Repudiation and Arbitration:
The Need for an Integral Approach

By Alejandro Bendaña
 

Introduction

Jubilee South was founded on the notion that the historical roots and socio-ecological costs of external debt, as interpreted and felt by its victims, made it necessary for campaigns and allies to work beyond notions of simple debt relief and debt cancellation. The fundamentals of the illegitimacy of the debt understanding is found in the Johannesburg South-South Summit Declaration and in subsequent documents. While affirming the right and need of every national campaign, North and South, to base its work on their particular contextual realities, it was also imperative to articulate demands and strategies rooted in a perspective and an analysis that takes the issue of the legitimacy of the debt into account. This shift also reflected an intention to directly address a broader set of countries than the "poor country" or "debt alleviation" framework of the petition which, as could well develop in disjointed appeals for "arbitration", could serve to detract from the necessary reframing of debt campaigns so as to demand among other elements the immediate and unconditional cancellation and nonpayment of the bilateral and multilateral illegitimate debts of all poor countries.

Jubilee South recognizes that the focus on illegitimacy represents the entry, for many campaigns, into new policy terrain. This discussion paper is an attempt to present the perspectives of Jubilee South so as to contribute to the discussion and the necessary development of greater clarity and focus in campaign demands, and particularly the Free and Transparent Arbitration Process.

From a historical, moral, environmental and human rights perspective, foreign debt can be posited to be illegitimate and therefore non-existent. Jubilee South makes the case that it is the North that owes the South. This is our starting point as well as our premise–one that conditions our analysis of debt, not as an accounting or question of "sustainable" repayment negotiated between two contracting parties. In the context of unequal power relations and a systemic proclivity to widen the gap between the power and powerless, debt is recognized as one instrument, among others, employed by the powerful to institutionalize and reproduce inequality.

The broad recognition of debt as illegitimate is complemented by the underscoring, in an illustrative and educational sense, of particular cases or modalities of illegitimate debts. While other categories and conceptualizations around illegitimacy can and should be posited, examples of illegitimate debt can be given exposure for campaigning, emblematic and educational purposes. Emphasis in defining illegitimacy is also being shaped by national context and strategies ranging from audits, popular tribunals, an international court case and global proposals such as FTAP.

Our objective is to build unities in a process that increasingly complements the collective call for cancellation with one for repudiation. South and North campaigns are invited to support such a position–in the South by the building of movements demanding deliberately non-payment on a collective basis, and in the North by campaigns that educate constituencies on the illegitimate nature of the debt, the expression of a broader illegitimate globalization process, and in the process articulating clear structural demands that actively contests the fundamental injustice of the debt crisis and the neoliberal global economic system.

Jubilee South will continue to insist on the illegitimacy of the global framework on the one hand, and on the other that understandings must also be rooted in people’s understanding and experiences, encompassing notions of justice and human rights. Within this analytical definition of an illegitimate system, a particular or specific definition of illegitimate debt must be articulated for the purpose of focused advocacy. This definition must be rooted in people’s concrete experiences, and must resonate with widely accepted and understood concepts and practices of fairness, justice and morality, in the framework of globalization. In this context the struggle against illegitimate debt forms part of the construction to place social justice at the center of an economic system, something that the present neoliberal global system has failed to do.

Jubilee South feels that advocacy, however, cannot be restricted to the "legal" or policy discussions. While the legal approach offers some possibilities, it is governmental political will and courage that will determine decisions not to pay, that is, to act on the basis of illegitimacy criterion. Strictly legal criteria, more often than not, pushes democratic governments to honor the debts of corrupt overthrown dictatorships (Philippines, Indonesia). "Legal" therefore should not be confused with "legitimate", as legitimacy is fundamentally a political concept bestowed through popular consent. Our challenge is to delegitimize the creditors. Collective repudiation is more important than individual acts.

At the same time, Jubilee South understands that advocacy requires focused definitions. We are also sensitive to the need to highlight specific emblematic examples as examples of illegitimacy–even though a case-by-case consideration logically creates a tension for the postulate of illegitimate debt as a comprehensive category. There is no denying that the identification of examples is crucial for the exercise of pressure on governments for repudiation and cancellation. Examples in turn require the development of more definitive or minimal criteria. We recognize also that the more rigorous and specific the criteria, the more effective the strategy for advocacy will likely be. But criterion need not be preclusive or monolithic, particularly as many campaigns and movements feel a need to articulate systemic definitions for educational and political purposes. This is not to work at cross-purposes: the challenge is for both perspectives on illegitimacy to arrive at broad of framework definitions that are useful in advocacy and education.

