By Anh Nguyen, law graduate of the University of Vienna, trainee in international dispute resolution completing her judicial clerkship in the Vienna circuit courts. 

Repudiating “odious debt” incurred by prior regimes which have been found to have perpetrated war crimes and gross human rights violations appears to be a salient if not cathartic means of bringing about justice in post-conflict states. While the notion of “odious debt” is not considered a definite legal rule anchored in international law, it is considered as a policy framework[1] in both the context of sovereign debt restructuring and transitional justice to address the financial accountability and reckoning of sovereign debt inherited from a previous odious regime. This article will start by analysing factual precedents and case law on sovereign debt linked to jus cogens violations of previous odious regimes.  It will then examine the public international law basis for post-conflict states’ right to repudiate such debt.

The earliest examples of successor governments invoking the notion of “odiousness” was to sever debt obligations inherited from a prior despotic regime, which incurred that debt for illegitimate purposes to suppress its people. This usually relates to their struggle for colonial independence, such as the US’s refusal to assume Cuban debt obligations towards Spain after the Spanish-American War, Mexico’s repudiation of debts incurred by the Habsburg Emperor Maximilian and the Soviet repudiation of Tsarist debts.[2]

While these examples precede the crystallisation of the right to self-determination in international law and its current tentative jus cogens status,[3] the first instance of odious debt being invoked in the context of a definitive violation of jus cogens is the debt incurred by the apartheid regime in South Africa. However, Nelson Mandela and the African National Congress distanced themselves from calls to declare apartheid-era debts void due to pressure not to default on debts in order to attract potential foreign investments.[4]

Purported “odious debts” have been asserted with regard to various forms of sovereign debts, from conventional bilateral or institutional loans to “financial assistance” packages, such as in a “Food for Peace” programme for Cambodia provided by the US to the “illegitimate” government of Lon Nol.[5] Odious debt through the acquisition of sovereign bonds have also been denounced, such as the $3 billion debt sold by then President Yanukovich to Russia in late 2013, which Ukraine defaulted on in 2015, claiming in proceedings in front of the UK Court of Appeals that it had been forced to accept Russia’s “financial support”, which also subsequently invaded the country.[6]

Over the past two decades, calls for writing off odious debt have become more frequent in post-conflict states in which members of a prior regime have been investigated or indicted for international crimes by international criminal tribunals. For instance, in Sudan, which contracted $3.4 billion in bilateral loans from international lenders between 2001 and 2008 while destructive campaigns in South Sudan and Darfur were ongoing[7], or in Liberia, whose post-conflict debt in 2006, incurred during the dictatorial regimes of Samuel Doe and Charles Taylor, was 680% of its GDP.[8] In the case of SFRY successor states, the position of odious debt incurred by Serbian proxies did not take root in Bosnia when it renegotiated its sovereign debt. Similar to the position taken by South Africa, Bosnia adopted a policy of debt assumption to prove it was economically capable of shouldering the same allocated debt burden as other SFRY successor states[9]. Notably, during the armed conflict in Yugoslavia, IMF loans to Serbia were blocked because of Milosevic’s policies in Kosovo.[10]

Pursuant to Art 53 of the Vienna Convention on the Law of Treaties (VCLT) a treaty is void if, at the time of its conclusion, it conflicts with a jus cogens norm. As a result of the treaty’s invalidity pursuant to Art 71 (1) VCLT, the contracting parties shall:

(a) eliminate as far as possible the consequences of any act performed in reliance on any provision which conflicts with the peremptory norm of general international law; and

(b) bring their mutual relations into conformity with the peremptory norm of general international law.

The perpetration of any of the four “core crimes” under the Rome Statute indisputably constitutes a violation of jus cogens. For a loan agreement to be void under Art 53 VCLT, a link between the loan and a jus cogens violation must be established. When a state provides funds to odious regimes, which are directly used to finance the commission of war crimes or more generally used to sustain the regime’s political hold, this conduct could constitute an “aiding or abetting another State in the commission of an internationally wrongful act” under Art 16 of the International Law Commission (ILC) Articles on State Responsibility. If financial institutions are also involved as lenders, their conduct could fall under the ambit of Art 14 of the ILC Draft Articles on the Responsibility of International Organisations – the counterpart provision to Art 16 above.   Modes of criminal participation under the Rome Statute, especially Art 25 (3) lit (c) on the aiding or abetting a Statute crime,[11]would also provide a relevant basis if private actors contract with the “odious debtor”. This article, however, does not provide for the possibility of corporate criminal responsibility in international criminal law.

