Applied Legal History: Demystifying the Doctrine of Odious Debts
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Duke Law Scholarship “Odious debts” have been the subject of
debate in academic, activist, and policy circles in recent
years. The term refers to the debts of a nation that a despotic
leader incurs against the interests of the populace. When the
despot is overthrown, the new government—understandably—does not
wish to repay creditors who helped prop up the despot. One
argument has focused on whether customary international law
supports a “doctrine” of odious debts that justifies non-payment
of sovereign debts when three conditions are met: (1) the debts
were incurred by a despotic ruler (without the consent of the
populace); (2) the funds were used in ways that did not benefit
the populace; and (3) the creditors were aware of the likely
illegality of the loans. Advocates of this doctrine, which was
synthesized by Alexander Sack in 1927, typically cite two
examples of U.S. state practic