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Africa: Debt Arbitration
Africa: Debt Arbitration
Date distributed (ymd): 020308
Document reposted by Africa Action
Africa Policy Electronic Distribution List: an information
service provided by AFRICA ACTION (incorporating the Africa
Policy Information Center, The Africa Fund, and the American
Committee on Africa). Find more information for action for
Africa at http://www.africaaction.org
+++++++++++++++++++++Document Profile+++++++++++++++++++++
Region: Continent-Wide
Issue Areas: +political/rights+ +economy/development+
SUMMARY CONTENTS:
This posting contains two new documents calling for approaches to
debt cancellation not exclusively dependent on creditor-dominated
decision-making mechanisms. The first consists of excerpts from a
new paper on debt arbitration, by the African Forum and Network on
Debt and Development; the second is a statement from a workshop
hosted by Jubilee Netherlands.
The Jubilee Debt Campaign in UK (http://www.jubileeplus.org) and
Eurodad (http://www.eurodad.org) have also just released
substantive new reports ("The Unbreakable Link" and "Going the
Extra Mile" respectively), documenting the inadequacy of existing
creditor debt reduction measures. Both reports, available in PDF
format on the websites noted) call for additional debt reduction
(Eurodad says "more" and Jubilee Plus 100% cancellation), as well
as new additional resources in official development aid.
+++++++++++++++++end profile++++++++++++++++++++++++++++++
FAIR AND TRANSPARENT ARBITRATION ON DEBT
Issues Paper No. 1/2002
AFRODAD African Forum and Network on Debt and Development
Box MR 38, Marlborough, Harare, Zimbabwe
Tel: 263-4-702093; fax: 263-4-702143
e-mail [email protected];
[email protected]
web: http://www.afrodad.org
[Excerpts only: Full text, including Section B with legal
commentary, available at
http://www.afrodad.org/html/research_arbitration.htm and
http://www.una.dk/ffd/south_ngo/AFRODAD_Debt_arbitration.htm ]
Preface:
This Issues Paper is an attempt to help move the debate on Debt in
Africa beyond the unfulfilled demands made by the severely indebted
low income Debtor countries and by global civil society for Debt
cancellation. Total debt cancellation of both bilateral and
multilateral Debt will provide finance for economic and human
development. For Africa this could mean a minimum of US$13 billion
per year. The legitimate demands for Debt cancellations have not
met with a genuine and positive response by Creditor governments
and institutions. As donors, creditor governments and institutions
continue to dominate the decisions regarding the Debt relief
initiatives. Their perceptions to the issues of Debt tend to have
the interest of safeguarding the existence and well-being of the
international financial system rather than have any concern for the
development of the people of the indebted countries. This reflects
a lack of fair and transparent global governance that should
protect the interests of the weak debtor nations and their people.
A structural change is now required to reshape the global relations
around the Debt crisis. Global civil society, the African
Governments and the intergovernmental institutions are called upon
to demand and work towards the establishment of a Fair and
Transparent Arbitration mechanism under the United Nations as part
of a sustainable way of finding a solution to the Debt crisis.
Various options are available at the global level to deal with the
problem. In the final analysis, we suggest that an International
Arbitration Court is long overdue and is feasible.
This Issues Paper is in two parts; the first provides the
introduction and rationale for Arbitration and the second part
provides a summary of the opinions sought from African Lawyers from
the East, Southern and West Africa on the arbitration process.
These were Dr. Halima Noor-Abdi (Kenya), George Kunda (Zambia),
Quentin Tannock (Zimbabwe) and Dominic Ayine (Ghana). We thank the
contributors for their good efforts. AFRODAD takes full
responsibility for the content of this document. Their specific
contributions are available at AFRODAD as Discussion Papers. ...
We take this opportunity to thank The World Council of Churches
(WCC) for enabling AFRODAD to undertake this work. We also thank
Dr. Rogate Mshana for his encouragement in our ongoing search and
advocacy for sustainable paths to development in Africa.