Art 16 of the ILC Articles on State Responsibility requires, first, that the state providing financial assistance or aid has knowledge of the circumstances of the internationally wrongful act. Second, the aid or assistance must be given with a view to facilitating the commission of the wrongful act. Third, the state giving aid or assistance to the breach of an international obligation must itself also be bound by this obligation. The third requirement would generally limit the scope of application of Art 16.[12] However, given the concurrent erga omnes nature of jus cogens norms[13], the third requirement could be deemed less of a legal hurdle in our present case. From the perspective of international criminal law, the causal relationship between “aiding and abetting” and the principal criminal act is not one that constitutes a condition sine qua non but, as held by the ICTY in Furundzija, it must make a “significant difference to the commission of the criminal act by the principal”.[14]Thus, the contribution of the loan to the jus cogens violation must have been substantial, but not indispensable.

The Nuremberg Military Tribunal distinguished the degree of financial assistance to NS war crimes in the cases of Rasche and Flick. While Rasche, the chairman of Dresdner Bank, was acquitted for charges of knowingly providing large loans to SS enterprises, which employed inmates of concentration camps[15], Flick, an industrialist, was convicted for contributing funds to the SS with the knowledge of the crimes committed.[16] The Tribunal held in Flick that it was “immaterial whether it [funds provided] was spent on salaries or for lethal gas”. However, in Rasche, the Tribunal condemned the loan from a “moral standpoint” but held that the transaction “can hardly be said to be a crime.” The underlying reasoning for the acquittal regarding the loan and the conviction for the direct provision of funds, despite both serving the same financing function, is the Tribunal’s unease with criminalising “commercial” activities, such as those of a lender or a merchant “who sells supplies or raw materials to a builder building a house, knowing that the structure will be used for an unlawful purpose”.

In In re South African Apartheid Litigation, US national courts dealt with the causal connection between funds provided by Barclays and UBS to the crimes of the apartheid regime. The claims against these banks under the US Alien Tort Claims Act encompassed their loans to the regime’s security forces, Barclays’ acquisition of large amounts of South African Defence Bonds, which directly financed the South African armed forces, and the UBS’s holding of billions of dollars of South African Reserve Bank funds for the regime’s arms industry. The court held that the causal connection between the provision of assistance hinges on the inherent quality of goods which are “specifically designed to kill, inflict pain or cause other injuries resulting from violations of customary international law”.[17] Thus, because of the neutral and “fungible” quality of money, “supplying a violator […] with funds […] is not sufficiently connected to the primary violation to fulfil the actus reus requirement of aiding and abetting a violation of the law of nations.”[18] In the same case the court also decided on a claim against IBM for providing the technical infrastructure to South African authorities in carrying out denationalising policies of black South Africans, ruling that such an act fulfilled the actus reus in question. In Almog v Arab Bank, with regard to the financing of Hamas’ terrorist activities, in particular suicide bombings, in Israel and the Palestinian territories between January 1995 and July 2005, US courts took a more liberal approach, holding that “acts which in themselves may be benign […] may be actionable if done with the knowledge that they are supporting unlawful acts.”[19]

These judicial precedents show that in establishing the causal connection between financing activities and the violation of jus cogens, it is not enough to merely prove that a large volume of funds was provided to a known odious regime violating international law. This strict approach was also taken in the Tinoco arbitration by the presiding arbitrator, US Chief Justice Taft, who found that the new Costa Rican government could not void unilaterally all financial obligations incurred by the Tinoco regime by sweeping claims of illegitimacy. The findings on the odious nature of the debt was subsequently based on the failure of the claimant, the Royal Bank of Canada, to show it acted in good faith when it directly made the loan to Tinoco, who had a reputation for patent corruption.[20] De lege feranda one could still consider, given the wording of Art 53 VCLT, that the loan agreement could be declared void if it merely “conflicts” with jus cogens, such that moral rationales could be incorporated, in line with the more liberal approach taken in Flick and Almog v Arab Bank.

In recent years, however, the international community has moved towards condemning the financing of human rights abuses, as can be seen e.g. in the Security Council’s resolution on asset freezing of such funding[21], the General Assembly’s adoption of the Convention for the Suppression of the Financing of Terrorism[22] and the development of international codes of conduct for corporate due diligence regarding money-laundering and the funding of terrorist activities.[23] This points towards a call to deliberately withhold funds from odious regimes, not so much in order to deprive them of means to carry out jus cogens violations, but rather to ensure that they lose the financial life line enabling them to remain in power and perpetuate that cycle of grave systematic abuse. Thus, given that funds provided to regimes found to have violated jus cogens would more likely than not be directed at facilitating such violations, as systematic jus cogens violations could be said – pointedly – to be that odious regime’s raison d’être, a reversal of the burden of proof should be considered in establishing the causal connection. The underlying loan arrangement should then be considered void, unless the lender produces evidence that the funds were directed towards non-odious purposes. In this regard specific measures taken by creditors, such as risk assessment before granting a loan[24] or inclusions of “use-of-proceeds covenants” in agreements governing sovereign bonds[25] could be adopted to guard against potential invalidation of the loan.

