24 March 2014

Promise-Keeping and Ukrainian Debt

Years ago I posted several remarks about the mutual moral obligations of promise-makers and promise-beneficiaries. (Here and here will get you started.) The gist of my argument was that a recipient of a promise, like one to be paid money, has moral obligations equally as significant as those for one who made the promise. Thus, for example, bankruptcy's discharge of debts is not necessarily immoral. (For the details of my bankruptcy argument go here, here, and here.) 

The correlative justification of promise-keeping for recipients of promises is the virtue of forbearance. I have not addressed the moral consequences from the sorts of behaviors of recipients of promises that are widely regarded as justifying the promise-makers refusal to carry through such as misrepresentation, coercion, etc. because those are widely accepted.

No legal regime exists to recover debts in the world of borrowing by nation states. In general, sovereigns are immune because there is no "super state" that has the authority to adjudicate or enforce claims against another nation. Nations can, however, agree in the instruments that create their debt that they will submit to adjudication in the courts of a particular nation. Yet, even here, there's not always a clear way for a successful creditor to get paid.

Notwithstanding the lack of a universal mechanism to enforce payment of national debts, there's every pragmatic reason for nation states to pay. After all, should a country like, say, Argentina, stiff its lenders, it's going to find it very difficult to borrow again.

There is, however, one frequently-talked-about exception to the pragmatic rule that national debts should be paid: the doctrine of odious debts. Rarely utilized, the doctrine of odious debts holds that some national debts need not be paid not because the debtor cannot pay but because creditors knowingly lent to a government that oppressed its people.Go here and here to read a two-part series by Ann Gelpern making the argument that the last-minute $3 billion lent by Russia to Ukraine falls into this category.

I'm certainly no expert on the doctrine of odious debts but it's worth thinking about as Congress considers whether to authorize lending by the U.S. to Ukraine.

No comments:

Post a Comment