Opa Kapijimpanga AFRODAD Coordinator.
Introduction
The persistence of the debt crisis faced by the severely indebted
low-income countries and the inability of the international
community to find both immediate and sustainable solutions has
raised concern and the need for structural changes at the global
level to resolve the problem. There are many facets to the debt
crisis but the fundamental weakness is that the Creditors, who
constitute the donors, continue to dominate the decision making
regarding how to resolve the Debt crisis. ...
Part A Background and rationale for Arbitration:
Arbitration is one of the alternative methods of resolving a
dispute outside the traditional court system. In this process a
third independent party would provide a final decision on a
dispute.
Dispute in the arbitration process can be defined to include the
existence of divergent or opposite views which cannot be reconciled
by two parties and which therefore requires a third party, to make
a decision on which view should prevail depending on the arguments
presented by the two parties. Arbitration agreements allow for
settlement or final decisions to be made on grounds other than
purely legal principles, such as considerations of justice, equity
and human rights.
In the case of the Debt problem faced by heavily indebted low
income countries all over the world, there are the divergent or
opposite views between the Debtors and the Creditors that should be
subjected to Arbitration. These include the following:
a). The absolute need for cancellation of official bilateral and
multilateral debts:
While the debtors have made undisputed and legitimate claims and
demands for debt cancellation, the creditors on the other hand
claim that debt cancellation is not the action needed to resolve
the problem. So whether or not there should be debt cancellation is
a subject of arbitration. The Calls for debt cancellation have been
made in the following contexts (to name a few):
- Jubilee 2000 movement, which collected millions of signatures
from all over the world calling for total debt cancellation. The
Call was ignored by the Creditor governments and international
Financial Institutions
- The Secretary General's Report of December 2000 to the Financing
for Development Preparatory Committee Meetings noted the difficult
situation of debt confronted by heavily indebted low-income
countries; no matter how skilled their economic management is. ..
- The Third United Nations Conference on the Least Developed
Countries (UN LDC-III) which was held in Brussels in May 2001 had
fully acknowledged that the external Debt overhang of the majority
of LDCs constitutes an obstacle to their development efforts and
growth and that Debt service takes up a large part of the scarce
budgetary resources that could be directed to productive and social
areas ..
- The African Ministers of Finance meeting in Addis Ababa in
November 2000 as part of the Regional Meetings on Financing for
Development called for an independent body that would not be unduly
influenced by the interest of the creditors ..
- The High Level Panel appointed by the UN Secretary General to
provide expert opinions of various issues in the context of
Financing for Development process, led by Mr. Ernesto Zedillo
recognised the existence of the Debt crisis and the inadequacies of
the current Debt relief initiative ...
b). Reassigning the responsibility for the Debt crisis and burden
partitioning where that might be necessary.
Currently, the assumption of the current Debt relief Initiatives is
that the Debtor countries are solely responsible for the crisis.
While accepting part of the responsibility, due to lack of proper
debt management, corruption and other shortcomings, the Debtors
point to the large impact of the external factors that have been
identified to have contributed to the Debt crisis including the
existence of a global trade regime in which the Debtor countries
continue to suffer declines in terms of trade and ongoing lack of
global market access; natural disasters and factors introduced by
inappropriate policy advice by IMF and the World Bank as well as
the push factors in lending, to mention a few. Creditors never seen
to be part of the problem, which they obviously are.
c). The way to resolve the debt crisis remains a point of
divergence too as reflected in the fact that Creditor initiated and
imposed Debt Relief Initiatives such as HIPC do not address the
Debt crisis adequately. ...
d). There is a need for Arbitration on specific types of Loans or
debt in particular the odious and illegitimate debts which are
categorised to include the following: - Debts that cannot be
serviced without causing harm to people and communities. It is a
violation of human rights to repay debt at the expense of meeting
human development needs. - Debts incurred by illegitimate debtors
and creditors acting illegitimately which includes odious debts and
loans stolen through corruption. - Debts incurred from illegitimate
uses such as projects that did not benefit the people as were
intended. - Debt incurred through wrong policy advice or a result
of external factors over which debtors have no control. - Debt in
which the money was actually stolen and banked in the North
e). Return of wealth stolen from developing countries and held in
the rich countries.
f). One of the major reasons for the lack of political will to
resolve the debt crisis is that the Creditors see the protection of
the international financial system as the basis of decision.
