<> COCOO: AR (NORTH STEALS FROM SOUTH) <> OD (SOUTH STEALS FROM NORTH)

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 COCOO's CSO AND CHARITABLE [OBJECTIVES = CONSTITUTIONAL DUTIES]:
[NGOs + journalists + Academia = CSOs (civil society orgs)]
TRACEPublic: to TRACE BOS

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0/ To share lists of politically exposed persons (PEPs), to exchange corruption evidence , to help :
1/freezing, 
2/confiscating;
 3/ AR+ TE (tax evasion)

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0.1/  to: pressure (at the right time and method) governments; to act through campaigns; to raise awareness

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/ To claim/complain v banks/firms/ns, for:

A. FAILING TO PREVENT FORESEEABLE FRAUD 
B.  FAILING to perform proper due diligence checks 
C. DISRUPTING [OR FAILING TO PREVENT DISRUPTION] OF CLCP...BECOS: BRFS THAT DISCLOSE THEIR BOS, OBTAIN A 
competitive advantage, as multinational companies (to do business with), often require third parties to disclose
BOS, as part of their due diligence process DDP....to eliminate the risk of abuse of anonymous company ownership

EGS:
<> cocoo: claims that the contracting [banks/firm/sn = BFS], should not have done business with a bank/firm/ns that did not disclose bos..
 thus  the firm/sn failed ddp.....  <> cocoo claims that the contracting BFS, failed to draft a proper ddp, thus disrupting clcp 

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/ to present a statement of policy reforms to world governments, through the UNCAC Coalition

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/ to follow new leaks ...eg. The Panama and Paradise Papers, following the Swiss and Luxleaks investigations

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1/ to support gov in identifying theft of public funds using firms...by using BORS and other techniques.

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1/ to contribute to tracing stolen assets through independent investigations

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2/ to ensure the transparent and accountable use of assets once they are returned

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4/ advocacy to reform of systems that allow/ed the theft of public assets

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5/ TO PURSUE parallel litigation grounds, to those currently used by
 ngos v implementation of netzero 2030 GOAL.....
WHY SHOULD COCOO PURSUE THIS? ....BECOS another 2030 TL HAS BEEN SET: ''the main target under Goal, by 2030,
  is to significantly reduce illicit financial and arms flows [iffs/iafs], strengthen the recovery and return of stolen assets and combat
 all forms of organized crime, obliging States to work towards strengthening the system'' 
EG: COCOO JR V SR'S FAILURE TO DECIDE , OR FOR UNLAWFUL DECISION WRT 
TO THE GOAL TO REDUCE ILLEGAL FIN. ON ARMS

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6/ to JR or complain, in order to:

a. require sns to start proceedings, 
b. to require sns to finally freeze local assets asap, 
c.request WPI DAMAGES TO THE SN'S PEOPLE

...ow....COCOO CLAIMS THAT A SN FAILED: 

to start proceedings ingoodtime or at all
to, act
 to cooperate with other sns
to ASK ANOTHER SR TO FREEZE CORRUPTION ASSETS]]

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7/ .<> cocoo's duty + duty of the court, to allow cocoo (as intervener/complainant)
 to be involved in restitution judicial processes, to ensure that the funds returned are 
allocated to projects that benefit the population, to ensure the resitution does not fall back into 
the channels of corruption.the returned assets could be at risk of misappropriatation and
 relaundering. [by insisting on guarantees of transparency, accountability and integrity]
EG. TI France and Sherpa launched a complaint and intervened as a civil party to a criminal investigation
 (and to get Restitution),
 requiring the French prosecutor to open an investigation into the allegedly illicit wealth of the ruling families of 
different african countries, found guilty of corruption in 2017.....

The NGO’s Transparency International France (TI-F), 
Sherpa and the Human Rights Association in Central Asia (AHRCA) are highly concerned over the opacity
 of French-Uzbek negotiations in the return of Gulnara Karimova’s illict assets to Uzbekistan.
 This also includes concerns over the French modality for overseeing the asset restitution
 to Uzbekistan; as well as the lack of transparency in the disbursement and monitoring of returned
 funds by Uzbekistan.

2020, the Uzbek authorities announced that they had received US$10 million from France in the return of “illegally acquired” assets of Gulnara Karimova, daughter of the former President of Uzbekistan.

The announcement follows a 9 July 2019 decision by the French court to approve the confiscation of property acquired by Gulnara Karimova, through money derived from corruption and ordered its return, as compensation, to the Republic of Uzbekistan, who had filed a civil suit. Karimova – currently serving a prison term in Uzbekistan – is accused of soliciting bribe payments from three telecommunications companies with approximately a billion USD’s under investigation.

