On odious debts, the Paris Club, and reparations

Iraqi Jurists Union

November 28, 2004

Following our first announcement released March 8, 2003 after the re-activation of our union, we demanded a development plan to help kick-start the Iraqi economy. At that time, our union confirmed that an essential prerequisite for such a plan to succeed was the cancellation of debt and reparation claims against the Iraqi people.Those claims were the result of wars for which the Iraqi people had no responsibility and because the Iraqi people were the primary victims of these destructive wars. The Economic and Financial Committee (EFC) of the Iraqi National Assembly (INA) confirmed the damaging effect of such debt and reparations claims for the Iraqi economy and for future Iraqi generations. The EFC subsequently recommended that the INA, the interim Iraqi government, and the Iraqi people refuse to recognize these debts and reparations as they are illegal. The Iraqi Jurists Union supports this recommendation and hopes the assembly will ratify it and the interim government will both accept it and reiterate that the Iraqi people are not responsible for the debts accumulated by the regime of Saddam Hussein.

Our Union also recognizes that the foreign creditor countries that form the Paris Club are attempting to impose upon the people of Iraq claims for loans their countries extended to Saddam Hussein’s regime to finance wars between Iraq and neighbouring countries and to finance the building of a large defence industry in Iraq. Total claims against the Iraqi people amount to an estimated $130 billion, of which $42 billion is owed to Paris Club members, $60-$65 billion to non-Paris Club members, $3 billion to commercial banks and $13 billion to privately held companies. Other claims against the Iraqi people include reparations claims of $97.2 billion for the Iran-Iraq war, and claims for the occupation of Kuwait (of which environmental claims alone exceed $69 billion). Of this, $50 billion has already been ratified by the United Nations Compensation Commission (UNCC) with $20 billion paid, coming from the sales of Iraqi oil, including $2 billion since the occupation of Baghdad. According to current claims, these payouts, based on 5% of Iraqi oil production, will last for at least three generations.

The central committee of our Union, and its legal committee have concluded, based on international legal principles and precedents, and state without reservation, that the majority of these debts are odious and are not legally enforceable. We base this on judicial decisions and the teachings of the most highly qualified legal publicists and authorities from around the world, including Alexander Sack, the worldÊäØ pre-eminent legal scholar on the treatment of state debts. We have also based our position on precedents and the principles of the international legal doctrine of odious debts as applied in the following countries: in 1898, the United States was one of the first countries to apply such principles after winning Cuba from Spain. The U.S. refused to accept responsibility for debts it argued Spain had incurred without the consent of the Cuban people and had used against their interests: In 1918, the Bolsheviks repudiated the Czars’ debts, and the Reparation Commission in the Versailles Treaty of 1919 refused to apportion debts to the newly liberated Poland incurred by the German and Prussian governments to colonize Poland ?calling this decision a just reversal of “one of the greatest wrongs of which history has record.” These principles were also applied by Chief Justice Taft of the U.S. Supreme Court who was asked to arbitrate a debt incurred by Costa Rican dictator, President Tinoco, from the Canadian Royal Bank that was used for his personal purposes. Justice Taft ruled that the bank would have to lend money “for the real use of the Costa Rican Government . . . or its legitimate use.” The bank did not do so, leading Justice Taft to rule that the bank’s “claim must fail.” Clear cases of odious debt in recent years have emerged in Rwanda, the Congo, and South Africa, Argentina, Nigeria, and the Philippines.

Following from this introduction in regard to Iraq’s external debt:

1) Our union demands the interim Iraqi government refuse responsibility for these debts on behalf of the Iraqi people and demands that these debts be declared odious, in accordance with international and common law and based on the qualified opinion of jurists and legal and economic experts around the world, particularly from creditor countries.

2) Our union demands that the interim Iraqi government reject the authority of the Paris Club to decide the fate of Iraq’s debts, particularly as the Paris Club represents the interests of the creditor nations only. However, if Paris Club members and non-Paris Club members agree to an immediate and unconditional cancellation of at least 95% of their total claims, we will accept this as a full and final settlement. The remainder of the debt can then be treated as non-odious and Iraq will not take legal action against it.

3) Based on the Paris Club’s announcement on November 20 offering to cancel 80% of its members’ claims against Iraq in three stages over a period of three years until 2008, our union calls on the Central Bank of Iraq and Iraq’s Ministry of Finance to refuse this offer because it presumes these claims against the Iraqi people are legitimate and does not recognize them as odious in law. We also believe this offer represents the Paris Club’s tacit admission that its claims are largely illegitimate. Given that the Paris Club members were the main financiers of the previous regime, that their decisions were driven by political, not commercial interests, that the monies were used for military purposes, and that the proposed Paris Club settlement would be conditional upon adherence to IMF policies, we believe this offer is an insult to the Iraqi people.

