Opinion: Lenders, beware — a Kenyan court case may invalidate ‘odious debts’

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Or sign-in if you have an account.Kenyan citizens, a petition contends, should not be responsible for repaying president William Ruto and former president Uhuru Kenyatta's loans they neither authorized nor benefited from. Photo by Fredrik Lerneryd/Bloomberg via Getty ImagesIn international law and finance, few doctrines challenge the legitimacy of dictators, autocrats and unaccountable rulers more directly than the “doctrine of odious debt.” First formalized by Russian legal scholar Alexander Nahum Sack in 1927, the doctrine holds that debts incurred by despotic or unrepresentative regimes should not bind their country’s citizenry. These are not legitimate obligations of the state, the theory goes, but personal liabilities of the rulers who incurred them without the consent of the people and not for their benefit, often with the complicity of creditors.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountHistory offers clear precedents. After the Spanish-American War of 1898, the United States repudiated Cuba’s debts to Spain because the funds had been used to suppress the Cuban people. In 1919, in the aftermath of World War I, the Reparation Commission refused to burden newly independent Poland with German and Prussian debts incurred to colonize it. In 1923, U.S. Chief Justice William Howard Taft, sitting as arbitrator, rejected the Royal Bank of Canada’s claims against Costa Rica for loans extended to the dictator Federico Tinoco.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againThe doctrine is a perpetual threat to those who get into bed with despots. After the Gulf War, Paris Club creditors forgave 80 per cent of Saddam Hussein’s debts rather than risk an odious-debt arbitration that would have exposed their financing of his regime.Today, the doctrine looms large over Africa. In June 2026, over the government’s strong objections, a three-judge High Court bench in Nairobi greenlit a full hearing on the legality of roughly US$54 billion worth of Kenya’s public debt.The petition, filed in April 2025 by Senator Okiya Omtatah and eight co-petitioners, invokes the doctrine of odious debts in challenging a decade of borrowing under the administrations of former president Uhuru Kenyatta and current President William Ruto. It specifically targets a Eurobond debt totalling about US$7.1 billion as unconstitutional and unlawful.The petitioners claim that less than 30 per cent of the borrowing received proper parliamentary approval. The remainder was allegedly incurred outside the budgets approved by Parliament, never appeared in official appropriation laws, and was not linked to identifiable public development projects. Instead, funds were allegedly deposited into offshore accounts, in violation of constitutional public-finance provisions and the Public Finance Management Act.The petitioners seek declarations that portions of this debt are unconstitutional and odious. Kenyan citizens, they contend, should not be responsible for repaying loans they neither authorized nor benefited from. They further seek personal liability for former president Kenyatta and other officials.In dismissing the government’s attempts to strike down the case, the court signalled that a sea change in debt accountability may be underway. In a dramatic twist, the Central Bank of Kenya, a respondent in the case, has joined the petitioners, arguing in court filings that the petition “raises contested substantial issues of undoubted public importance” and that “the weight, sensitivity, and public interest surrounding the Petition call for collective judicial thought to establish enduring jurisprudence on the delicate constitutional questions at stake.”This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Legal analysts and public-interest practitioners following the matter describe the petition as a game-changer. One Nairobi law firm wrote that the High Court is “seized of a petition that could dramatically redefine the contours of fiscal accountability and sovereign debt jurisprudence in the region,” calling it “a critical inflection point in the evolution of Kenya’s jurisprudence on constitutional law.”Outside Kenya, the African Sovereign Debt Justice Network noted that the petition’s outcome “carries the potential to establish a crucial precedent regarding the judicial enforcement of the ‘odious debt’ doctrine, potentially reshaping transparency and accountability in borrowing.” A separate analysis in This is Africa observed that the case “carries the potential to produce the first African judicial precedent on the enforceability of the odious debt doctrine.”The doctrine’s criteria remain straightforward: lack of genuine public consent, absence of public benefit, and creditor awareness (or willful blindness). As agents of the people, sovereign borrowers’ relationship with lenders is fraught with moral hazard. Sovereigns want to borrow and spend to win votes, favour cronies, secure power and, often, to siphon money off for themselves. Lenders extend credit to dubious regimes or for dubious purposes, confident that citizens will be forced to repay.Kenya’s case demands an examination of whether specific borrowings complied with the Constitution and whether the public received any corresponding benefit. If the High Court ultimately finds the borrowings fail that test, the implications will stretch far beyond Nairobi. Creditors who lent without insisting on parliamentary approval or transparent project linkage may discover that the “sovereign” they financed was, in important respects, acting outside the law that gives sovereignty its legitimacy.Sack’s doctrine has long been more theory than practice, largely because powerful creditors and debtor governments share an interest in maintaining the fiction that all sovereign debt is legitimate. Kenya’s High Court has now opened the door to test that fiction.Patricia Adams, executive director of Probe International, is the author of the 2014 book, The Doctrine of Odious Debts. We apologize, but this video has failed to load.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.