The confiscation of Gulnara Karimova’s three properties in France was decided in a “guilty plea”.  This acceleration of the restitution of Gulnara Karimova’s assets was thus achieved at the expense of transparency and accountability. the lack of transparency inherent in this restitution is damaging and paradoxical because there is no guarantee that this money will be used to benefit the looted populations. to be transparent, should involve French and local independent NGOs, to ensure that the funds returned are allocated to projects that benefit the population

The CRPC negotiations in 2019 covered several tens of millions of euros, a minor part of the approximately 1.3 billion dollars that Gulnara Karimova is suspected of having acquired illegally and invested abroad….France has not provided any information regarding the restitution process, while the Uzbek authorities have merely indicated that the 10 million dollars returned would be transferred to the Uzbek state budget.

Switzerland, which has confiscated several hundred million Swiss Francs from Gulnara Karimova’s associates, has at least issued a press release announcing the restitution of confiscated funds

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uncac = The United Nations Convention Against Corruption :
Articles 12 and 14 call on States Parties to enact measures to identify the legal
and natural persons behind companies

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The Financial Action Task Force (FATF)
guidance on providing public access to beneficial
ownership information in company registries.iv

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To date, Bulgaria, Denmark, the UK and Ukraine
are the first countries to institute public,
beneficial ownership registries.

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The UK included beneficial ownership in a public
company register from July 2016, allowing
anyone to see the beneficial owner of
companies registered in the UK
uk has a very high 25% ownership threshold...so
One in ten UK companies didnt list a beneficial
owner, as none of their beneficial owners met
the threshold

In the UK beneficial owners are listed on companies' own records and on the publicly accessible register
 of people with significant control (PSC) register at Companies House.

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The Ukrainian register requires payment to
access data on past changes to company
founders, directors and beneficial owners,
making it difficult for to track changes without
paying and downloading several documents

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AR asset recovery

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According to the World Bank, USD 20 to 40 billion is stolen through corruption from
the Global South and is hidden overseas, often in Europe and North America, every
year. Only a very small part of this is identified and returned....

AR = process of identifying, seizing and returning assets stolen by
public officials from one country and transferred to another

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Grand corruption is, however, far from a victimless crime.
In all the asset recovery stages it is the people (WPI), often
from developing countries, who lose. 

Typically, a case of international AR starts
when a government in jurisdiction X asks authorities in
jurisdiction Y to freeze assets related to the proceeds of
corruption. 

confiscation generally requires a final conviction for corruption in the country where the assets were stolen....
 Given the difficulties of this....some countries have introduced
non-conviction-based forfeiture, enabling civil procedures to be brought for the proceeds of corruption

The UN Convention against Corruption, (UNCAC), remains the key int. legal instrument for inter-state AR cooperation

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in the second half of the 20th century, countries from the Global South started asking other countries for help to AR , stolen by high-level officials of their
previous regimes...and not to pay their own ODs

AR cooperators:  the United Nations Office on Drugs and Crime (UNODC) and the World Banks Stolen Asset Recovery Initiative (StAR) with the participation of
key governments from the Global North and the Global South

The Tax Justice Network, through its Financial Secrecy Index, which analyses financial secrecy in more than 100 jurisdictions.

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INVESTIGATION RISKS

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 in 2018 alone, three journalists were murdered in the EU for investigating corruption.  

Several international forums have taken place on asset recovery, and the Conference of Parties to the UNCAC
 has an annual meeting on the topic. However, SCO access to these events has so far been limited,
in contrast to human rights forums. This means that organised civil society is often excluded from large areas of
decision-making

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 Mozambique: The Hidden Debts

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after the work of csos, in 2018 the Moz Public Prosecutor, launched proceedings against the managers of the
public companies. The tribunal can issue financial penalties but criminal charges are unlikely

The case involves a secret US$2 billion loan from the UK
branches of the Swiss Bank Credit Suisse and the Russian
Bank VTB Capital, to partially state-owned companies
in Mozambique, with the government of Mozambique
providing a state guarantee for the loan. the three borrowing companies were only established shortly 
before the banks provided the loans and that they all had the same CEO

later became clear was that they were earmarked for maritime security. 
Despite legislative requirements, Parliament was not informed of
these loans, with details only becoming public following
a public statement by the Mozambique authorities that they
were unable to service their debts

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 Nigeria: the return of the Abacha funds:

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Nigeria is likely one of the most politically active countries worldwide in its efforts to recover national assets looted through corruption. 

the Nigerian government has vigorously requested the governments of countries
where Nigerian stolen assets are allegedly hidden, to make greater efforts to help Nigeria recover these assets.

