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

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 Images

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In 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.

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History 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.

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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.

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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.

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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.

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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.”