Odious Debt in the 21st Century: From Despotic Regimes to Predatory Creditors

Pierre Pénet ()
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Pierre Pénet: ENS Paris Saclay - Ecole Normale Supérieure Paris-Saclay, CNRS - Centre National de la Recherche Scientifique

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Abstract: This article investigates the renewed significance of the odious debt doctrine in contemporary sovereign finance. Initially formulated to challenge debts contracted by illegitimate regimes, the doctrine now engages broader debates around creditor accountability and abusive lending practices. Drawing on case studies including Cuba, Costa Rica, Iraq, Ecuador, Venezuela, and Greece, the article traces the doctrine's shift from a legal basis for debt repudiation to a versatile tool of political contestation and market signaling. Despite its legal ambiguity, the odious debt doctrine remains a powerful vehicle for challenging illegitimate debt and redefining sovereign borrowing in an era of intensified scrutiny of creditor behavior.Recent debt crises have seen the rise or resurgence of various legal counter-cultures. This article examines one of their most structured expressions: the doctrine of odious debt. Situated within a broader set of efforts aimed at limiting the unchecked assertion of creditors' rights, the doctrine contributes to an ongoing redefinition of the normative architecture governing sovereign credit relations. Although diverse in design and scope, these approaches share a core idea: debtors have rights and creditors cannot be absolved from responsibilities. In a marked departure from the orthodox conception of sovereign lending, they reject the premise that the mere extension of credit establishes an absolute right to repayment. On the contrary, creditors, too, may be held to standards of accountability, particularly when debt contracts are compromised by elements of illegitimacy.The odious debt doctrine rests on a fundamental contestation of the legal validity of debts contracted under tainted conditions, especially when the borrowing regime lacks legitimacy or when the funds are used for purposes contrary to the public interest.Originally articulated in the early 20th century in relation to issues of state succession, the doctrine has undergone successive evolutions in both its criteria and scope,

Date: 2025-07-01
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Published in Proceedings of the Paris Institute for Advanced Study, 2025, 21, ⟨10.5281/zenodo.15828934⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05151682

DOI: 10.5281/zenodo.15828934

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