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malaysia 

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After the change in government following the 2018 election in Malaysia, the new Malaysian government
reopened the 1MDB investigation and arrested Najib, with police claiming to have found nearly USD 275 million in assets in 
linked property

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Case study 4 : Mexico: Asset thefts by state governors and the Odebrecht case:

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Mexico has also been affected by the Odebrecht investigations spanning the Americas. in 2016, when the company admitted to U.S.
, Swiss and Brazilian authorities in a multibillion-dollar settlement that it had paid USD 10.5 million in bribes to Mexican officials

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Case study 5: Moldova: The one billion dollar bank fraud

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In late 2014 a huge corruption case hit Moldova, The scandal, involving three of the largest banks
of the country – Banca de Economii, Banca Sociala and
Unibank, holding around one third of the country’s assets
at the time, put the fragile economic and banking system
in Moldova severely at risk, robbing the country at least
one billion dollars, around 15% of its annual GDP. 

 2014, shortly before national elections,
in just two days, the three Moldovan banks transferred
up to USD one billion in loans to companies owned by
anonymous individuals. The assets, which the banks paid
out with reserves of the National Bank of Moldova, were
transferred to bank accounts in Latvia belonging to Hong
Kong and UK-registered companies

The scheme involved the use of offshore companies in the UK and tax
havens, banks in Latvia and corrupt judges in Moldova.
According to OCCRP, over 20 judges in Moldova helped
launder over USD 20 billion from Russia to Europe, a
staggering figure for a tiny and poor country such as
Moldova

the fraud investigation, commissioned by the Moldova National Bank, to the US investigation
company Kroll in 2015, the mastermind of this plan was
the political figure and entrepreneur llan Shor.

Plans to conduct this sophisticated theft started 

modus operandi:  as early as 2012 [4 years before the theft], groups started aggressively buying shares
of the involved banks; the banks were then decapitalised by lending assets far beyond their resources, the purpose
being to involve the National Bank in lending them liquidity through its reserves

 in 2014 when the legislation governing the banking system was amended, allowing for emergency loans from the National Bank
to commercial banks under government guarantee.

but little to no progress has been made in tracing the assets, and linking them to
the responsible individuals....On the contrary, the Moldovan government has actively tried to create a certain
perception around how the two cases have been handled
and to assure Moldovans and international partners that
investigations are ongoing....but There is not even indication that
Moldova requested mutual legal assistance to foreign
jurisdictions on starting recovery 

After November 2014, the National Bank of Moldova
put the banks in special administration, after which they
declared bankruptcy and were liquidated

In 2016, the government decided to put the burden of the accumulated debt on the taxpayers: the Moldovan domestic debt was more
than tripled in just a year and the fraud debt was to be repaid in the next 25 years

When details of the one billion fraud case were revealed
in 2015, tens of thousands of Moldovans went on the
streets, protesting against corrupt government officials,
judges and criminals. 
Additionally, Moldova played a key role in a large crossnational money laundering scheme which moved billions
of dollars from Russia to the EU between 2010 and 2014

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OD

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Odious debt: OD

a political transition, even  from  an  oppressive regime to a popularly legitimized one, does not break the continuity of state-to-state debt obligations: DEBTS, TREATIES ETC, even where the transition involves state succession.

But…Equity belongs to “the general principles of law of civilized nations,” one of the fundamental sources of international law in the ICC statute.

OD is a set of equitable considerations to sever debt obligations in cases like eg. secession, whether from war or decolonization or political revolution.

OD claims may be raised in bilateral or multilateral negotiations on debt relief, or they could be adjudicated in arbitration, or in domestic litigation

where an incumbent elected Government planned to rig elections or suspend democracy, it would borrow as much as possible before the “odiousness” of the regime was declared……THIS EXCESSIVE BORROWING SHOULD BE A RED FLAG TO BANKS,,, AND IT MEANS THAT BANKS SHOULD HAVE KNOWN THAT IT WAS AN OD FROM THE BEGINNING.

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<> COCOO: THE GOV SUCCESSION IS A FRAUDULENT DESIGN TO TURN A LEGITIMATE DEBT, INTO AN ILLEGITIMATE DEBT, MAKING LENDINGGOVS/BANKS, BELIEVE THAT A GOV DEBT IS NOW PERSONAL OF THOSE OTHERS INDIVIDUALS THAT WERE IN GOV BEFORE.

COCOO WILL CHALLENGE GOVS TO PAY THEIR DEBTS, AS THEY ARE LEGITIMATE….IN THE WPI:

-GOVS FAILURE TO PAY, DISTORT BANKING COMPETITION: ods are a risk for lenders and bond investors, and increase borrowing costs (premiums) for countries under [threat of regime change = threat of having to repay a huge debt]

+CONSUMER

+TAXPAYER 

+TO AVOID WARS. HOW?: SUCCESSION FRAUD SOMETIMES INVOLVES WAR DESIGN+

Under the law in many countries, corporations are not liable for contracts that staff enter into without the authority to bind the corporations

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odious debts (ods) are incurred by gov/firm staff who:

• lacks the consent of the People [= lacks demolegit]
• lacks the authority to bind the People [eg not ratified by the king]
• and not benefiting the People

Thus, ods are not transferable to a successor government, especially if (malicious) creditors should/could have been aware of that their loans were (potential) ods

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example:

the apartheid-era government of South Africa borrowed from international banks and investors to build dams, power plants, and other infrastructure. When the African National Congress (ANC) took power in 1994, it inherited these debts. Many members of the successor government, led by President Nelson Mandela, argued that these debts were odious due to the social policies of the prior regime….

