Odious Debts

The concept of state debt rests on a legal fiction: that states, unlike individuals, do not die. This fiction allows for continuity in international obligations, enabling governments to borrow, trade, and negotiate treaties with the assumption that their successors will honor these commitments. Under international law, this is known as the doctrine of state succession. Regardless of revolutions, regime changes, or the passage of time, the debts incurred by previous governments remain binding. But this principle, while useful for ensuring global economic stability, raises serious moral and practical concerns when applied to oppressive or kleptocratic regimes. These governments often incur massive debts—frequently to finance repression—knowing that they will not bear the cost of repayment. The burden instead falls on future administrations and citizens, including those who may have suffered under the prior regime. This creates perverse incentives: dictators borrow freely, creditors lend greedily, and the people pay. Cases such as post-Saddam Iraq, post-apartheid South Africa, and post-Yanukovych Ukraine highlight the injustice of forcing new governments to honor illegitimate debts. While no tribunal has yet declared such debts legally odious, the flexibility of customary international law could allow for such a precedent. If legal fictions are meant to serve the public good, then their abuse—especially when it perpetuates harm—should justify their suspension. The challenge lies in deciding when to break with the fiction of infinite state life and acknowledge the moral rupture between a legitimate state and its illegitimate predecessor.

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