Patricia Adams is the executive director of Probe International and the author of The Doctrine of Odious Debts.
Citizens everywhere need freedom from debt that was never theirs. When unaccountable rulers borrow in the name of the people—without consent, without public benefit, and often with the knowing complicity of lenders—the resulting obligations become chains on future generations. Taxes rise, public services shrink, and economic opportunity withers under the weight of someone else’s excesses. Applying a test of odiousness to sovereign debt would break those chains. It would free citizens from illegitimate burdens, restore accountability, and ensure that only debts truly incurred for the public good bind the nation.
In international finance, the fiction that all sovereign debt is legitimate and binding on a nation’s people has long served creditors and unaccountable rulers alike. That fiction is fraying. Courts, scholars, and citizens are increasingly invoking the doctrine of odious debt—formalized by Russian legal scholar Alexander Nahum Sack in 1927—to demand that debts incurred without the consent of the governed, and not for their benefit, should not bind successor populations. Applying rigorous tests of odiousness is not radical disruption; it is overdue accountability that would curb moral hazard, protect taxpayers in debtor countries, and force lenders to exercise genuine due diligence.
Sack’s criteria are straightforward and rooted in precedent. A debt is odious if it was contracted by a despotic or unrepresentative regime without the people’s consent, if the proceeds did not benefit the population, and if the creditors knew or should have known.
History confirms the principle’s force. After the Spanish-American War, the United States repudiated Cuba’s debts to Spain because the funds had financed the suppression of the Cuban people. In 1919, the Reparation Commission declined to saddle newly independent Poland with German and Prussian debts used to colonize it. In 1923, U.S. Chief Justice William Howard Taft, arbitrating a claim by the Royal Bank of Canada against Costa Rica, rejected loans made to the dictator Federico Tinoco for personal purposes.
These are not dusty relics. After the fall of Saddam Hussein, Paris Club creditors forgave 80 percent of Iraq’s debts rather than risk an odious debt determination that would have exposed their financing of a regime whose borrowings bought weapons, palaces, and instruments of repression. Most of Saddam’s estimated $120 billion in claims qualified as odious under the doctrine. An arbitral process to distinguish legitimate from illegitimate obligations would have demonstrated to Iraqis that the rule of law could deliver justice, while clarifying creditors’ responsibilities and reducing the moral hazard that has long destabilized international lending.
Today the doctrine is moving from theory toward practice. In Kenya, a High Court has greenlit a full hearing on a petition challenging roughly $54 billion in public debt accumulated under former President Uhuru Kenyatta and President William Ruto. Petitioners, including Senator Okiya Omtatah, argue that less than 30 percent of the borrowing received proper parliamentary approval. Much of the remainder never appeared in appropriation laws, was not tied to identifiable public projects, and was allegedly routed into offshore accounts in violation of Kenya’s Constitution and Public Finance Management Act. A Eurobond of about $7.1 billion is specifically targeted as unconstitutional and odious. Kenyan citizens, the petition contends, should not repay loans they neither authorized nor benefited from; personal liability for officials is also sought.
In a dramatic twist, the Central Bank of Kenya, a respondent in the case, has joined the petitioners, arguing in court filings that the petition “raises contested substantial issues of undoubted public importance.” Legal observers describe the case as “a pivotal moment in Kenyan jurisprudence, potentially redefining sovereign debt accountability and strengthening constitutional protections against fiscal mismanagement.” Its outcome, they say, “could reshape how nations address the legacy of unsustainable or corrupt borrowing practices.”
Venezuela has similarly become a poster child for the problem. Economists Ricardo Hausmann and Ugo Panizza noted that well-functioning markets should have cut off the Maduro regime’s access to finance long before U.S. sanctions did so. The regime’s unconstitutional moves—sidelining the elected National Assembly and installing a compliant Constituent Assembly—drew “a rare bright line between what might be an unsavory regime and an illegitimate one,” said Anna Gelpern, a law professor at Georgetown and a former Treasury official.
Critics worry that recognizing odious debt would chill legitimate lending or create uncertainty. The opposite is true. Private lenders already protect themselves with representations, warranties, and project-specific due diligence. An explicit odious debt framework would simply formalize those standards for sovereigns. Creditors who insist on parliamentary approval, transparent use of proceeds, and identifiable public benefit would secure stronger claims.
Those who lend blindly to despots or for opaque offshore transfers would bear the risk they knowingly assumed. As American commissioners told Spain in 1898, “the creditors, from the beginning, took the chances of the investment.”
The benefits extend beyond individual cases. An odious-debt regime would starve tyrants of easy finance, reduce the ability of unaccountable rulers to borrow against their people’s future for repression or personal enrichment, and promote sounder investment. It rests not only on international custom but on familiar domestic principles: unjust enrichment and the law of agency. Sovereigns are agents of their people; when they act outside that mandate, the principal is not bound. International lending agencies like the IMF and other official institutions should champion rather than dismiss this application of the rule of law. Clarifying the rules in advance would lower borrowing costs for legitimate, transparent governments by reducing the risk that future political transitions will trigger blanket repudiations.
Kenya’s pending case, the unfinished business of Iraqi and Venezuelan debt, and the clear historical precedents demonstrate that the doctrine is neither mythical nor impractical. Testing sovereign debts for odiousness is a practical, justice-oriented reform that would finally give citizens the freedom from illegitimate debt they deserve. Lenders who ignore the tests do so at their peril and at the continued expense of the people forced to repay what they never owed.
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