<> cocoo disagrees with mandela…becos the infrastructure build with the loans benefited the SA wpi…thus, is not an od.

but mandela , temporarily, got away with not paying the debt, because the sovietunion was supporting mandelas’ anc….but, with the collapse of the Soviet Union in the early 1990s, to maintain access to international credit markets, the new government ended up paying those debts, not to scare off badly needed foreign investment….and because it really was not an od.

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OD IN PUBLIC INTERNATIONAL LAW

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July 2007

OD is a set of ecs (equitable considerations), to adjust or sever debt obligations in the context of political transitions. od’s ecs: 

-the purported odiousness of the previous regime

-the debt did not benefit, or was used to repress, the people

equity(ecs) lives inside GPLCN [ “the general principles of law of civilized nations”], one of the fundamental sources of international law stipulated in the Statute of the International Court of Justice

most debt contracts are governed by the domestic private law specified  in  the  contract…where [if OD does not apply], debts can be invalidated of grounds of : “clean hands”, or illegal purposes.

in the cases examined, there were doubts as to whether the debt was “od” or valid as it may have conferred some benefits on the population or the new regime

State-to-state debt contracts may specify a forum for the settlement of disputes.

ODS are growing in legal and political significance in the early 21st century, due to a large  number  of political regime changes, whether due to war, revolution, secession, or the peaceful evolution of societies

“…if a despotic power incurs a debt not for the needs or in the interest of the  State, but to strengthen its despotic regime, to repress its population that fights against it, etc., this debt is odious for the population of the State…..it is a regime’s debt, a personal debt of those that have incurred it….ods are not repayable because are illegal as they fail to comply with the requirement that State debts must be incurred and used for the needs/interests of the State.

ods = debts incurred and used for ends which, to the knowledge of the creditors, are contrary to the interests of the nation, do not compromise the nation ….except to the extent that real advantages were obtained from these debts.”

<> cocoo will seek partial repayments, if partial benefits arised from the debt

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types of ods:

-war debts: debts contracted by the State for the purpose of funding a war which the State eventually loses and whereby the victor is not obliged to repay the debt.

-subjugated or imposed debts

-regime debts

-“hostile debts” =  incurred to suppress secessionist movements, to conquer peoples and so forth.

-“profligate debts”

– “developing world debts not spent in the interests of the population” 

-irresponsible lending 

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ods are incurred for purposes in breach of the principles of international law embodied in the Charter of the UN:

“(1) The new Government would have to prove and an international  tribunal would have to ascertain:

“(a) That 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

“(b) That the creditors, at the moment of paying out the loan, were aware of its odious purpose.

“(2) the creditors must then prove that   the funds for this loan were not utilized for harming the people

The above formulation does not appear to require that the creditors be aware of how in fact the funds were actually spent

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when state succession occurs, no international legal obligations are automatically transferred to the new State/s….this may lead to

a. financial instability and uncertainty

b. UE: unjust enrichment of the new State…eg infrastructure

<> cocoo claims that a nation as UE’d and owes Restitution to other nations/banks

Article 16 of the 1978 vienna Convention provides that “a newly independent State is not bound to maintain in force or to  become party to, any treaty by reason only of the fact that at the date  of the succession of States  the treaty was in force in respect of the territory to which the succession of States relates.”

<> cocoo will claim that certain treates no longer apply to a certain country

Article 38 of the 1983 Convention: “(1) When the successor State is a newly independent State, no state debt of the predecessor State shall pass to the newly independent State, unless an agreement between them provides otherwise, but does not harm the People.

apportionment of debt between several new States that are the successor of a single now-defunct State (eg ussr),  has to take into consideration the relative benefit from the lending that flows  to each of    these successor States, not just considerations of relative gross domestic product, population or territory. Consideration of the “odiousness” of a particular debt is another example.

is there an  obligation on States, to ensure that ods are not paid?

<> cocoo: country A is failing its duty to ensure ods are not paid…..

<> cocoo: country B is failing its duty to claim restitution from country A [for its unjust enrichment]

– limits of freedom of contract (illegality[ ..eg OD], fraud, changed circumstances, ostensible authority of the agent to contract, public policy, etc.)