Jubilee South’s definition views "debt" less as a financial category than as instrument of power that helps insure and perpetuate the transfer of resources from South to North (South and North also defined in sociological more than geographical terms). But the fact that the South is an unpaid creditor does not preclude Jubilee South from tackling "external debt" as commonly understood. It does, however, demand that historical creditor (the South) be regarded as the fundamental protagonists of a debt campaign that encompasses the right to restoration and reparations.

In the current global system, most of the power is concentrated on the side of the creditors. And, unlike many national contexts, on the international level there

are precious little checks on the capacity of the powerful to punish potential and actual defaulters. We accept that a global system with a serious and impartial mechanism–Fair and Transparent Arbitration Procedure (FTAP)–would spell a considerable improvement over the current system lacking such a mechanism. At the same time, however, we recognize that the problem of external indebtedness will not be solved by arbitration alone. That sovereignty is an essential component of democracy and democratic global governance–and a technical approach may indeed pose risks to national sovereignty and legalize and pseudo legitimize debts that are in fact illegitimate.

The assessment and nonpayment of developing countries’ illegitimate debt is fundamentally a national sovereign task. An independent arbitration tribunal may undertake its own assessment, and indeed serve a purpose to creditor countries or entities in helping them establish the illegitimacy and/or illegality, and hence recommend the canceling of such debts. But it cannot bring into question the right of the people themselves to bring about and act upon the terms and instruments of oppression. It goes unstated that for any arbitration body not to become an instrument of powerful creditors, it must be totally independent of the International Monetary Fund and the World Bank. The International Financial Institutions are themselves creditors and the perpetrators of illegitimate debt accustomed to acting as judge, jury and executioner. Civil Society representation is indispensable, and proceedings should be open and transparent. Yet again, the priority campaigns extend to the establishment of an international arbitration tribunal should be equal to that of other instruments to establish and determine the illegitimacy of debts and illegitimate debt.

In this context, work on FTAP must be aware of the risks, and that "achievements" are not real if they detract from a consideration and understanding of debt illegitimacy. There can be no conditionality–however well intended–on the sovereign right of a people (and their democratically achieved government) to repudiate debt that is illegitimate and unsustainable. Sustainability from the Jubilee South perspective is not defined in accounting terms but as regards its cost to the dignity and life of human beings, and in the light of the historical exploitation of South by North. The human and collective right to repudiation is not negotiable, and therefore cannot be subject to arbitration, any more than there can be arbitration between rapist and raped, criminal and victim.

Within the framework of historically defined illegitimacy (as opposed to banker-defined sustainability) the place of arbitration can be quite distinct. In the illegitimacy context, recourse to arbitration is visualized not as a means whereby bankers to assure support for punitive measures and "compensation". Arbitration rather can and should be conceived as a check on the powerful to punish a sovereign country that politically and democratically opt for non-payment. Whereas legal disputes may admit arbitration, illegitimacy issues of are another order. Not all that is legal is legitimate, and not all that is "illegal" is illegitimate. It follows that arbitration must take account of issues of both legality and legitimacy. Reducing our recommendations to a purely legalistic approach would in practice undermine the struggle for cancellation and for repudiation of illegitimate debt. We need a proactive approach in which the fate of peoples is not the product of tribunals but of their own efforts. We are all aware that international entities, in the current context of power, may be more inclined to the powerful than to the powerless. Evidently our objective is not to give the present unequal power structure pseudo legitimacy, contributing to its reselling and consolidation.

The time is ripe to demand more than a simple arbitration mechanism or tribunal. This is so precisely on account of the political demands made by Jubilee South and Southern peoples that their governments repudiate illegitimate debts.

This is a fundamental source of pressure that must be augmented and not undermined. Popular tribunals, such as those that have occurred in Brazil and Argentina, have established the ethical case for the outright cancellation of illegitimate debts. An International Ethical Tribunal planned for the meeting of the Second Social Forum (January 2002) are central sources of inspiration, legitimacy and information for determining the illegitimacy of debts and for proposing solidarity instruments, including a tribunal process, that would ensure solidarity and just outcomes. The Jubilee South guiding principle, upheld strongly as regards many formulations of so called debt relief, is to struggle so as peoples, allies and even governments North and South not to be trapped by dealing with the alleviation of symptoms, but face up to the structural and ideological root causes of poverty, inequality and debt oppression.

