 'Debt Policy Statement' | official statistical series | 1995-2007 | Provides figures on external and domestic debt growth and repayment profile, which are used to criticise the Musharraf borrowing record. |
| Pakistan newspaper reports and expert quotes (e.g. Dr Shahid Hasan Siddiqui) on debt, unemployment, GDP growth and World Bank/ADB lending | newspapers periodicals | 1970s-2007 | Supplies unemployment and GDP-growth comparisons and the World Bank/ADB lending totals, apparently drawn from press sources. |
| Global Third World debt aggregates (1970-2006) cited by Tariq | international trade or finance data | 1970-2006 | Used to show the growth of Third World debt and net transfers to creditors. |
| Swiss SECO debt relief programme figures (bilateral programme, conversion funds, relief value) | commission or official report | 1991-2007 | Bernasconi uses programme cost and relief figures to document Swiss debt relief policy. |
| Author's accounts of Congolese infrastructure projects (Inga I/II, Maluku steelworks, Kimpese cement, Inga-Shaba line, Gécamines expansion) | author survey or fieldwork | 1960s-2007 | Project-by-project narrative of irregularities is offered as grounds for cancelling Congolese debt. |
| Indonesia warship sale case materials (sales contract clause, German export regulations, reports on use in Aceh/East Timor) | other | 1989-2007 | Kaiser asserts the contract restricted use of the ships and that the vessels were used in internal conflicts. |
| Khulumani v. Barclay National Bank et al. (ATCA litigation, US District Court New York) on apartheid-era financing | state archives | 2002-2007 | The ATCA damages suit against Swiss, German and British banks and corporations is the key apartheid-debt case discussed by Abrahams. |
| South African court case on the British Aerospace arms deal (constitutional authority of the finance minister) | state archives | c. 1999-2007 | Used by Abrahams as an example of a constitutional challenge to a state contract, which the court rejected as an executive discretion matter. |
Inference¶
Quantification: Illustrative figures.
Conference proceedings made up of NGO and legal-expert presentations. Claims rest on case-study narrative (Argentina, DRC, Pakistan, Azerbaijan, Indonesia, South Africa), on illustrative official debt figures, and on doctrinal legal argument and discussion. There are no systematic datasets or statistical tests.
Key claims¶
| Claim | Basis | Strength |
|---|---|---|
| Argentina's 1976-83 debt build-up was arbitrary and fraudulent, and the IMF knew of and was complicit in it. (p. 15) | Federal court ruling in the Olmos case (July 2000) and Case No. 17.718, as characterised by Keene; debt rose from US$7bn to US$43bn. | Partial data |
| The apartheid-era debt could not be challenged under the odious debt doctrine, so the campaign pursued damages against banks and corporations under the US Alien Tort Claims Act on ius cogens grounds. (p. 59) | Abrahams's first-hand account of the Khulumani/ATCA litigation and the South African government's reluctance to support a debt challenge. | Illustrative or anecdotal |
| Congolese borrowing financed uneconomic, irregular projects (Inga, Maluku, Inga-Shaba line, Gécamines expansion) that served foreign suppliers and should be cancelled. (p. 31) | Author's project-by-project narrative with assertions on costs and non-functioning equipment; no documents cited. | Illustrative or anecdotal |
| Pakistan's external debt rose under Musharraf (from $33bn in 1999 to $40bn in 2007) while borrowing was wasted and corrupt, and debt service crowds out social spending. (p. 35) | Finance ministry Debt Policy Statement figures and press-reported statistics on spending shares. | Partial data |
| Azerbaijan has a low, conservatively managed foreign debt (7.7% of GDP) with no major odious debt cases, though oil dependence poses future risks. (p. 23) | Debt structure statistics as of July 2007 and the author's scenario analysis. | Partial data |
| The traditional Sack doctrine of odious debts is legally weak, and alternatives (ius cogens, agency/constitutional invalidity, private-law defences) are more promising. (p. 47) | Doctrinal legal reasoning by Michalowski and Gulati, supported by the author's own research on Argentina; no empirical dataset. | Asserted |
| Whether illegitimate debts are paid is ultimately a political rather than a legal question, and progress has come through political will rather than court rulings. (p. 6) | Kaiser's experience of NGO campaigns and the Norwegian cancellation, with no systematic comparison. | Illustrative or anecdotal |
The author's caveats¶
Speakers acknowledge limited resources and access to information. Pakistan figures are largely press-based, and Mbembe notes the difficulty of doing research without funds. Abrahams notes that loan contracts are not open to public scrutiny and that proving lender knowledge is hard without a 'smoking gun'. Michalowski notes that little academic work exists on the question.
Gaps in the evidence¶
The apartheid-relevant material is limited to a legal-strategy account of the Khulumani/ATCA case. There are no data on the size, creditors, terms or use of apartheid-era loans, and no archival or bank-lending records. Systematic debt statistics (South African Reserve Bank, bank syndication records, Chamber of Mines or parastatal borrowing) would be needed to test claims of creditor knowledge or benefit to the population. Some of these sources were available then (official statistics, the court record) and many more are now.
Replicability: Data poorly documented.