Odious Debt Wears Two Faces: Systemic Illegitimacy, Problems, and Opportunities in Traditional Odious Debt Conceptions in Globalized Economic Regimes

I INTRODUCTION In the early 1980s, the People's Republic of China (PRC) resisted a lawsuit filed in U.S. federal court seeking to enforce obligations to pay on defaulted bearer bonds issued by the Chinese Imperial government in 1911. (1) The PRC maintained, in part, that it had no obligation to pay because "the Chinese view the bonds as an improper part of the Western powers' domination of China at the beginning of this century and as a direct cause of the Revolution of 1911." (2) This political reality, China argued, had a substantive legal consequence: "the PRC maintains that under the principle of non-liability for 'odious debts' China bears no responsibility for the bonds." (3) The case was ultimately dismissed on other grounds. (4) After the overthrow of Iraq's leader Saddam Hussein, Perweez Mohammed of the Patriotic Union of Kurdistan urged the repudiation of Iraq's sovereign debt incurred under the Hussein regime for the purpose of maintaining itself in power and invading Iran. He argued that the "creditors' cooperation enabled Saddam to preside over atrocities such as Halabja. Saddam never spent money for the benefit of the Iraqi people, but just for himself and his followers." (5) Another opposition spokesman, "Hajim al-Hassani of the Iraqi Islamic Party said of the creditors that 'the Gulf countries should not receive a single dinar. The Iraqi people lost hundreds of thousands of lives because of the Iran-Iraq war, which would probably have ended much earlier without the money they provided.'" (6) This article examines how the traditional notion of odious debt as a method of repudiating sovereign debt may undergo a conceptual revolution as it changes focus from the illegitimacy of governments obtaining loans to the illegitimacy of the systems through which such loans are made and enforced generally. The focus of this analysis is the conceptual framework Fidel Castro sought to introduce into the debate about the legitimacy of sovereign debt and the extent to which this reframing might influence international institutional approaches. It is only fitting that the focus of the analysis turns to developments in Cuba. The origins of the concept of odious debt can be traced at least as far back as the Spanish American War, when the United States used the notion successfully to resist recognition of war debt incurred by Spain in defense of its Cuban colony on the grounds that the debt had not been incurred for the benefit of the Cuban people, so they, the putative debtors, should not be responsible for these debts. (7) Amplified by Alexander Sack, an emigre Russian academic in 1920s Europe, (8) this Aristotelian construction of state debt, the state, and its apparatus (or government) as autonomous and separable objects or entities, (9) and the rules under which each would be tied to the others, has become the stuff of the general construction of global law since the end of the twentieth century. (10) But in the hands of the Cubans, it has become more than that. The concept has begun to be deployed against its creators and primary beneficiaries--developed states and their financial organs. From a tactic in the struggle among imperial powers for control of subaltern and dependent territories, a means by which Americans and Spaniards could settle the financial consequences of their war for control of Cuba in 1898, the duster of principles constituting modern odious debt doctrine has become a means to restructure hegemonic systems of transnational subordination. (11) The odious debt doctrine traditionally focused on the circumstances under which a successor state or states could avoid the obligation to pay the debts incurred by a now-extinct predecessor state. (12) It focused as well, though less often, on the obligations of successor governments to repay the obligations of prior regimes (especially when succession occurred after civil wars, revolutions, or other contests for control of the state apparatus). …