Odious Loans between Legal Legitimacy and Financial Sustainability
DOI:
https://doi.org/10.35246/3fp17685Keywords:
Public Loans, Odious Loans, Public Revenues, Sustainable DevelopmentAbstract
The phenomenon of odious debt has long posed a dilemma for international law and global financial governance. Although many developing and post-conflict countries have endured the burden of illegitimate loans contracted by authoritarian regimes, the concept of “odious debt” has not been formally recognized under international law. This raises a fundamental legal and ethical question: should successor governments and their citizens be bound by debts incurred without popular consent, often used to finance repression, corruption, or wars against their own populations? Against this background, the present study explores the legitimacy of odious loans and their broader implications for financial sovereignty, human rights, and sustainable development.
The study concludes that odious debt remains primarily a moral and political principle rather than a binding legal rule. Nevertheless, its recognition could serve as a foundation for greater financial justice and international accountability. The findings underscore that such debts undermine development, violate human rights, and perpetuate inequality, while creditor states often evade responsibility. The research recommends advancing toward codification of the doctrine within international agreements, clarifying its legal bases through principles such as unjust enrichment and abuse of rights, and creating mechanisms for debt repudiation or cancellation. Ultimately, embedding the principle of odious debt into international financial governance could not only relieve debtor states of unjust obligations but also promote sustainable development and protect future generations from the consequences of illegitimate borrowing.
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v. It should be noted, however, that the Constitution of the Republic of Iraq of 2005 (in force) did not specify an explicit provision that obliges the public loan to be a law, similar to taxes and fees. However, Article 110 stipulates the following: Federal authorities shall have the following exclusive competences: First: drawing up foreign policy, diplomatic representation, negotiating, signing and concluding international treaties and agreements, borrowing policies, and drawing up sovereign foreign economic and trade policy.
vi. Under this provision, it singled out the federal authority for borrowing, signing and concluding policies, without specifying either of the two powers, whether legislative or executive.
vii. I have raised jurisprudence that this text refers to the legislative authority rather than the executive, but it is clear to us that the text is ambiguous, as it does not give the competence to conclude public loans definitively.
viii. To address this ambiguity, the Financial Management Law No. (6) of 2019 (as amended) was issued, which stipulates in Article (12) that the House of Representatives has the authority to ratify loans, sovereign guarantees, and international agreements. In addition, Public Debt Law No. 94 of 2004 (as amended) empowers the Minister of Finance to conclude optional loans, while not addressing compulsory loans, meaning that this type of loan requires its own legislation.
ix. See: Hanan Abdul Khader Hashem Al-Musawi, Hussein Ali Awish Al-Shami, Public Loans and Their Developmental Effects on Investment Spending in Iraq for the Period 2004-2020, Al-Ghari Journal for Economic and Administrative Sciences, Vol. 18, Special Number, (Nov 2022), pp. 159-180.
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xii. United Nations, General Assembly, United Nations Human Rights Council Resolution (2024): "Effects of Foreign Debt on the Full Enjoyment of All Human Rights", ref. A/HRC/RES/55/6 , 3 April 2024.
xiii. These rights are enshrined in the International Covenant on Economic, Social and Cultural Rights , which is one of the two fundamental documents in international human rights law, along with the International Covenant on Civil and Political Rights. It was adopted by the United Nations General Assembly on December 16, 1966, and entered into force on January 3.
xiv. The Arab Charter on Human Rights stipulates that the right to development is one of the basic human rights, and all countries must develop development policies and measures necessary to guarantee this right.
xv. See: Mead Yousef Al-Shirawi, Faisal bin Halilo, The Role of the United Arab Emirates in the Preparation and Activation of the Arab Charter on Human Rights of 2004, Journal of the University of Sharjah for Legal Sciences, Vol. 21, No. 2, June, 2024, pp. 87-121.
xvi. February 27-24, 2017, See: Pascal Fouad Daher, The Principle of Odious Debts in International Law and the Extent to which the Lebanese State Can Benefit from It, published in Al-Nahar newspaper.
xvii. https://www.annahar.com/arabic/article/1138895, 5/30/2025,2:6 AM.
xviii. Dr. Mohamed Ahmed Hamad, The Theory of Abhorrent Religion in Public International Law, Journal of Legal Sciences, Vol. 7, No. 1, 2012, p. 34.
xix. The Spanish-American War took place in 1898 after the explosion of the American destroyer "USS Maine" in the port of Havana, and Spain was blamed at that time, so the United States intervened militarily in Cuba, which was one of the colonies of Spain at the time, and supported the Cuban revolutionaries against Spanish rule, and resulted in Spain's defeat and loss of its colonies in Cuba, Puerto Rico and Guam, in addition to selling the Philippines to the United States of America. Spain ceded Cuba to the United States under the Treaty of Paris in December 1898.
xx. For example, South Africa's apartheid regime borrowed from private banks during the 1980s, while much of its budget went to fund the military and police and suppress the African majority. The people of South Africa have borne the debts of their oppressors. The Archbishop of Cape Town has campaigned for the apartheid-era debt to be declared abhorrent and cancelled. South Africa's Reconciliation Commission has expressed a similar view. But the post-apartheid government has submitted to current international standards and accepted responsibility for the debt, fearing that default would hurt its chances of attracting foreign investment.
xxi. Jeff King , The Doctrine of Odious Debt in International Law: A Restatement (Cambridge University Press, First published 2016 , p 62-87.
xxii. Era Dabla-Norris ( 2019) , Debt and Entanglements Between the Wars, International Monetary Fund , pp121-173.
xxiii. United Nations Conference on Trade and Development (UNCTAD). "The Concept of Odious Debt in Public International Law, No. 185 July 2007, https://unctad.org/system/files/official-document/osgdp20074_en.pdf.
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xxvii. Patrick Bond, Should South Africa Follow the Law of the Jungle – or the Doctrine of Odious Debt? 30 April 2020 , http:// www.cadtm.org/Should-South-Africa-Follow-the-Law-of-the-Jungle-or-the-Doctrine-of-Odious-Debt#south_africa_should_join_the_club_questioning_odious_debt, 18/5/2025, 12:26 PM.
xxviii. Susan Hawley, Odious Debt, Human Rights and the Democratic transition in south Africa
xxix. Patrick Bond, Should South Africa Follow the Law of the Jungle – or the Doctrine of Odious Debt? 30 April 2020 , http:// www.cadtm.org/Should-South-Africa-Follow-the-Law-of-the-Jungle-or-the-Doctrine-of-Odious-Debt#south_africa_should_join_the_club_questioning_odious_debt.
xxx. https://unctad.org/debt-and-finance/research,4/5/2025,1:16PM
xxxi. https://www.cadtm.org
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