Transitional justice as well as sovereign debt restructuring efforts in post-conflict states have often been driven by “equity” rationales to facilitate debt relief from sovereign debt burden left by odious regimes. The core of such rationales is ex inuria non ius oritur: creditors may not stand to profit from their engagement with regimes which blatantly violate jus cogens norms to the detriment of the victims, the peoples of post-conflict states. While a legal right under international law to repudiate odious debt has yet to crystallise, future efforts to anchor the concept of odious debt in international law should consequently be directed at, and advocated for, states whose people must endure the legacy of systematic perpetration of such grave international crimes and human rights abuses.

[1] James Gallen, “Odious Debt and Jus Post Bellum” (2015) 16 The Journal of World Investment and Trade 666, 668.

[2] Christoph Paulus, “The Evolution of the “Concept of Odious Debts”” (2008) 68 ZaöRV 391, 397 et seq.

[3] Cf Conclusion 17 in ILC, ‘Report of the International Law Commission on the Work of its 71st Session’ (29 April – 7 June and 8 July – 9 August 2019) UN Doc A/74/10.

[4] Robert Howse, “The Concept of Odious Debt in Public International Law” (2007) No.185 UNCTAD Discussion Papers.

[5] Julia Wallace, “Cambodia Appeals to Trump to Forgive War-Era Debt” (New York Times, 2 April 2017) <> accessed 18 April 2021.

[6] Alex Hryhorczuk, “How a Commercial Bond Dispute in the UK Supreme Court Invokes International Law” (EJIL:Talk!, 30 December 2019) <> accessed 18 April 2021.

[7] Sean Brooks, “Why All the “Howling” About Sudan’s Debt?” (African Arguments, 16 October 2009) <> accessed 18 April 2021.

[8] “Experts Urge US Government to Cancel Liberia’s Odious Debt” (Probe International, 15 March 2006) <> accessed 18 April 2021.

[9] Mark Stumpf, “Reflections on the Bosnia debt Restructuring” (2010) 73 Law and Contemporary Problems 301, 306.

[10] Transcript of President Clinton’s Remarks to the IMF/World Bank (6-8 October 1998) <> accessed 18 April 2021.

[11] Art 25 (3) lit (c) Rome Statute:      “facilitating the commission of such a crime, aids, abets or otherwise assists in its commission or its attempted commission, including providing the means for its commission”

[12] Art 16, ILC Draft Articles on Responsibility of States for Internationally Wrongful Acts, with commentaries (2001).

[13] Cf Conclusion 17 in ILC, ‘Report of the International Law Commission on the Work of its 71st Session’ (29 April – 7 June and 8 July – 9 August 2019) UN Doc A/74/10; Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Croatia v. Serbia), Judgment, ICJ Reports 2015, p. 3, at p. 47, para. 87; Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory, Advisory Opinion, ICJ Reports 2004, paras. 88, 149 and 155; Barcelona Traction, Light and Power Company, Limited, Judgment, ICJ Reports 1970,p. 32, paras. 33–34.

[14] Prosecutor v. Furundzija, Case No. IT-95-17/1-T, Judgment, 232-33.

[15] United States v Weizsaecker [1947] Trials of War Criminals Before the Nuremberg Military Tribunals Under Control Council Law No.10, Volume 14, p 621-22.

[16] United States v. Flick [1947] Trials of War Criminals Before the Nuremberg Military Tribunals Under Control Council Law No.10, Volume 6, p 1217-23.

[17] In re South African Apartheid Ligation, 617 F. Supp. 2d 228 US (S.D.N.Y 2009) 269.

[18] Ibid.    

[19] Almog v Arab Bank, 471 F. Supp. 2d 257 (E.D.N.Y. 2007) 291-292.

[20] Tinoco Claims Arbitration (Great Britain v. Costa Rica), (1923) 1 RIAA 369, 176.

[21] UNSC Res 2231 (20 July 2015) UN Doc S/RES/2231.

[22] UNGA International Convention for the Suppression of the Financing of Terrorism (adopted 9 December 1999, opened for signature 10 January 2000) (2000) 39 ILM 270.

[23] Cf Financial Action Task Force’s Standard and Recommendations on <>

[24] Sabine Michalowski and Juan Pablo Bohoslavsky, ‘Ius Cogens, Transitional Justice and Other Trends of the Debate on Odious Debts: A Response to the World Bank Discussion Paper on Odious Debts’ (2009) 48 Columbia Journal of Transnational Law 59, 80.

[25] Caroline Gentile, “The Market For Odious Debt” (2010) 73 Law and Contemporary Problems 151, 170.