-Treaties are binding as a matter of international law and the doctrine of “maintenance” turns State-to-State debt agreements into treaties.

diff: rd (repudiated debt)… od 

in the case of state-to-state debt, od may be invoked in state-to-state arbitration or even in the International Court of Justice, but in practice  it is much more likely to be voiced in political or diplomatic discussions and negotiations in the context of political transition

In some transitional situations, the  best  option  for  reasons of economic and financial stability (wpi), is to continue to pay all debt, even  if it  is  odious.

<> cocoo: country A failure to pay od, is bringing ec.instability (harming wpi) and clcp…thus, should (partially) pay.

<> cocoo: country B failure to accept od (no payment), is causing ec. instability in country A

in reality, rather  than  repudiating  debt,  a debtor State might invoke concerns of odious debt in

negotiations with its creditors, to  reach a compromise that promotes financial stability and future

access to credit….creditors will accept to avoid bad reputation effects and also to  maintain relationships.

successor regimes may give amnesties and pardons to human rights  violators  in the previous regime, for reconciliation and building a successful democracy

<> cocoo: country B should only ‘forgive’ the od, if , ow, country A would suffer ec.instability, and anticomps….and if it gives amnesties and pardons to hr violators in former regime; and if continues to be part of certain treaties..

the new regime may even examine the actions of the international financial community in the context of a truth commission [such as the South African Truth and Reconciliation  Commission]…. so that, only if creditors admit OD complicity (ie, forgive the debit), and make amends through new lending, or even apologies, the new regime may be satisfied for accountability to them about the past.

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OD EXAMPLES

In 1922, Costa Rica refused to honour loans made by the Royal Bank of Canada to the former dictator Federico Tinoco. This is an example of state practice with respect to a change of Government and not state succession.

In 1917, Federico Tinoco overthrew the Government of Costa Rica and later held an election to ratify the “revolution”. During the summer of 1919, the Banco Internacional de Costa Rica issued several “bills” of credit to the Royal Bank of Canada, in respect of which the Royal Bank paid several cheques drawn by the Tinoco Government.  The  money was  used personally by Tinoco and his brother and for no public purpose. By August 1919, Tinoco and his brother had left the country and the Government fell in September. The restored Government of Costa Rica enacted a law which invalidated all transactions between the State and the holders of the “bills”  issued by  the Banco Internacional.

Chief Justice William Howard Taft was the sole arbitrator for the dispute. Taft agreed that the Tinoco Government was a de facto Government capable of binding the State to international obligations. Despite this, Taft emphasized the fact that the debt in question did not create a valid public debt, nor was it in the WPI. The evidence established that the funds were used for the personal enrichment of the Tinoco brothers and that the bank was aware of this, since the transactions “were made at a time when the popularity of the Tinoco  Government  had disappeared, and when the political and military movement aiming at the overthrow of that Government was gaining strength….Taft required    the Royal Bank to prove that  the Costa  Rican Governments had  used the money for legitimate purposes, something which it could not do. Accordingly, Taft allowed the OD…so no repayment.

Taft also dismissed the claim of Great Britain on behalf of the Royal Bank of Canada because the contract was ultra vires the Constitution. The contract contained provisions regarding taxes, and therefore  to be valid required the approval of both Houses of Congress, not the Chamber of Deputies alone.

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German repudiation of Austrian debts – 1938

The Government Austria was heavily indebted to foreign creditors at the time of the German annexation of Austria in 1938, when loans from creditors had been expressly designed to prevent union with Germany.  Germany repudiated the debt, citing prior  American and British practice   and arguing that it was  contracted  against  the  interests  of  the  Austrian  people. To no avail, the Americans tried to argue that much of the debt  had been used for  the purchase of food.

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1947 Treaty of Peace with Italy

Article 254 of the 1919 Treaty of Versailles: exempted Poland from those debts attributable to the costs incurred  by Germany and Prussia, during the German occupation of Poland.

The ruling drew a parallel with the Italian occupation  of Ethiopia,  considering it  inconceivable that Ethiopia should have to assume the burden of expenses incurred by Italy in order to ensure its domination over Ethiopian territory” (Bedjaoui: 71).

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Apartheid debt

Advocates of repudiation of debt incurred by the apartheid South African regime argue that apartheid was a racial dictatorship

South Africa was forced to leave the Commonwealth  in  1961. in 1985 the United Nations Security Council imposed trade sanctions on the apartheid regime. Despite this, the regime continued to borrow from private banks throughout the 1980s. In July 1985, the Government declared a state of emergency and on South Africa defaulted and stopped paying its creditors. Archbishop Desmond Tutu, among others, called on the banks  not  to  reschedule South Africa’s debts and advocated the confiscation of South African assets abroad instead. Nevertheless, a settlement was reached in 1987 with 14 major banks….sa repaid on promises to maintain relationships for foreign investment… but Foreign direct investment has been tiny – And new lending has not kept up with repayments – over six years South Africa paid out $3.7 billion more than it received. Thus, promises have not been kept and policy advice was wrong. If South Africa had

repudiated the odious apartheid debt – or even if it had demanded a ten year moratorium

