International Peoples' Tribunal on the Debt
World Social Forum, Porto Alegre, Rio Grande de Sul, Brasil
1-2 February 2002

Debt Background | Chronology | Tribunal | Tribunal Verdict

	Jubilee South, along with KAIROS and others convened the International Peoples' Tribunal on Debt during the World Social Forum in Port Alegre, Brasil. Though it was a court of opinion rather than a court of justice, the Tribunal carefully and astutely upheld judicial traditions and processes.

	Contents

• The Prosecution's Case - The Bill of Indictment
• The Illegitimacy of Debt Based on the Impact of Debt Service
• The Illegitimacy of Debt based on the impact of Projects and Policies Financed by Debt
• Illegitimacy of Debt based on the Nature of Contracting Parties, Processes, Terms and Usage
• The Illegitimacy of Debt Based on the Use of the Debt to Impose Conditionalities and the Use of Debt Relief as leverage for more Conditionalities
• Prosecutor's Closing Remarks

• The Verdict
• Recommendations
• Judgement
• Conclusion

Jubilee South, along with KAIROS and others convened the International Peoples' Tribunal on Debt during the World Social Forum in Port Alegre, Brasil. Though it was a court of opinion rather than a court of justice, the Tribunal carefully and astutely upheld judicial traditions and processes.

The Jubilee movement began with a call for cancellation of the debts of all low-income countries and an end to Structural Adjustment Policies (SAPs). Implementation of SAPs generally involves drastic cuts in government spending on public services and subsequent privatization of state enterprises, deregulation, currency devaluation, and the promotion of export-oriented growth. As the Jubilee movement grew broader-particularly in the South, more sophisticated understandings of Southern debt and the impacts of debt-service were developed. Through global discussions, an understanding of illegitimate debt began to emerge. The Jubilee movement then added a third demand-calling for the assessment of all developing country debts and the cancellation of those found to be illegitimate. The important work of research and gathering evidence had begun.

The Tribunal was convened to examine the crime of illegitimate debt and the unjust burden that illegitimate debt has placed upon countries and peoples of the South. Those on trial were banks and transnational corporations, governments in the North, the International Monetary Fund (IMF), the World Bank and other international financial institutions. In addition to exposing the nature of illegitimate debt and its impact on countries and peoples of the South, and ruling on the accused, the Tribunal set forth a number of recommendations and alternatives.

	The Prosecution's Case - The Bill of Indictment

The plunder of the South by the North began with colonialism, setting the stage for unequal relations and producing a system that relies on that disjointed relationship. In laying out its case, the Prosecution provided an overview of the ways in which Southern debt can be considered illegitimate and the factors that contribute to it's illegitimacy. These included:

In addition, the Prosecution set the stage for the Tribunal by providing an overview of the history of the debt crisis and the United States' complicity in helping to shape that crisis by putting an end to the Bretton Woods system of fixed exchange rate leading to currency devaluation. As a consequence, a flood of petrodollars was deposited in Northern banks leading them and their governments, in pursuit of profits, to lend indiscriminately and encourage borrowing in high-risk conditions, thereby subsidizing their economies. "The United States now attracts more net capital inflows than all the developing countries combined. It has thus gone from being a net creditor to the rest of the world at the beginning of the 1980s to being the largest net debtor in the world-to the tune of $2,300 billion by 2000." (McKinnon: June 2001)
The unilateral decision of the US at the end of the '70s to raise interest rates from their historical level of 4 to 6% to more than 20% within a few months led to the 'debt crisis.' Thus the Prosecution argued that the United States "has been and is now the principal cause of the financial, economic, and social problems that are at the heart of the accusation."

