Prof. Kunibert Raffer, Ethics & International Affairs, Vol. 18, No. 2

A report by Austrian-based economist Kunibert Raffer published last
year and now available for access on the Odious Debts Online Web site,
calls for the creation of a permanent international court of
arbitration to work through disputes between IFIs and borrowing
countries.
Arbitration courts have worked effectively in the field of
international investment and could help resolve disagreements over IFI
loans.
Prof. Raffer suggests such a court process would permit both IFIs and
developing countries to nominate the same number of members, who would
then elect one further member to reach an uneven number to assure
majorities in order to avoid deadlocks.
An international court of arbitration is one of the proposals Prof.
Raffer offers as a way of holding IFIs financially accountable for
their actions and decisions.
The lack of IFI accountability he says, leaves developing countries and
the poor unprotected against “negligently or even willingly inflicted
damage.” A state of affairs made worse because “damages caused by one
project or adjustment program call for a new loan to repair them, thus
increasing IFI income ‚Äì in other words, IFI-flops create IFI-jobs.”
Legal redress has not been possible for victims of development
projects, although the principle that anyone can seek redress for
“suffering or alleging to suffer damages due to another’s fault or
because of failures to observe a purely equitable duty” is firmly
established in OECD countries.
“The only exception of this generally accepted rule is development
cooperation,” says Prof. Raffer, “the last sphere where damage can
still be inflicted with impunity and even financial gain.”
The “perverted incentive system that rewards errors and negligence of
IFIs must be brought to an end,” he says. If normal accountability
standards applied, he claims there would be “no multilateral debt
problem” because IFIs would be forced to shoulder their part of the
responsibility for the outcome.

Paper no longer available for access.