Besigye got it wrong on odious debt doctrine

I read with interest Dr Kizza Besigye’s article in Daily Monitor of October 22 titled, “The citizens of Uganda will not pay Chinese odious debts”. However, his application of the odious debt doctrine is problematic and deeply flawed.

Dr Besigye suggests that the doctrine offers a blanket opportunistic cover for any successive government to renege on Uganda’s contractual obligations in total disregard of other well-known and binding international law principles such as “pacta sunt servanda” (Agreements must be kept).

Since its postulation in the post-World War I times by jurist Alexander Nahun Sack, in “The Effects of State Transformations on their Public Debts and Other Financial Obligations” in 1927, the odious debt principle has been punctuated with many exceptions as to its legal efficacy and applicability.

The overriding principle is sanctity of contracts as legally binding agreements between parties, for example, states (within a Public international law context), or individuals (within a private international law andor a domestic law framework).

To avoid an arbitrary use of the odious debt doctrine, the following qualifications have been applied in various international tribunals. The new government would have to prove that:
(1) The needs which the former government claimed in order to contract the debt in question, were odious and clearly in contradiction to the interests of the people of the entirety of the former State or a part thereof, and
(2) The creditors, at the moment of paying out the loan, were fully aware of its odious purpose.

Upon establishment of these two points, the burden of proof then shifts to the creditors, who must prove that the funds for this loan were not utilised for odious purposes – harming the people of the entire State or part of it – but for general or specific purposes of the State which do not have the character of being odious.

All the examples cited by Dr Besigye (the Standard Gauge Railway, Karuma dam, the oil refinery and pipeline) are public infrastructure projects that are in the best interest of the domestic and regional population (citizens).

Whereas it is true that there are legitimate public procurement process concerns in Uganda’s system, this does not make these projects “hostile debts”, or “odious” in nature that the Chinese companies and other contractors involved should not expect payment. This would be blatant breach of contractual obligations, and not even Dr Besigye would want to run a government that violates domestic and international legal norms.

A lot of ink has been spilled on Uganda’s public procurement process and its attendant bureaucratic red tape emphasis on procedures, rather than results.
This is an internal issue to be sorted out by Uganda’s policy makers, not the lenders or the companies undertaking to enter into contractual relations with Uganda.
Furthermore, for the concept of “odious debt” to be applicable in the circumstances, there should be state dismemberment (for example, the case of the former Soviet Union), State succession or some other change that fundamentally alters the nature of the sovereign itself that international legal obligations are not thought to be automatically transferred to the new state.

As a formal matter, the identity of the sovereign itself should be so fundamentally changed and the new sovereign must unequivocally express its will not to be bound by the prior contractual agreements.

Contrary to Dr Besigye’s constant assertions, Uganda has witnessed some irreversible democratic gains since the NRM regime he served came into power.
It is not easily foreseeable that there will be such a fundamental or radical change in the political structure of Uganda after President Museveni that it will greatly alter the Ugandan political and social structures to justify and sustain a plea of odious debt in light of that change.

All the case studies cited by Dr Besigye are inapplicable to our situation. Therefore, we need to mobilise the population to rally behind these infrastructure projects, because ultimately, they are for the benefit of all Ugandans.

Securing the assurance of those who have undertaken to fill our large-scale project finance gaps should not be seen as “odious”, but as a legally binding commitment on the respective parties to honour their obligations and see to it that these projects are successfully accomplished.

Mr Kayondo is a legal researcher on Sovereign Finance and International law.

SOURCE: Daily Monitor

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