4) Under the current circumstances, and to demonstrate our respect for common justice and international law, our union believes debtor countries must be given the opportunity to engage in an arbitral process that is open, just, transparent and in accordance with internationally recognized United Nations’ procedures. Debtors would agree to the appointment of an acceptable number of arbitrators and creditors would be required to demonstrate that their claims are not odious, that their disbursement benefited the people of Iraq, and that they were not used for corrupt purposes. Upon proof under an arbitral process that such claims are legitimate, Iraq will agree to reschedule repayment taking into account the urgent needs for the reconstruction of Iraq.

5) Our union calls upon the interim Iraqi government to give priority in awarding reconstruction contracts to debtor countries that accept the principle of arbitration and our recommendation on odious debts. At the same time, we demand strict and strong decisions not to award contracts to companies from countries that do not accept our recommendations.

6) Our union demands that the interim government support the decree from the Economic and Financial Committee of the Iraqi National Assembly calling for the establishment of a higher national council for debt and reparations. This council should include representatives from concerned ministries and the INA to work with economists and jurists and should disclose the full details of the debts and reparations claims to simplify its decision-making.

As for reparations:

1. The previous regime accepted the principle of compensation and reparations, because it had no choice but to accept. This acceptance, however, does not legitimize the mechanisms and decisions which have no precedents or basis in the principles of the United Nations. For example, the treaties that settled the end of hostilities in the First and Second World Wars included principles which were not followed in the case of Iraq. They are:

1.1 All previous treaties consider only physical or material losses and do not include psychological and moral losses;

1.2 Such treaties do not include articles which impose interest on claims or on settlement amounts;

1.3 All such treaties decree negotiations for lump sum amounts, which are then agreed between the two concerned countries;

1.4 The attendance and participation of the defendant country in the negotiations and in every committee and meeting so the defendant country could discuss the type of claims, cases, and amounts guaranteed. The UNCC refused to allow Iraq such participation.

1.5 All previous World War reparations decisions were subject to appeal, while the decisions taken by the UNCC were made behind closed doors, and were considered final and without appeal.

1.6 The excessive costs of UNCC (170 employees, with salary costs ranging from US$25,000 per month to US$250,000 for higher ranking officials) represent direct cuts from the funds of the Iraqi people. The current mechanisms and procedures violate legal principles of justice, the principles of the United Nations and the human rights of the Iraqi people, and enforce the long-term embezzlement of Iraqi resources in violation of international law.

2. The establishment of the reparations fund indicates that the Security Council overstepped its limited mandate regarding United Nations’ principles, which are to keep or restore international peace and security (Article 39 from the decree). The Security Council gives itself full control and power over the Iraqi economy and can impose deductions from revenues earned by Iraqi oil exports.

3. International principles of justice cannot impose demands for payment of reparations on victims of the regime.

4. The countries that supported, financed, and supplied the army of the previous regime, most of which are Paris Club members, are responsible for paying reparations to Iraq and Iraqis first and to other claimants.

5. Arab and non-Arab countries that gave money and support to the regime of Saddam Hussein, and who are now claiming repayment and reparations from the oppressed people of Iraq, are plundering Iraq’s national resources which are needed for development and reconstruction. This action, which will have dire consequences for the Iraqi people and for Iraq’s future generations, will not be forgiven by the people of Iraq.

Based on the above, the union believes:

1. It is clear to the entire world that the Iraqi people are the principle victims of torture, oppression, genocide, sanctions, near total destruction of basic infrastructure, and other human and financial losses visited on them by the existence of the regime of Saddam Hussein. For this reason, there is universal repugnance and a deep sense of injustice at the notion of innocent Iraqis being held to pay reparations to others.

2. There must be proper disclosure of reparations claims to determine which are just and which are suspected to be the result of fraud and deception, counterfeit, and verestimation. Meanwhile, the Iraqi people can provide evidence to justify reparations for millions of just and lawful claims for human and financial losses.

3. The union demands the interim government immediately inform the United Nations that it must cease its deductions of 5% from oil revenue for the UNCC administered reparations and that the UNCC cease making decisions regarding reparations.

4. The guilty party is not the oppressed people of Iraq, but the countries that supported and financed the regime of Saddam Hussein. They are the ones responsible for reparations payments. We are asking for a complete review of claims for reparations which the UNCC has been charged with awarding in order to determine who owes reparations to whom, and who should pay. Any consideration of claims for reparations must also include claims for reparations by the oppressed people of Iraq.

Iraqi Jurists Union, Baghdad, November 28, 2004

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