In 1980 the South owed $567 billion dollars; since then it has repaid $3,450 billion has been paid or more than six times the amount of the actual debt. Yet the creditors continue to claim that they are owed over two trillion dollars-three and a half times more than in 1980. Essentially, the payment of services on the external debt results in a net transfer of resources from the South to the North. In 1998 the HIPC (Highly Indebted Poor Countries) sent $114.6 billion dollars to the North, some $1.68 billion dollars more than they received.
Therefore the Prosecution demonstrated that the debt to have been paid many times over. It was suggested that an actuarial study be made that discounted fictitious debts, amortizations, usurious interest, interest on interest already paid, disproportionate costs and commissions, debts contracted by private individuals, or debts incurred by corrupt leaders. Then it would readily be demonstrated that the debt has been totally paid and repaid and that the debtors are in fact creditors.
The Prosecution's case was further elaborated using four broad categories under which testimony was presented:

• impact of debt service,
• impact of projects and policies financed by debt,
• the nature of contracting parties,processes, terms and usage,
• and the use of debt to impose conditionalities and the use of debt relief as leverage for more conditionalities.

:: The Illegitimacy of Debt Based on the Impact of Debt Service

Creditors' insistence on debt payments regardless of the economic and social costs has contributed significantly to the denial of human rights to large numbers of peoples in the South. It stands in stark contrast to the way that many of the same creditors' acted towards a defeated Germany after World War II by enacting the Marshall Plan.
The UN International Covenant on Economic, Social, and Cultural Rights (ESCR) obliges states to ensure the fulfilment of ESCR for all it's citizens. ESCR include equal rights for women and men, the right to just and favourable conditions of work, the right to social security and social insurance, protection and assistance for the family, the right to health and education, and the right to an adequate standard of living. Commonly, human rights are considered indivisible, therefore a state's first obligation can be understood to be the fulfilment of their citizen's rights rather than debt repayment or servicing of debt.

Evidence from Testimony
The global testimony spoke of the impacts of debt service and the consequence of redirecting funds away from state social service obligations. Testimony from Uganda spoke of how debt servicing has led to greater poverty that, in turn, has led to greater illiteracy among girls. As child labour increased, resources for health care diminished leading to a disproportionate burden on women to maintain and extend the caregiver role in a time of regional health crisis due to the spread of HIV/AIDS. Between 1990 and 1993, the African region paid $13.4 billion annually to its external creditors, more than its combined spending on education and health.
In Uganda the government spends US$3 per person annually on health and on education and US$17 per person on debt repayment even though five out of 10 Ugandan children die of preventable diseases before reaching the age of five. The IMF claimed that from 1994 to 1998 there was an 80% increase in public spending on education and health. However, African countries' expenditure rose only 20% per year after falling continuously for 15 years. Therefore it would take until the year 2010 to restore spending on education and health to 1985 levels.
Testimony from Ecuador spoke of the impact of debt on indigenous peoples-the destruction of their culture and their way of life, the loss of their land, and vast ecological destruction. Furthermore, the Jury heard, "If we add up all of the gold that they took from us, the silver that they plundered, the land that even their companies continue to occupy-it will be clear that we have already paid off the debt. It is they who owe us."
Testimony from Senegal spoke to the effects of debt on young people. The weight of debt, it was noted, has as a consequence the lack of education among the young. Moreover, the Jury heard, payment of debt and debt servicing has led to a shrinking of the domestic economy in Senegal and hence high unemployment rates for the young. This lack of employment has meant that young women are increasingly being pushed into prostitution as a means for supplementing family income.

:: The Illegitimacy of Debt based on the impact of Projects and Policies Financed by Debt

Projects and policies financed by lenders have often resulted in enormous ecological and social damage. These include natural resource extraction that is destroying the means of survival for Southern communities, the degradation of the best lands for use for export production, the contamination of the atmosphere through excessive emissions of greenhouse gases, mega-projects geared towards profit, the appropriation of traditional knowledge and seeds, the dumping of toxic wastes in the South, selling pesticides to the South which were banned in the North, and Northern financial and political support of armed conflict. Such vast destruction may be understood to be ecological debt or debt that the North owes to the South.

Evidence from Testimony
The ecological cost of development was highlighted by testimony from India, citing how the building of big dams has devastated environments, habitats, and forcibly displaced millions of people. Dam building has been inextricably linked to loans and debt accumulation by borrower countries. It was estimated that loans for irrigation, drainage, and flood control make up 14% of World Bank loans to India. The testimony spoke to the Union Carbide disaster. In 1984 poisonous gases escaped from Transnational Union Carbide's pesticide plant in Bhopal immediately killing 3,000 people and over 20,000 people from the ongoing effects. This disaster has illustrated the need to stop further environmental destruction and degradation done in the name of trade and development.