– it would have been $10 billion better off. Foreign aid during this period was only $1.1 billion, so even if aid had been cut off, South Africa would have profited by $8.9 billion.”

on 12 November 2002, a suit was filed in the New York Eastern District Court for apartheid reparations [for funding/helping the apartheid regime + failing the promises under which SA decided to repay them], against eight banks and 12 oil, transport, communications technology and armaments companies . The suit was filed on behalf of the Khulumani Support Group, representing 32,000 individual “victims of state-sanctioned torture, murder, rape, arbitrary detention and inhumane treatment”, by the Apartheid Debt and Reparations Campaign.  The suit was brought pursuant to the Alien Torts Claims Act (ATCA) which allows any non-United States citizen to bring a claim for damages against any other person who has violated customary international law.

The Government of South Africa continues to distance itself from the  popular  movement  to cancel the apartheid debt.

Others argue that the UN should have declared the od….but if so, private banks would not have been willing to make the loans that effectively kept South Africa afloat for a few more years

Similar action could have been taken after  major  shareholders  forced  the International Monetary Fund to cut all lending to the former President of  Croatia,  Franjo  Tudjman, in 1997, after he was accused of resorting to political violence and appropriating public funds…..However, in the absence of UN action, private commercial banks continued to lend Croatia a further $2 billion until Tudjman’s death in 1999.

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Iranian debt

In 1982, usa claimed that iran owed them a substantial amount of money pursuant to a contract dated 1948 relating to the purchase by Iran of certain World War II surplus military property.

Iran denied any liability, claiming that the debts were ODs, imposed by the United States, and were “subjugation debts” of the prior regime. As such, they are “not transferable to the Islamic Republic of Iran”

the Iran–United States Claims Tribunal held :

that the original contract was not imposed on Iran… is not possible to establish any connection between the Contract and the crisis in Iran that led to the  Islamic Republic  of Iran in  1979. The Contract did not and in fact could not, in any respect detract from or undermine the new Constitution, the social order and the form of government of Iran as created in and after 1979. also, the revolutionary changes in Iran are state continuity, not state succession, because despite the change in head of State and the system of government in 1979, Iran remained the same subject of international law as before the Islamic Revolution. When a Government is removed through a revolution, the State, as an international person, remains unchanged and the new Government generally assumes all the previous international rights and obligations of the State”. also the contract  was not for objectives contrary to the legitimate interests of Iran , nor  of international law”….…. for all those reasons, the iran debt is not an OD

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Iraqi debt

Prior to the overthrow of the Government of Saddam Hussein, Iraq accumulated over $125 billion of unpaid debts.

following the overthrouw of sadam, a United States congressional initiative in 2003 was set up to eliminate Iraqi OD, on the notion that such debt not only impedes a successful rebuilding of post- authoritarian States, but that the debts were never legitimate inheritances of the new Government…much of the money borrowed by the Iraqi regime had been used “to buy weapons and to build palaces and to build instruments of oppression.

Eventually, Iraqi debt relief was granted not with references to its legitimacy (OD), but for reasons of “debt sustainability”….why?:  invoking considerations of odiousness, make the task of obtaining relief more difficult or slower, than the use of more easily applicable criteria of economic sustainability.

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Norway’s ship export debt

the Government of Norway in 2006 determined that money lent and owed to them by some developing countries, should be cancelled, on grounds  that Norway ought to share responsibility with the debtor countries for the failure of the  programme, based on  inadequate  needs  analyses and risk assessments.

This is not an OD example …indeed  the  Government stressed that the debt was not “illegitimate”. But the notion of co-responsibility exemplified by the unilateral and unconditional cancellation of these debts,  means that repayment is subject to Equity considerations between debtor–creditor

<> COCOO WILL CLAIM THAT SOME DEBTS , THOUGH LEGITIMATE (NO OD), ARE, HOWEVER, TO BE CANCELLED, ON THE BASIS THAT THE LENDER MUST SHARE RESPONSIBILITY [WITH DEBTORS] FOR THE FAILURE OF THE LENDING PROJECT OF DEVELOPMENT.

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State succession v government succession

In state succession, the debtor has ceased to exist. thus, is OD.

what about in [ regime change = gov.succession]?….the Iran Claims Tribunal, said no OD…. because the identity of the State is unchanged

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Creditor knowledge of OD

for OD to be allowed, the creditor, at the time at which the loan was made, knew, or should have known, that the debtor wanted the money for a purpose contrary to the interests of the population.

 thus, there is a burden on creditors to take positive steps to inform themselves of the purposes of the loan, and to assess the credibility of assertions of borrowers…ow, the debt may not be repayable.