Debtors on the other hand argue that a human rights criterion would
better reflect the so-called partnership that is expected to exist
between the developed countries and the developing countries. ...
Instruments and institutions:
There is a need for finding an appropriate instrument and
institution to deal with the special case of the Debt problem.
Existing instruments such as the Permanent Court of Arbitration
based in The Hague, the United Nations Commission on Trade could
either have its mandate extended to include Debt issues or a new
Commission specifically for Debt could be established. We also
argue that in the end, the optimal solution is to set up an
International Arbitration Court on Debt through a Treaty.
Part B: Issues raised by the Lawyers
[section not included in this posting.]
Statement by Parliamentarians and Civil Society Representatives on
Debt and Financing for Development
Amsterdam, 1 March 2002
Jubilee Netherlands is a coalition of Dutch organizations.
Organizations on the steering committee include Both Ends, Cordaid,
the Evert Vermeer Foundation, NIZA, NOVIB, Oikos, and Wemos. For
more information see: http://www.oneworld.nl/jubilee
The Jubilee Netherlands secretariat is hosted by Oikos:
Jubilee Netherlands p/a Oikos
Mariahoek 16/17, Postbus 19170
3501 DD Utrecht, Netherlands
(030) 231 9424 (030) 236 4903
e-mail: [email protected]
Web: http://www.oneworld.nl/jubilee
The need to find a solution for the debt problem should remain high
on the international agenda for reasons of international justice,
human rights, stability and development needs. Major reforms of
current debt relief mechanisms are needed, which are fair and
transparent, and identify the responsibilities of both debtors and
creditors. We regret that the Financing for Development Draft
consensus has not set a more ambitious agenda to resolve the debt
crisis. We urge the UN member states to take the following
statementinto consideration during the discussions in Monterrey.
A fair and transparent framework for debt relief
The current decision making process, in which creditors play the
role of plaintiff, judge and jury, needs urgent revision. The draft
Monterrey Consensus rightly encourages 'exploring innovative
mechanisms to comprehensively address problems of developing
countries, including middle-income countries and countries with
economies in transition'.
We call on our governments to further discuss with parliaments,
civil society and at international fora the proposals for a new
mechanism, considering the following elements:
- Available to all countries with debt problems;
- An independent decision making body;N
- Recognition of creditors' and debtors' shared responsibility for
both the problem and the solution of the debt problem; both parties
are accountable for the implementation of a fair solution;
- Providing room for civil society and parliaments;N
- A moratorium for debt repayments, until a final arrangement has
been agreed upon;
- Fair burden sharing among all creditors, including private
creditors and non-Paris Club members.
We call for the recognition of debt reduction as a vital and
necessary condition to achieve social and sustainable development.
It frees resources to be used for essential development activities,
including but not limited to the strengthening of the economy.
We urge UN member states to endorse the need to develop an
international framework to identify, track and facilitate the
recovery of illegally acquired wealth to the country of origin.
We urge governments to take concrete steps to further develop the
UN comprehensive convention on corruption as mentioned in the Draft
Consensus for the Financing for Development conference, as well as
regional conventions on corruption.
Debt relief to enable social and economic development
We call on the UN member states to endorse in Monterrey the
following principles for determining, within a fair and transparent
framework, how much debt relief is required:
- Safeguarding of government expenditures in essential fields (with
the Millennium Goals as a bottom line), while ensuring that freed
resources contribute to social and economic development;
- Realistic economic projections, allowing for flexibility to take
into account the impact of external shocks;
- Involvement of all sovereign debts: private, bilateral and
multilateral;
- Bilateral and multilateral debt relief should be financed with
additional resources, using International Financial Institutions'
(IFI) reserves and bilateral contributions additional to current
ODA spending.