Testimony from Nicaragua highlighted how "development," foreign investment and the debt have been used as tools by the North to control and exploit Southern nations, their natural resources, and their workforce. In addition, the jury heard that between 1980 and 1988 the US, despite international rulings against such interference, financially propped up the illegal Contra forces and engaged in "low-intensity warfare" by providing them with more than $100 million dollars, thereby contributing to an extensive armed conflict that cost over 50,000 lives and inflicted a high ecological cost. In 1983 oil deposits in Benjamin Zeledon Port were bombed creating huge contamination areas. Moreover Contra forces placed 81, 626 anti-personal mines between 1982 and1989, creating not only a huge danger to local communities but also inhibiting potential local agricultural production.

Testimony from Angola noted that Angola is a resource-rich country being a producer of oil, diamonds and minerals. Alongside this wealth, the country has suffered four wars in the last 40 years, with the last war creating an unprecedented military debt which was illegally financed by governments and multinationals. Today 60 percent of the country's budget goes to service the debt and keep the war machine functioning. Ironically, the G8 countries sold weapons to both sides in the conflict, all the while imposing adjustment policies which left the Angolan people to bear the brunt of both military and economic warfare. The testimony concluded by lamenting that Angola is now considered the worst country for a child to be born in. In the capital city, every 100 metres you'll find a child on the street who is either orphaned or mutilated by one of the landmines financed by the very same countries which house the major creditor institutions.

:: Illegitimacy of Debt based on the Nature of Contracting Parties, Processes, Terms and Usage

Three sub-categories of illegitimate debt were introduced: debt amassed through fraudulent means and operations such as embezzlement; odious debts; and the illegitimacy of usurious interest rates.

Fraud
Debt incurred through fraud, including fraudulent operations and terms between transnational banks and Southern elites whereby some entrepreneurs or speculators contracted loans and deposited the money in external banks instead of investing in their own countries. Other loans simply disappeared or could not be accounted for. Many times 'private' loans wound up being converted into public loans, placing an unjust burden on the people of the South.

Odious Debts
The legal doctrine of odious debts as part of international law, is understood to be debts contracted for illegitimate purposes by illegitimate parties. This debt becomes odious for the entire population, it is not an obligation of the state, but rather "a regime's debt, a personal debt of the power that has incurred it, consequently it falls with the fall of this power." (Adams, Patricia: 1991) International Financial Institutions (IFIs), transnational banks and Northern governments knowingly provided support for military dictators by propping them up financially and through loose lending restrictions. For example, under the International Convention on the Repression and Punishment of the Crime of Apartheid, and the UN General Assembly adopted sanctions against the regime and yet, in flagrant violation of these mechanisms, the World Bank and the IMF continued to lend money to the South African regime.

As a result, the people of South Africa are being revictimized by apartheid as they are forced to bear the apartheid regime's unlawful debt. M.P. Giyose of South Africa asserted that, "No foreign loan granted to South Africa during the apartheid years could have been legitimate because the apartheid state was itself illegitimate; and any attempt to claim ignorance of this fact would not be credible. This single circumstance means that no lender would have a valid claim against democratic South Africa for any loans outstanding from the apartheid years."

Usury
The charge of usury and usurious interest rates was introduced as a source of illegitimate debt. The interest payments charged on much of the Southern debt are much higher than normal levels which has led to continuous increases of external debt rather than decreases. In addition, excessive and disproportionate commissions and costs were charged. Between 1985 and 1989 the real long term interest rate in six Northern countries was on average 4.35% compared to the average real rate of interest paid on the external debt by 6 Southern countries which was 16.8% (UNDP 1992)

Evidence from Testimony
Testimony from Nigeria that had little or no external debt prior to the mid-eighties, attested to how the debt problem was aggravated by mismanagement and wide-scale corruption. Before the military took over power in 1983, Nigeria's external debt was $8.93 billion dollars. By 1985 it had risen dramatically to $19.55 billion and by 1995 to $34.1 billion dollars. The testimony carefully details close to 30 different loans and projects that cannot be accounted for such as: the "Arochukwu-Ohafia Water Scheme, Warri Farm Project" and the "Kaduna bus project" where state officials claim no knowledge of the loan.

