A Fate Worse than Debt: An Alternative View of the Right to Development and its Relevance in the External Debt Problem of Developing Countries

Abstract

The external debt problem of developing countries is a lacuna in public international law. An author has observed that uncertainties and questions about external debts “remain ignored by treaty law or have not been regulated by contracts and are probably not yet governed by customary law.” There is currently no multilateral treaty that specifically governs the situation of a developing country plagued by simultaneous debt repayments. Neither is a typical international loan contract useful in looking for fair and equitable solutions to the problems occasioned by external debts. This thesis aims to contribute in filling up this legal void. The main controversy in this thesis involves a collision between the principle of pacta sunt servanda as applied in international loan contracts and a proposed legal principle that may be employed to counter the ill-effects upon a debtor country of a high level of external indebtedness. This thesis will propose an alternative view of the “right to development” which is supported by certain legal norms whose bases are well-established in public international law. It will argue that the right to development can be invoked as a legal shield to protect debtor countries against the adverse repercussions occasioned by debt-related arrangements and policies in the international plane. This alternative view will be put into an empirical application within the backdrop of the external debt problem of the developing countries. Is the right to development applicable in the specific context of creditor-debtor relation between states? How can it be applied vis-a-vis the main problems occasioned by a huge external indebtedness? The area of public external debts is one of the many international settings where the cards are stacked, so to speak, against the debtor countries. This thesis will show how a high level of indebtedness adversely impacts a debtor country in two major ways. First, through the use of policy “conditionalities,” the present international debt relief mechanisms significantly limit a debtor country’s prerogative in managing its own process of economic development. And second, the creditors’ staunch claim to be repaid and the debtor country’s lack of choice but to heed such a claim result in the latter’s inability to perform its treaty obligations to realise the economic, social and cultural rights of its people. This thesis will argue that both are legally incompatible with the right to development, and both ought to be addressed by a proposed debt restructuring mechanism for debtor countries that genuinely respects and promotes this right. Contact author at Noel.Villaroman@monash.edu.