Most debts created by Saddam Hussein in thename of the Iraqi people would qualify as “odious“according to the international Doctrine ofOdious Debts. This legal doctrine holds thatdebts not used in the public interest are notlegally enforceable.
There is a widespread acknowledgment thatthe debts created by Saddam Hussein’s regimebought weapons, palaces, and instruments ofrepression. Iraqi legislators should, as a firstorder of business, establish an arbitral process todetermine the legitimacy of the estimated $120billion in claims against their people. Only afterIraqis have an accurate accounting of theseclaims against their nation, and determine whichare legitimate, should they appeal to creditors fordebt relief, if any is required. To do otherwisewould allow creditors to evade responsibility forfinancing Saddam’s regime against its people.
An odious debts arbitration would demonstrateto Iraqis that justice can be served by therule of law. An arbitration would also expose therole of foreign creditors and thus help establishaccountability in other countries.
Fears that an Iraqi debt arbitration wouldthreaten the stability of international finance aremisplaced: most claims against Iraq are held bypublic creditors, not private; furthermore, anarbitral process would establish the due diligencethat creditors need to observe in order toprotect future loans against odious debt charges.By clarifying the responsibilities of creditors (orborrowers), and thus their rights to repayment(or repudiation), an odious debt arbitrationwould help reduce the moral hazard that hasdestabilized international finance for the past 60years. More profoundly, by giving creditors anincentive to lend only for purposes that aretransparent and of public benefit, future tyrantswill lose their ability to finance their armies, andthus the war on terror and the cause of worldpeace will be better served.