The Philippine testimony highlighted how, in addition to incurring a huge debt legacy of $28.206 billion by the time of its collapse in 1986, the Marcos regime had allowed a sizeable amount of the massive foreign debts it had incurred at the people's expense to end up as crony capital abroad or in unproductive investments of crony firms at home. The government took over a number of private firm debts including debts held by Philippine Airlines, Marinduque Mining and Industrial Co., Philippine Plate Mills, Union Bank of the Philippines, and Galleon Shipping Corp. In addition, the Marcos regime contracted public sector debts for relending to private sector organizations such as the Central Bank - Apex and the National Investment and Development Corporation.

Testimony from Argentina demonstrated how the debt dramatically increased during the military dictatorship between 1976 and 1983. Before 1976, Argentina had a small (both private and public) debt of $4 to 6 billion. (Garcia-Mansilla: 2000) By 1984 that debt had climbed to $46 billion. The evidence brought forward supported the legal conclusion reached by Argentine federal court Judge Jorge Ballestero in July 2000 supporting the claim that much of Argentine debt was fraudulent. Evidence cited that there were overwhelming irregularities and inconsistencies in accounting procedures including "double accounting", usury, the inability to track loans, payment by the Central Bank of higher than usual expenses, commission and fees. As a result, a lot of private debt was assumed by the state during this illegal regime. During the time of dictatorship, capital flight amounted to US $35 billion.

:: The Illegitimacy of Debt Based on the Use of the Debt to Impose Conditionalities and the Use of Debt Relief as leverage for more Conditionalities

Structural Adjustment Programs (SAPs) have been used as conditionalities and eligibility criteria for different types of loans including "debt relief". These conditionalities followed a prescription formula that includes the privatization of essential services, natural resources, and state enterprises. These policies affect the fundamental rights of the population in general-rights to health care, education, housing, labour, social security rights and a healthy environment. SAPs divert financial resources away from health and education towards debt payment. Currency devaluation results in deteriorating terms of trade (imports cost more and exports are worth less), a focus on export-oriented growth at the expense of subsistence agriculture as well as exponential increases in debt payments.

The Prosecution cited the Highly Indebted Poor Countries Initiative (HIPC) as an example of the use of conditionalities for debt relief. HIPC was launched in 1995 as a way to reduce the debt of the poorest countries. In exchange for strict adherence to SAPs, the poorest countries were promised debt relief. Yet, according to the IMF itself, in 1996 the total debt of the 41 countries involved was $205 billion and by 2001 it had actually grown to $215 billion.

The HIPC Initiative has been described by the IMF as a way to reduce debt to 'sustainable' levels, thereby essentially ensuring that debt service or payments to the North continue. Thus, adjustment policies have served one purpose which was to ensure that the debtors pay the service on the debt to the creditors. The Prosecution argued that a cycle had been created: the economy of the debtor countries remains stagnant or grows slowly, making it difficult to fulfill demands (which in themselves are illegal); therefore debtors must contract new loans to pay the service on prior loans. Thus External Debt has become Eternal Debt

Evidence from Testimony
Testimony from Korea spoke of how the 1997 Crisis had tremendous negative effects on Korea. At the outbreak of the crisis, the IMF blamed the crisis on the collusion between the Chaebols (industrial conglomerates) and government resulting in a bloated public sector, excessive concessions to workers, and market protectionism. Though this collusion did exist, testimony pointed to the opening up of the Korean economy in 1995 leading to the over-accumulation of capital, and increased speculative capital. In addition, the government eased restrictions on private companies' access to foreign or international bank loans. Korea could not keep its doors closed to the pressure of neo-liberal globalization. Overproduction by Korean companies, in line with global overproduction, ensued accompanied by pressure from its short-term debt. Conglomerates started to crumble, leading to massive capital flight out of Korea at the first signs of danger.