There is an urgent need to arrive at international agreements to
provide faster, deeper and broader debt relief, including
multilateral, bilateral and private debts, under a fair and
transparent process. These efforts should not replace nor delay
unilateral debt reduction by creditor countries. Debt service
payment from HIPC countries not eligible for international debt
relief should be placed in a separate fund, until the reasons for
non-eligibility are removed.
We call upon creditor countries to immediately cancel illegitimate
and odious bilateral debts.
We also call upon creditor countries, as the major shareholders of
the IFIs, to accept co- responsibility for 'failed' IFI lending,
i.e. loans that have not contributed to social and sustainable
development.
Enhanced quality of future borrowing, lending and spending
We emphasise that increased scrutiny by parliaments and civil
society in both creditor and debtor countries enhances political
and financial accountability and helps to ensure that civil society
concerns are reflected in lending and borrowing.
We call upon debtor and creditor governments and the IFIs to limit
future lending and borrowing to relevant developmental purposes and
increase transparency in the decision making process. This implies
on:
- export credits: host countries should adopt clear and binding
criteria for Export Credit Agencies (ECA) to ensure transparency
and public scrutiny, and ensuring that only those credits qualify
for back-up guarantees from governments, that contribute to social
and sustainable development. This should pave the way for
international binding regulation of ECAs to avoid adverse social
and environmental impacts of these transactions.
- IFI loans: shareholders should ensure that IFI programmes and
conditions support the implementation of national poverty reduction
strategies, while IFIs should accept responsibility for the social
and environmental impact of their programmes and policy advice.
- bilateral Official Development Aid (ODA): loan dependence should
be decreased through increasing available grants for national
development strategies. OECD countries should achieve the 0,7% ODA
target within a timeframe consistent with the achievement of the
Millennium Goals.
- borrowing: decisions concerning new government loans should be
made subject to public scrutiny and be based on democratically
developed and agreed upon priorities and criteria. Loans should be
used for productive investments, in order to be able to repay the
loans. The use of borrowed funds should be closely monitored and
made public.
We urge OECD governments to open their markets for developing
countries products and avoid market distorting subsidies.
We recognise that parliaments have a crucial responsibility to
enhance political accountability and monitor the quality of the
lending, borrowing and spending processes.
We strongly call for increased information disclosure and
involvement from an early stage in the loan contraction process,
both in debtor and creditor countries, and including lending from
multilateral institutions. The capacity of parliamentarians to
fulfill this responsibility should be strengthened through e.g.
international networking and sharing of information, among
parliamentarians and civil society organisations.
Mr. Pius Anyim, President of the Parliament, Nigeria
Mr. Yandoma, Senator, Nigeria
Mr. Mammon Ali, Senator, Nigeria
Mr. Augustine Ruzindana, Member of Parliament, Uganda
Mr. Gheysika Agambila, Deputy Finance Minister, Ghana
Ms. Julia Drown, Member of Parliament, United Kingdom
Mr. Bert Koenders, Member of Parliament, the Netherlands
Mr. David Ugolor, Director of the African Network for Environmental
and Social Justice, Nigeria
Mr. Anthony Ampaw, Jubilee Ghana, Ghana
Mr. Wahyu Basyir, Institute for Development and Economic Analysis,
Indonesia
Mr. Jurgen Kaiser, Erlassjahr 2000, Germany
Ms. Charlotte Mwesigye, Uganda Debt Network, Uganda
Mr. Gert van Maanen, chairman of the meeting, the Netherlands
Ms. Joyce Kortlandt, Jubilee Netherlands, the Netherlands
This material is being reposted for wider distribution by
Africa Action (incorporating the Africa Policy Information
Center, The Africa Fund, and the American Committee on Africa).
Africa Action's information services provide accessible
information and analysis in order to promote U.S. and
international policies toward Africa that advance economic,
political and social justice and the full spectrum of human rights.
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