In his millennium address "We the people", Kofi Anann, the UN Secretary General spoke of the negative impact of the debt crisis on the lives of millions of people in the developing world. In relation to resolving the situation, he stated:

"a debt arbitration process should be instituted that would balance the
interests of creditors and sovereign debtors, introducing greater
discipline into their relations"

The practice of international arbitration in relation to debt is nothing new. In the aftermath of World War II, German debt service payments were negotiated around the need for reconstruction and development. Then in the 1970s, General Suharto of Indonesia was awarded a very lenient debt settlement, in return for his friendship with the West during the cold war. In both of these situations, an independent arbitrator negotiated the debt settlement.

At present there are international procedures to arbitrate on human rights, war crimes and other issues. These operate in ways that are transparent, independent and with the consent of the wider international community.

Jesuits for Debt Relief and Development (JDRAD), among others, have proposed the establishment of an International Arbitration Procedure as one possible way to ensure that the scales of justice in relation to the debt issue are properly balanced. JDRAD are members of the Debt and Development Coalition in Ireland.

It is proposed that an International Arbitration Procedure would consist of two panels:

• A conciliation panel, to facilitate negotiated settlements
  
  
• An arbitration panel, in situations where settlements could not be agreed, this panel would be legally binding.

The following three criteria are essential for the International Arbitration Procedure to work:

• Government and civil society in both creditor and debtor countries would nominate the members of the panels.
  
  
• The panels would not be subject to political control nor influenced by any participant.
  
  
• The panel members would elect an independent chair.

The debt issue is as much about power relations and politics as it is about finance and
economics. Since the debt crisis arose from past mistakes and poor judgement by both
debtors and creditors, it is only right that both debtors and creditors should be fairly represented in an effort to deal with the situation. However, right now the creditors police the issue of national debt: the creditors play both judge and jury.

The money to service debts comes from the national budgets of debtor governments. The
responsibility for the provision of basic needs lies with national governments. It is they who should determine how much money remains, following provision of basic needs, to service their debts. However, right now it is the creditors who decide how much a country can afford to pay. They do not question the legitimacy of the debt nor do they consider, in any real way, the limits of a country's ability to pay.

An International Arbitration Procedure has the potential to resolve this crisis in an ethical and practical manner. A democratic body affording a voice to both creditors and debtors in the negotiations, the Arbitration Procedure would provide the appropriate forum to tackle a crisis which has been allowed to drift on for far too many years.

Read more about Arbitration here >>

Contributors:

Michael O'Sullivan Columban Mission Education

Niamh Gaynor JDRAD

Maire Kelly Jubilee Ireland

Useful Websites:

www.jubileeplus.org

www.jesuit.ie/jdrad

www.debtchannel.org

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