The IMF intervened with a rescue package of $56 billion dollars in exchange for draconian reforms. The IMF prescribed the lowering of wages, privatization of public companies, restructuring in four major sectors (financial, private, public, and labour), liberalization of capital movement and currency devaluation. In one year the won was devalued by 98%, there were massive lay-offs with close to two million jobs lost and changes were applied to the labour laws weakening trade-unions. Currently Korea "stands as the world's highest indebted country in short-term (maturity of less than one year) debt, ranks seventh in total debt, and State debt has reached dangerous levels due to the astronomical amount of public funds poured into the restructuring process. Millions of workers have been thrown onto the streets and wages have plummeted-resulting in unprecedented levels of poverty and inequality. This seems rather grim for a country praised as being a model of IMF success."

:: Prosecutor's Closing Remarks

Through argumentation, presentation of fact, and testimony, the Prosecution presented a well-documented and poignant case for understanding most external debt as illegitimate and therefore unjust and unpayable. It was demonstrated how, throughout history, the external debt has been used to exploit the peoples of the South, appropriate their wealth, their natural resources, and the fruits of their labour.

It was noted that the accusation speaks of the Northern States (alongside the IMF, World Bank, and national banks) as those with international responsibility for damages caused to the South. Those guilty in the South either formed part of an illegal regime officially (such as a dictatorship) or unofficially (elites). In both instances loans without accountability were easily attainable.

The evidence showed the complicity of the accused in a number of crimes and offences which range from fraud, embezzlement of public property or the collection of usurious interests and the violation of fundamental human rights. The systematic plundering resulted in serious violations of economic, social, and cultural rights and the right not to suffer inhuman or degrading treatment.

Given the evidence, the Prosecution highlighted Article II of The Convention for the Prevention and Punishment of the Crime of Genocide ("intentional submission of the group to conditions of existence, which bring about its total or partial physical destruction") and how external debt can be understood as violating that Convention.

In summary, based on the evidence presented, the Prosecution charged the accused with the following crimes: fraud; embezzlement of public property; usury; extortion by the imposition of conditions before agreeing to renegotiate debts; swindling by continuing to collect nonexistent debt; systematic violation of economic, social and cultural rights; violation of the inherent dignity of the human person and inhuman or degrading treatment; complicity in the crime of apartheid; complicity in the massive violation of human rights committed by dictatorships in different eras; crimes against humanity; and the crime of genocide.

Responsibilities of the accused
The States: The closing argument cited the UN Declaration of Human Rights, the UN Charter, and the International Covenant on Economic, Social, and Cultural Rights (ESCR), as they refer to international cooperation and "solidarity rights" which oblige the creditor States or the States in which private creditors are headquartered to promote the right to development and the progressive enjoyment of ESC rights. Thus there exists "an active universal obligation of the States to guarantee them (these rights), and a passive universal obligation to respect them." The Prosecution noted that violation of these rights is understood to occur by both omission or commission.

The IMF and WB: These bodies are responsible for fulfilling their mandates. Article 1 of the IMF Statutes lists six objectives, including "facilitat(ing) the balanced growth of international commerce, contributing in this way to the promotion and maintenance of high levels of employment and real incomes and the development of productive capacity." In addition, the IMF and World Bank, as specialized institutions of the United Nations system, have a duty to promote the fulfilment of Economic, Social, and Cultural rights, the right to development and the right to respect human rights as persons subject to international law. Thus the IMF and World Bank may be held accountable for any violations of ESC rights that they commit either by omission or commission. In addition, the profoundly undemocratic nature of the IMF decision-making was cited wherein a handful of countries hold a majority of the votes (numbers of dollars equalling the numbers of votes) and that one country, the US, can block or veto important decisions.

Transnational Banks and private individuals: The closing argument cited that those who participated in criminal operations related to external debt must be held liable for common law crimes such as the embezzlement of public property, swindle, usury, and others as documented throughout the course of testimony.

The governments of debtor countries: The Prosecution stated that Southern governments are obliged to negotiate forcefully for illegitimate debt cancellation. The debtor governments, it was claimed, should use the arguments of historical precedents of non-payment of external debt, the illegitimacy and illegality of debt-in particular when contracted and embezzled by a dictatorship. Furthermore, the debt has already been repaid through usurious interest payments and there is an urgency to invest in the people. Governments ignoring their responsibilities may be charged with the systematic and generalized violation of the fundamental human rights of their own people.