Campaign strategy must derive from an historical analysis. If we argue that there should be one common justice and transformation-oriented framework, and that arbitration is one component in the framework, the danger arises that FTAP discussion, by outpacing the illegitimacy discussion may also displace that of legitimacy, as opposed to an approach that reinforces each other. The point is not to create confusion in those we seek to influence and educate in all the components and basis of illegitimate. Such at least was the explicit intention in the Dakar conclusions. In other words we run a risk in pushing too far ahead and independently in the FTAP while other illegitimacy instruments components such as popular tribunals, auditors and debt repudiation movement building lag behind.

If all initiatives are not better linked and brought under a common framework of understanding there is the danger that peoples are left out of the equation. It must be remembered that our starting point is not governments but people. If this is not the case, then state-based initiatives are starting elements. In and of themselves, it can be assured; governments will not easily take up the illegitimacy element, as opposed to the arbitration one--a safer and less costly one, similar to South government advocacy and support for debt relief as opposed to debt cancellation and debt repudiation. This of course relegates appeals based on legitimacy. We cannot agree with some of the arbitration proposals that explicitly indicate that repudiation is a non-starter on account of its non-acceptability to the G-77. This is not acceptable, lest we believe that viability and "realism" must overrule morality and justice. For these reasons, as well as elementary democratic reasoning, Jubilee South cannot, as AFRODAD appears to do, accept the positions of governments in the G-77 as its own starting point.

Our job precisely is to turn the tables on this sort of morally unacceptable "realism or viability"–which is why we explain and defend the legitimacy approach whereby it becomes morally and historically unviable for governments and peoples, including NGOs in the North, NOT to defend the principle of repudiation, and argue arbitration, among other mechanisms including reparations and restoration, in that light. We ask all to reflect on these arguments and to sharply articulate an arbitration perspective and campaign that is neither contrary nor undermining or substitutive of a repudiation or illegitimacy approach. Let us not be naive because there will be those who will politically seek to play one approach against the other, posing a fundamental contradiction where there is none. Arbitration is a means to an end, and not an end in itself! It is not a question of cutting out potential allies and collaborators but of building the broadest possible bridge in both directions. It is important that both in those in the streets as those in governments be obliged to deal with repudiation and arbitration strategic proposals in the struggle for a better debt-free world.

To be genuine, Jubilee and the commitment to economic justice must recognize and challenge debt bondage as one expression of an illegitimate system of domination and exploitation. There is no separation of one from the other. Partial relief cancellation, or arbitration dealing only with uncorrectable portions of debt amounts to false justice (or Perverse Jubilee as Hugo Assman terms it) which perpetuates the current system of domination.

Concerned about the possibilities for co-option and manipulation against the notion of illegitimate debt, Jubilee South does not take a position of support for the FTAP. At the same time we recognize that further study and discussion is required, and Jubilee South will seek to participate constructively.

1 Illegitimate Debt: Definitions and Strategies for Repudiation and Cancellation Policy Forum, Canadian Ecumenical Jubilee Initiative, November 15-16, 2000, Sheraton Hall, Wycliffe College, Toronto, 4.

2 Archbishop Njongonkulu Ndungane (1999) Address to the Jubilee 2000 South South Summit Gauteng: Jubilee South, p.3. See also Smith, Julie Ann and Kufuor, Kofi Oteng (2000) Legal Aspects Underlying Resolution of State Insolvency London: School of Law, University of East London; Raffer, Kunibert (1993) "What’s Good for the United States Must be Good for the World: Advocating an International Chapter 9 Insolvency" in From Cancun to Vienna: International Development in a New World Vienna: Bruno Kreisky Forum for International Development; UNCTAD (1998) Trade and Development Report Geneva: United Nations Conference on Trade and Development, pp.89-93.

3 Canadian Ecumenical Jubilee Initiative (2000) Report on Forum on Illegitimate Debt: Definitions and Strategies for Repudiation and Cancellation Toronto: Canadian Ecumenical Jubilee Initiative.

4 AFRODAD (2000) "International Arbitration Court on Foreign Debt", Harare: AFRODAD