April 15, 2008
I am very grateful to Professors Mitu Gulati and Sarah Ludington for the wealth of information they have gathered about the life of Alexander Sack, the Russian legal scholar who penned the doctrine of odious debts, in their article “A Convenient Untruth: Fact and Fantasy in the Doctrine of Odious Debts.” I have taken note of the authors’ view that an inadvertent error was made by Michael Hoeflich, whom I cited in my book, Odious Debts: Loose Lending, Corruption and the Third World’s Environmental Legacy. I will amend the online version of my book, to discuss their view that Sack was a legal advisor to the Provisional Government of 1917, rather than a minister in the Tsarist regime.
In their paper’s abstract, Gulati and Ludington set out to expose the “murky reality” of the life of Alexander Nahum Sack, and how this reality conflicts with the “myth perpetuated in the odious debts literature.” The dominant theme, though insinuated rather than stated clearly, is that the odious debts movement has deliberately exaggerated Sack’s eminence in order to establish the doctrine as customary international law. The authors also make few distinctions among the various organizations in the debt forgiveness movement. I would recommend that the authors stick to the facts rather than assign motives, and be precise in their charges rather than employing broad brushes.
The facts they do present in their paper, in my view, do not diminish Sack’s scholarship on the issue of state debts and odious debts, in particular, but strengthen it. Moreover, rather than dispel myths, I fear their paper creates them.
Let me start with the issue I know best, the views that the authors, with their broad brush, may be wrongly ascribing to me. They seem to think that I have embraced Sack’s doctrine in order to indiscriminately relieve Third World debts. They have jumped to that conclusion without any basis in fact – nothing in my writings or in my organization’s indicate that Probe International is after debt relief, per se. Rather, as our history shows, we want honest and accountable international finance by establishing the responsibilities of creditors (or borrowers), and thus their rights to repayment (or repudiation). For this reason, we have always argued against giving blank checks to Third World governments in the first order, or in the form of debt relief.
While we are concerned about Third World poverty, we are not a poverty group. But, we believe, a crucial step in eliminating Third World poverty is to eliminate the moral hazard that has plagued sovereign Third World borrowing for the past 60 years. We applaud Sack for wanting countries and their citizens to assume responsibility for legitimate state debts. We also applaud him for wanting to place responsibility for the illegitimate debts where they belong — with the lenders and the true borrowing party, the dictator. Nowhere do I try to make of him a radical, as the authors seem to believe.
From this wrong premise as to my motives (as part of the so-called “radical debt forgiveness movement”), the authors seem to have leapt to other unwarranted assumptions. For example, to extract this “radical debt forgiveness” agenda from Alexander Sack’s doctrine they imply that I (and the “debt forgiveness crowd”) had to do some fancy footwork around Sack’s “consistently and uncompromisingly pro-creditor position” to fit his thesis to our bill. Here they have misrepresented Sack’s thesis.
Sack argued that state debts should be repaid in the interest of international commerce, with one exception — when the debts are odious. This is the qualifier — when creditors lend to a sovereign they need beware that the funds are not ultimately used against the interests of the people, to oppress the people, for manifestly personal purposes, etc., lest they lose their claim to repayment. To avoid arbitrary repudiation, Sack also proposed an arbitral procedure in which each side could make their case.
Are the authors saying that Sack didn’t mean to carve out “odious” debts as the exception to the rule of repayment of state debts? Are they saying that he disingenuously designed his test of odiousness to fail and therefore to appease creditors of the day? I prefer to take Sack at his written word rather than assign motives to a dead man as the authors seem to have done.
To their credit, Professors Gulati and Ludington concede that Sack’s innovative proposal for a new body of law that viewed states as private actors when they borrowed from foreign citizens on the international debt market – essentially, private contract law — didn’t turn out to be harebrained after all, even though it was dismissed at the time by some in the legal academy. “Sack was prescient,” they say, “because this is indeed the way in which the law governing state debts to foreign bondholders has evolved.”
I would argue that Sack’s genius may have stemmed from his economics and public finance perspective, and from experience that gave him novel insight into the perils of sovereign borrowing.
But there I go again, “lionizing” the man. I don’t mean to give credit to Alexander Sack to the exclusion of other scholars who have written about sovereign debt: I am grateful to Jeze for his articulation of the phrase “debts de regime,” to Charles Cheney Hyde for his notion of “hostile debts,” to the American Commissioners to the Spanish-American War peace negotiations for their arguments against assuming the so-called Cuban debts, to Chief Justice Taft for his opinion about the legitimacy of the Tinoco debts, and to Grotius for using the word “odious” 400 years ago, etc. The more the better, I say. But, as professors Gulati and Ludington point out, Sack did a rather good job synthesizing the various principles articulated by the above mentioned scholars and developing the concept of the duty of creditors. In short, he fashioned the doctrine of odious debts.
His inspired insights resonate with me. And — I’ll go out on a limb here – with millions (even billions, I dare say) of ordinary citizens around the world who sense that there ought to be a law against the kind of unaccountable sovereign borrowing that created the intractable Third World debt crisis.
As a non lawyer, but as one who is constantly searching for rules of law to correct injustices, derisive treatment of Alexander Sack at Gulati and Ludington’s hand suggests to me that the problem rests more with the process of international law-making than with Mr. Sack.
Put another way, does it really matter to law-makers today if Alexander Sack is deemed to have had no authority (according to the rules of international law making) to influence international public law, if the people, masses of people, say his formulation of the doctrine of odious debts is the law they want? More than people wanting his law, his doctrine has been accepted by quasi-judicial bodies such as the South African Truth and Reconciliation Commission, which surely must have some standing, by large segments of the Church community as a whole, which as we all know once wrote the law, and by leaders and governments in numerous countries. And their approach is not to repudiate, but to investigate, to separate the odious debts from the non-odious debts, and then to arbitrate. Alexander Nahum Sack made a great contribution to the advancement of the rule of law, a contribution that almost a century later resonates with great force. We should give the man his due.
And that is something the authors seem intent on robbing him of posthumously.
I am not persuaded that Sack did not enjoy wide respect in his day. For someone – a Jew in the anti-Semitic Europe of 100 years ago no less — to have been welcomed into the University of Petrograd, the school of International Law at The Hague, the Institute des Sciences Sociales et Politiques and the Ecole des Hautes Etudes Internationales in Paris, as he was, is remarkable. For a prestigious publisher to publish his major work, as it did, and for the work to be widely and favorably (and unfavorably) reviewed by some of the most prominent scholars in international law as it was, also demands respect. For respected schools such as Northwestern University and later New York University to have sought him, as they did, also speaks to the high regard in which he must have been held. There is no basis on which to judge Sack’s hardships as being deserved. After all, they chiefly stemmed from an accusation of having Soviet sympathies, a not uncommon charge in that nascent McCarthyite era, but surely a threatening and disturbing one to someone such as Alexander Sack.
To denigrate Sack, as the authors do, by portraying him as having no eminence as a scholar in any field of law, by describing his teaching history as “peripatetic,” and his response to ill-treatment (firing) by NYU as “cantankerous, outspoken, querulous and litigious” rings of “it serves him right.”
In the end, it seems to me that Gulati and Ludington are saying that Alexander Sack’s formulation of a doctrine of odious debts should be discounted because he wasn’t eminent enough or pleasant enough to win friends and influence people in international law. That he may have been difficult to work with (if this is indeed the case) seems beside the point. Many great personages throughout history have been difficult if not impossible to work with. We remember them for their accomplishments, not for their desirability as dinner guests.