The prosecution closed its case with a call for the debt to be declared illegal and unjust and that the Jury recognize, by virtue of the historic social and ecological debt, that it is the North that owes the South.

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	Verdict

Given the scope of the evidence, documentation, and testimony provided during the International Peoples Tribunal on the Debt, the Verdict recognized that, besides being unpayable, the debt is also illegitimate, unjust and immoral. As well, the debt was understood as an ethical, social, environmental and political problem. The explicit role of the US in furthering indebtedness and the imposition of IMF adjustment policies was noted. Overall, the external debt of Southern countries was recognized as a permanent violation of economic, social, and cultural human rights violations as established by the United Nations.
The members of the Jury found the External Debt to be ethically, legally and politically unsustainable. They found the accused (banks, transnational corporations, governments in the North, the IMF, World Bank and other International Financial Institutions) guilty of a wide range of crimes including upholding and favouring unequal terms of trade, charging usurious interests rates, carrying out fraudulent operations, applying structural adjustment, supporting dictatorial or criminal regimes, imposing economic integration programs that favour the interests of transnational companies, breaking international law, and committing crimes of genocide and crimes against humanity.

:: Recommendations

To conclude, the Jury made a number of recommendations:

• That all people stand in solidarity with the call for repudiation and cancellation of external debt;
• A call for independent audits of the external debts of Southern countries;
• Support for restitution of the riches extracted from the South;
• Payment of reparations for damages and support for payment of the Ecological Debt;
• A call for a Consultative Opinion from the International Court of Justice at the Hague with regards to the illegitimacy of debt;
• Development of processes that seek to create sustainable societies; and
• Constituting a Global Commission on Debt with a mandate to investigate and identify all those who are responsible for perpetrating illegitimate debt and to support initiatives to bring them to justice.
  

:: Judgement

The International Peoples Tribunal on the Debt took the time to gather evidence and documentation on external debt that examined not only the impact of external debt on peoples and communities in the South but the very nature and legitimacy of external debt.

On April 18th, 2002, on the occasion of the Spring IMF/World Bank Meetings in Washington, D.C., the Tribunal reconvened to hand down a Judgement. Before reaching Washington, the Peoples' Tribunal contacted the accused through a variety of means. In Argentina, Tribunal representatives met with the IMF team located there, personally handing them the Verdict and inviting them to respond.

After hearing a summary of Tribunal proceedings and taking into account the silence of the accused, the Judges of this popular court declared them guilty of a number of crimes, including the use of non-economic, political and military means to appropriate and transfer the wealth of the South to the North and using their economic and military might to create and perpetuate agencies like giant international banks, financial institutions, and trading corporations. Their pursuit of profit was cited, noting that it has led to the creation of multilateral institutions like the IMF and World Bank which ensure that debt dependence is used as an instrument to put in place neoliberal policies that perpetuate such dependence, as well as their use of coercion to force Southern governments to adopt policies that facilitate an illegitimate transfer of wealth. In addition, multilateral institutions were found guilty for having served as agencies that foster and sustain debt dependence, coordinate debt payments, and create conditions in the South that facilitate the transfer of wealth from the South to the North.

:: Conclusion

In conclusion the International People's Tribunal on Debt made the following declarations:

• All external debt being illegitimate should be immediately repudiated and cancelled.
• The countries of the South should be provided reasonable compensation from the North for wealth transferred. A Global Commission on Debt should be constituted to assess such debt.
• The power of banks, financial institutions and other economic agents should be curtailed so that the recurrence of the growth of illegitimate debt is foreclosed.
• International institutions such as the IMF and the World Bank should be decommissioned and any useful role they play should be handed over to more democratically-managed international institutions.
• Neoliberal policy regimes need to be replaced by more pro-people and pro-poor policies of development
• The Tribunal calls on people to use supplementary legal procedures such as petitions in the International Court of Justice at the Hague to bring forward individual instances of violation of individual, social and human rights.
  

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Debt Background | Chronology | Tribunal | Tribunal Verdict

KAIROS
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