Based on the agency concept, a regime’s reputation for exploiting and oppressing its own people may place on the lender a higher burden to satisfy itself that the proceeds of the borrowing are benefiting the principal (the country) and not just the agent.

just as a court may  allow a creditor to recover [the money he lent to the firm], from an abusing shareholder….  a State may be allowed to avoid debts contracted by a collusive lender and corrupt government officials 

Even if a loan is assigned to a third party who had no knowledge [of, for example, corruption or bribery] the borrower can raise the same  defences against  the assignee

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The fungibility of debt

The concept of od, is based on the fact that the loan is  used for a purpose contrary to the interests of the people

However, loans used for a non-od purpose may indirectly contribute to odious purposes.. thus, it can be declared OD, a proportion of all loans to  an oppressive regime that was spending money on odious purposes, even if the connection loan/odious purpose, cannot be established

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State-to-state debt vs. state debt to private creditors

-in od, there is no unjust enrichment UE, since the funds were spent harming the interests of the people, or the successor regime itself.

-OD only applies between states….BUT,  in some cases, SNs repudiating contractual obligations to private creditors may constitute :

1/a violation of international law….egs:

• a.where the repudiation of a loan is analogous to expropriation of property; or 
• b.where the repudiation is discriminatory or arbitrary; or
• c. where the repudiating State gains a genuine benefit from the funds,

in all cases above, there is UE unjust enrichment that requires the State to restitute the private creditos.

2/a violation of domestic law:  contract law invalidates illegal purpose contracts…so, under domestic law, the private creditors may claim that the loan contract was invalid: A illegal (purpose) contract/agreement is not considered a contract at all….a court will not enforce it; rather, illegal contracts are void or unenforceable [as if the contract never existed]……Where odiousness  is established in a state succession, it would be very difficult for a private creditor ,or a State espousing its claim, to  argue successfully that the alteration of contractual rights is a denial of justice. Nor could the alteration of contractual rights  be considered fundamentally unfair  or  discriminatory, nor could it claim ue occurred, since a key aspect of odiousness is the notion that the population of the debtor State did not benefit from the loan

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<> COCOO WILL APPROACH PRIVATE CREDITORS[FIRMS/BANKS] TO GET STATES TO RESTITUTE THEM [UE] (UNDER INTERNATIONAL LAW) , OR TO VOID THE LOAN CONTRACT (UNDER DOMESTIC CONTRACT LAW  )

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new approach to odious debt

two DIFF SOLUTIONS:

A/trade sanctions: often harm the people they are intended to help. For example, if firms in a country are prevented from selling their products abroad, the loss of revenue may cause them to fire workers or lower wages

B/  curtailing dictators’ ability to borrow, loot, and saddle the people with large debts, would hurt illegitimate regimes but help their populations. and prevents ODs.

<> cocoo to challenge trade sanctions

Tudjman of Croatia was an odious ruler, having suppressed the media, instigated violence against political opponents, and looted public funds. In 1997, the IMF cut off aid earmarked for Croatia. Still, commercial banks lent an additional $2 billion to the Croatian government between the IMF decision and Tudjman’s death in December 1999…. this is an OD, but the new croatia has chosen to pay it….today, countries repay even ODs, because, if they failed to do so, their assets abroad could be seized and their reputations would be tarnished, making it more difficult for them to borrow again or attract foreign investment

<> cocoo v banks for lending the dictator gov,even when imf had cut off aid.

 

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How PIL (Public Interest Litigation) Led to Invalidation of Illegal Mozambican Debt

Category: African Sovereign Debt Justice Network (AfSDJN).  2020

multinational corporations identify development countries with something of value, such as minerals, and persuade the authorities of these countries to secretly take on huge development loans with banks. In most cases, the money never reaches the countries. Rather, the money is transferred directly from the banks to contractors and the countries are then left with massive debts. Resources and companies from developing countries are given as collaterals for these loans. Therefore, these poor country’s natural resources, are transferred to service these ods….. eg. this is what happened in Mozambique

In 2013, two London-based banks, Credit Suisse and Russian VTB lent $2 billion to three state-owned enterprises (SOE) that did not exist at the time. These companies—Ematum, Proindicus, and Mozambique Asset Management (“MAM”)—were created to facilitate the fraud and never generated any profit. These entities were owned by the Mozambican security and intelligence services.

these banks loaned millions to these soes….. but these loans were not approved by the Parliament of Mozambique, thus violating both the Mozambican Budget Law and the Constitution of Mozambique.

three different loans across multiple jurisdictions

in 2016, the (IMF) suspended its programme with Mozambique in line with its disclosure policy. Other donors followed suit, and all 14 donors who provided direct support to the state budget halted their disbursements. The country found itself facing a severe budget deficit. The loans have thus led to an economic and social crisis in Mozambique, with the local currency falling by 50% against the dollar and cuts to government spending. Consequently, the loans have drastically affected the already fragile provision of basic services, including health, education, water and sanitation.

