Back to Index

AFRODAD makes a break through in its call for the establishment of a fair and transparent arbitration (FTA) mechanism on debt
African Forum and Network on Debt and Development (AFRODAD)
November 21, 2003

After intensive lobbying and consultations with relevant stakeholders such as the United Nations (UN) and civil society groups in the world, the UN General Assembly (fifty-eighth's Session) has in its recent High-level Dialogue on Financing for development (FfD) Resolution 58/104 of 11 November 2003 requested:

" the Department of Economic and Social Affairs, in collaboration with the United Nations Commission on International Trade Law (UNCITRAL), to develop, through an informal process, within the Monterrey Modalities, a comprehensive, coherent and fair Debt work out mechanism to address debt, and its development dimensions for consideration by the General Assembly at its fifty-ninth Session."

This resolution stems from the realization for the need to finding more innovative and clearer principles for resolving the heavy debt burdens being faced by many countries in the world, including those in Africa. The basic fact still remains that the current debt relief initiatives such as the Heavily Indebted Poor Country (HIPC) initiative and the now famous Poverty Reduction Strategy Papers (PRSPs) have failed to adequately and satisfactorily address debt issues. Instead, they have successfully managed to contribute to negative economic growth and perpetuated poverty in these countries. Despite efforts by African countries to continue to strengthen its macroeconomic fundamentals and religiously focus on reducing poverty, " 80 cents on every dollar that flowed into Africa from foreign loans flowed back out as capital flight in 2002.And every dollar added to the stock of external of debt added 3 cents to the annual capital flight", (UNECA, Economic Report on Africa 2003,p.2). In addition, during the same year, Africa experienced a US$ 6 billion decline in Foreign Direct investment (FDI) inflows, alarming agricultural and food insecurity due to adverse climatic conditions; and privatization, which is an important source of investment flows, was slow and still reluctant - a clear indication that it has failed to boost investment in Africa.

It has also become apparent, globally that there are no neutral, fair and transparent arbitration mechanisms between Debtors and Creditors that would enable Debtors seek redress in cases of unpayable or illegitimate Debts. The creditors, who also constitute the donors, continue to prescribe debt initiatives ad make rules designed to serve their own interests. They also make all the decisions, define the rules of borrowing and repayment and impose their own tailor made measures through the Bretton Woods Institutions. The Paris Club, for example, is an undemocratic institution, which can be equated to a gang of Creditors acting against one Debtor.

AFRODAD believes that such undemocratic institutions ought to be replaced by structures, which respect human rights, democracy and the right of Debtor countries and their people to be heard. Such institutions should be based on global consensus in terms of respect for Human rights and other aspirations enshrined in the universal declarations.

We welcome this resolution in the hope that the UNCITRAL, which is both an institution and a set of arbitration rules in the settlement of disputes arising in the context of international commercial relations and contracts, will set the basis for the introduction of a process of arbitration that will enable the debt crises to be resolved in a way that preserves the integrity of Debtor countries and also ensures that Creditors share the responsibility for failure of the development process and the rise of the Debt crisis.

We, reiterate, however, that such processes should not undermine long-term development prospects of Debtor countries but allow justice to prevail in the resolution of illegitimate debts.

An arbitration mechanism, which is an alternate method of resolving disputes outside the traditional court system, can act as a vehicle for dialogue on the divergent views between Creditors and Debtors on the need for total Debt cancellation, options for retrieval of stolen wealth by some corrupt and despotic leaders, different methods of resolving the Debt crisis, and to stop paying huge debt servicing obligations at the expense of human development.

Support Debt cancellation efforts that place economic and social justice at the centre of development!

Barbara Kalima (Ms)
Coordinator

Visit the AFRODAD fact sheet

Please credit www.kubatana.net if you make use of material from this website. This work is licensed under a Creative Commons License unless stated otherwise.

TOP