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Prevention of Odious Debt Working Group (June 2009 – November 2010)
Many creditors will lend to a government without regard to the government's legitimacy, allowing illegitimate governments to saddle the country with debt and burdening the successor governments with repayment. Ex ante loan sanctions would put creditors on notice that any future loans to a regime would be considered the responsibility of that regime and would not be considered transferable to successor governments.
Members of the group, who serve in their individual capacity, are listed below.
Prevention of Odious Obligations Working Group Members:
Nancy Birdsall, Center for Global Development
Lee Buchheit, Cleary Gottlieb Steen & Hamilton LLP
Josh Cohen; Stanford University
Paul Collier; Oxford University
Kimberly Elliott, Center for Global Development
Jesus Estanislao, Institute of Corporate Directors, former Secretary of Finance of the Philippines
Charmian Gooch, Global Witness
Henrik Harboe, Norwegian Ministry of Foreign Affairs
Seema Jayachandran (Co-Chair), Stanford University
Stephen Krasner, Stanford University
Michael Kremer (Co-Chair), Harvard University
Benjamin Leo, Cisco Systems
Todd Moss, Center for Global Development
Richard Newcomb, DLA Piper
Y. Venugopal Reddy, University of Hyderabad, former Governor of the Reserve Bank of India
Nuhu Ribadu, Center for Global Development, former Chairman of Nigeria's Economic and Financial Crimes Commission
Neil Watkins, ActionAid
John Williamson (Co-Chair), Center for Global Development; Peterson Institute for International Economics
Ernesto Zedillo; Yale Center for the Study of Globalization, former President of Mexico
From the article:
On Friday August 25, the US government imposed financial sanctions on Venezuela, restricting the ability of President Nicolás Maduro’s government and its oil company, PDVSA, to issue new debt in American capital markets. The sanctions were imposed in response to the regime’s unconstitutional and fraudulent election of a constituent assembly and the de facto closure of the constitutionally elected National Assembly, with its two-thirds opposition majority...
According to this doctrine, debt incurred by “odious” regimes should not be enforceable, because the lender should have known that the debt was incurred without the consent of the people or for their benefit. As Sack put it: “This debt does not bind the nation; it is a debt of the regime, a personal debt contracted by the ruler, and consequently it falls with the demise of the regime.”
The odious debt idea was revived in an influential 2006 article by Seema Jayachandran and Michael Kremer, and in a 2010 report by the Center for Global Development (CGD), which proposed that economic sanctions include a mechanism aimed at preventing the accumulation of odious obligations. The mechanism would take the form of a declaration that debt issued by a particular government would be considered odious. In effect, this is what the Trump administration has just done.
Such a declaration reduces the flow of funds to odious regimes, owing to the risk that successor governments will renounce their predecessor’s debts without incurring legal and reputational costs (because participating countries’ courts will not enforce the debt contracts).
The CGD report proposes that a regime should be considered odious if it abuses the human rights of the population, employs military coercion, perpetrates electoral fraud, and mismanages or misappropriates public funds.
Read full article here.
The Syrian regime of Bashar Assad has killed thousands of people since protests began last year. The Arab League, United States and European Union have condemned the violence and imposed strong sanctions against Syria’s oil sector and central bank, but they have not adequately hindered the regime. It’s time to try a new tool that would strengthen existing sanctions: preemptive contract sanctions.