Pressure from civil society, development partners and the media, led the Attorney General in Mozambique to commission an audit on the three loans in 2017. According to the Kroll Audit Report, among several other detected irregularities, the banks lent the money knowing that the loans had not received parliamentary approval as required under the Mozambican Constitution. Furthermore, the banks did not carry out due diligence on the SOEs or on the guarantees provided by the government. The loans were given to three soes which had no revenue and no contracts in place to generate any future profits. The ships and equipment being supplied were massively overpriced and there had been no competitive bidding for the contract – the whole idea was presented by the contractor and the banks rather than being solicited by the Mozambican Government. Also, the money went directly from the banks in London to the contractor, Privinvest, in the United Arab Emirates, rather than to the SOEs in Mozambique. All of these irregularities were in collusion with Mozambican Government authorities.

In addition, the process followed by the arranging banks was not compliant with various legal and international standards, including the U.S. Foreign Corrupt Practices Act; U.K. Bribery Act; Mozambican Anti-Bribery Law; OECD Convention on Combating Bribery of Foreign Public Officials in International Business; and the FATF Recommendations which set an international standard on anti-corruption for countries to implement through measures adapted to their particular circumstances. This fraud was also in violation of the U.N. Convention Against Corruption; 2015 G20 High Level Principles on Private Sector Transparency and Integrity; and 2017 G20 High Level Principles on the Liability of Legal Persons for Corruption.

International and domestic law make contracts by corruption and bribery voidable. However, the government took too long to declare all the loans void and null.  a pending legal action in London might provide some relief…but, is unlikely that the contracts can be voided within a short-term period in the U.K. jurisdiction.

In 2019, as part of the U.S. investigation, three former employees of Credit Suisse were arrested in London, and a former employee of the United Arab Emirates company Privinvest, which supplied boats as part of the loan deal, was arrested in New York. The former Mozambican Finance Minister, Mr. Manuel Chang, was previously arrested in December 2018 in South Africa on charges of conspiracy to violate anti-bribery laws, money laundering and securities fraud on an Interpol warrant. Immediately after his arrest, Mozambique filed a request to extradite Mr. Chang to Mozambique. The U.S. indictment provides compelling evidence of the bribes and kickbacks that were paid as part of the loan deals. evidence that Credit Suisse failed to prevent this fraud. The bank did not have adequate procedures in place to prevent the dubious transactions.

The pressure prompted the Mozambican government to finally take action. The Attorney General has indicted and arrested 19 people on charges of abuse of power, abuse of trust, and swindling and money laundering.

We, the N’weti Organization, launched two applications in the Mozambican Constitutional Court to have the three loans declared illegal as they complied with neither the Mozambican budget laws nor the Constitution. The petitions were signed by 2000 citizens requesting the court to rule the debts illegal. In response to our filling, the Constitutional Court of Mozambique declared the three loans illegal, thus null and void

Then, the General Prosecutors Office filed a court case in the High Court in London against Credit Suisse, VTB and Privinvest – the corporation behind these frauds. Another court case was filed by the Central Bank of Mozambique against the same defendants last month also in London.

The General Prosecutor of Mozambique built on our legal argument requesting the cancelation of the loans to the Constitutional Court. The Mozambican state claimed that the then- mozambique Minister of Finance,  did not have the authority to sign the sovereign guarantees because the Mozambican Parliament had not approved the loans.  Mozambique sought: (1) A declaration that it is not liable to pay any of the debt on one of the three deals, namely the $623 million loan to Proindicus; (2) Compensation for the losses due to past or future debt payments concerning the loan (and the restructured loans in the case of the Ematum bond); (3) Compensation for all fees and expenses incurred in the restructuring of the Ematum bond; and (4) Compensation for macroeconomic losses resulting from the financial crisis and loss of donor funding which followed the revelations about the loans in 2016.

$200 million was paid for bribes, $200 million was paid as fees for arrangers, and more than $700 million is unaccounted for according to the Kroll Audit report.

In representation of the Mozambican civil society, we have intervened in this case by exposing that Mr. Chang (former moz.minister of fin):  (1) enjoys immunity; (2) there is no indictment launched in Mozambique; therefore, justice will not be served in Mozambique. He enjoys immunity as of the time of his arrest because he was a member of parliament.

the Swiss Money Laundering Reporting Office responded to a 2018 request by the Mozambican General Attorney for mutual legal assistance. The authorities in Switzerland finally started an investigation in January this year.

the g20  approved Transparent Lending Covenant (TLC) 2019 …but does not address the problem (corrupt ministers borrowing behind the back of the People) The TLC is just a set of voluntary Principles for Debt Transparency by the Institute of International Finance (IIF) and are applied only to lending from the private sector, not from states

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