The regulation of sovereign financing and the legal protection against excessive government debt are two highly topical and significant issues, in view of the recent global financial turmoil and economic crisis. According to the Global Debt Clock of the Economist, the current global public debt exceeds $50 trillion, escalating at an unprecedented rate of about 150 per cent in the course of the last decade. Among others, burdensome sovereign debts have detrimental effects on the enjoyment of basic socio-economic human rights - such as the rights to health and education - in many developing and developed countries, as they diminish or eliminate the capacity of the respective governments to design and implement policies for the realization of those rights.
The severe and systemic sovereign debt crisis has prompted a number of policy responses, the most significant of them being the unveiling of the UNCTAD “Principles on Promoting Responsible Sovereign Lending and Borrowing” in January 2012, endorsed by the UN General Assembly in its December 2011 Resolution on External Debt Sustainability and Development. Along with these political initiatives towards uniformity and standardization of sovereign financing practices, some - albeit few - studies have been undertaken on the regulation of sovereign lending. However, these scholarly efforts have largely brushed over the legal nature of sovereign lending per se. Moreover, the existing inquiries about potential human rights safeguards for states facing insurmountable external financial liabilities fall short of articulating a satisfactory legal framework that could accommodate debt service together with the unhindered implementation of internationally recognized socio-economic rights.
This research project assesses the role of international law in sovereign lending and borrowing and discusses the nature of government debt> from both legal and economic standpoints. In addition, it seeks to identify whether sovereign loan agreements are susceptible to any legal counter-arguments with regard to their impact on the national economy or the enjoyment of basic socio-economic human rights by the local population, or when these agreements have been concluded by illegitimate or corrupt domestic authorities or officials. In this latter context, the entrenched legal concept of odious debt is revisited and revised, in order to provide a platform for human rights defences against treaty and contractual obligations of over-indebted states vis-a-vis their creditors.
a) The first part examines the legal nature of sovereign lending and its legal regulation. Initially, it will track its changing pattern and classify its various types. Subsequently, it will scrutinise the different rules which apply to each one of these possibilities, in the light of contracts or other agreements entered into by the parties involved (e.g. Memoranda of Understanding, Stand-by-Arrangements in the case of the IMF which lack a contractual character, and others). Ultimately, it will look at the international regulation of sovereign financing - taking as a starting point the aforementioned UNCTAD principles and international lending practices - as well as the relevant domestic rules and/or principles. In other words, it will evaluate the existing international legal setting of sovereign financing and advocate its reform, in the direction of debt crisis prevention through better regulated sovereign financing practices that would exclude malevolent loan contacting and odious debts.
b) The second part centres on the investigation and establishment of potential counter-arguments against the execution and repayment clauses contained in the aforesaid loan agreements, against the benchmark of international human rights law. After a coherent overview of the historical and contextual development of the odious debt doctrine, this part will also discuss the contemporary legal nature and meaning of odious debt under international law and will explore new domains of its applicability in conjunction with human rights stipulations. The objective here is to reassess the classic understanding of that old concept and to construct a modern overarching theory for odious debt with the attachment of a novel human rights aspect.