- International Monetary Fund
- Published Date:
- January 1966
I. Text of Special Exchange Agreement
Whereas paragraph 6 of Article XV of the General Agreement on Tariffs and Trade (hereinafter referred to as “the General Agreement”) provides that any contracting party which is not a member of the International Monetary Fund (hereinafter called “the Fund”) shall, within a time to be determined by the Contracting Parties after consultation with the Fund, become a member of the Fund, or, failing that, enter into a special exchange agreement with the Contracting Parties; 1
Whereas paragraph 7 of the said article provides that such special exchange agreement shall provide to the satisfaction of the Contracting Parties that the objectives of the General Agreement will not be frustrated as a result of action in exchange matters by the contracting party in question, and taking into account that the terms of such agreement shall not impose obligations on the contracting party in exchange matters generally more restrictive than those imposed by the Articles of Agreement of the Fund on members of the Fund;
Whereas by Resolution of June 20, 1949 the Contracting Parties adopted the text of the special exchange agreement for the purpose of giving effect to the above-mentioned provisions of the General Agreement and authorized their Chairman to sign on their behalf a special exchange agreement in the terms of this text with any contracting party which is not a member of the Fund and to take all necessary action to give effect to that resolution;
The Contracting Parties and the Government of ………………………, acting through its representative duly authorized for this purpose,
Hereby agree as follows:
Article I: Exchange Stability and Orderly Exchange Arrangements
The Government of ………………….. shall collaborate with the Contracting Parties to promote exchange stability, to maintain orderly exchange arrangements with other contracting parties to the General Agreement, to avoid competitive exchange alterations, and to assist in the elimination of restrictions on the making of payments and transfers for current international transactions with a view to the establishment of a multilateral system of payments and to the promotion of international trade.
Article II: Determination of Initial Par Value
1. Unless an initial par value has been previously agreed between the Government of ……………….. and the Contracting Parties, the Government of ………………… shall, within thirty days after the Contracting Parties so request, communicate to them the par value of its currency based on the rates of exchange prevailing at the time. The par value so communicated shall be the initial par value of its currency for the purpose of this agreement unless within ninety days after the request has been received (a) the Government of ……………. notifies the Contracting Parties that it regards the par value as unsatisfactory, or (b) the Contracting Parties notify the Government of ……………….. that in their opinion the adoption of such par value would be prejudicial to trade among the contracting parties. When such notification is given, the Contracting Parties and the Government of ………………… shall, within a period to be determined by the Contracting Parties, agree upon a suitable initial par value.
2. The par value of the currency of ………………. shall be expressed in terms of gold as a common denominator or in terms of the United States dollar of the weight and fineness in effect on 1 July 1944.
3. The Contracting Parties will keep the Government of ……………… currently informed on the par values of the currencies of the other contracting parties.
Article III: Gold Transactions Based on Par Value
1. The Government of …………… shall not buy gold at a price above the par value of its currency plus the margin permissible under this article, or sell gold at a price below the par value minus the margin permissible under this article.
2. The margins permissible for transactions in gold by the Government of …………….. shall be the same as those permissible to contracting parties which are members of the Fund, and the Contracting Parties shall keep the Government of …………… informed of such margins.
Article IV: Foreign Exchange Dealings Based on Parity
The maximum and minimum rates for exchange transactions between the currency of ……………. and the currencies of other contracting parties taking place within the territories of …………………. shall not differ from parity:
(a) In the case of spot exchange transactions, by more than one per cent, and
(b) In the case of other exchange transactions, by a margin which exceeds the margin for spot exchange transactions by more than the Contracting Parties consider reasonable.
Article V: Obligations Regarding Exchange Stability
The Government of ……………… undertakes, through appropriate measures consistent with this Agreement, to permit within its territories exchange transactions between its currency and the currencies of other contracting parties only within the limits prescribed under Article IV. The Government of ……………… shall be deemed to be fulfilling this undertaking if its monetary authorities, for the settlement of international transactions, in fact freely buy and sell gold within the limits prescribed under Article III.
Article VI: Changes in Par Value
1. The Government of ……………… shall not propose a change in the par value of its currency except to correct a fundamental disequilibrium.
2. A change in the par value of the currency of …………….. may be made only on the proposal of the Government of …………….. and only after consultation with the Contracting Parties.
3. When a change is proposed, the Contracting Parties shall first take into account the changes, if any, which have already taken place in the initial par value of the currency of ……………… as determined under Article II. If the proposed change, together with all previous changes, whether increases or decreases,
(a) Does not exceed ten per cent of the initial par value, the Contracting Parties shall raise no objection;
(b) Does not exceed a further ten per cent of the initial par value, the Contracting Parties may either concur or object, but shall declare their attitude within ninety-six hours if the Government of …………….. so requests;
(c) Is not within (a) or (b), the Contracting Parties may either concur or object, but shall be entitled to a longer period in which to declare their attitude.
4. The Contracting Parties shall concur in a proposed change which is within the terms of (b) or (c) of paragraph 3 if they are satisfied that the change is necessary to correct a fundamental disequilibrium. In particular, provided they are so satisfied, they shall not object to a proposed change because of the domestic social or political policies of the Government of …………………..
5. If the Fund, in accordance with Article IV, Section 7, of the Articles of Agreement of the Fund, makes uniform proportionate changes in the par values of the currencies of Fund members, the Government of …………….. will change its par value proportionately, unless it informs the Contracting Parties within ninety-six hours after it has been notified by the Contracting Parties of the Fund’s action that it does not wish the par value of its currency to be changed.
6. Changes in the par value made under paragraph 5 shall not be taken into account in determining whether a proposed change falls within (a), (b) or (c) of paragraph 3.
7. If the Government of …………………. change the par value of its currency despite the objection of the Contracting Parties, in cases where the Contracting Parties are entitled to object, the Government of ………………. shall be deemed to have failed in carrying out its obligations under this agreement.
Article VII: Avoidance of Restrictions on Current Payments
1. Subject to the provisions of Articles IX and XI, the Government of ………………. shall not, without the approval of the Contracting Parties, impose restrictions on the making of payments and transfers for current international transactions.
2. The Government of ………………. shall not engage in, or permit its treasury, central bank, stabilization fund, or other similar fiscal agency, to engage in any discriminatory currency arrangements or multiple currency practices except as authorized under this agreement or approved by the Contracting Parties. If such arrangements and practices have been maintained since 1 January 1948 (the date on which the General Agreement was first provisionally applied), the Government of ………………….. shall consult with the Contracting Parties as to their progressive removal. This paragraph shall not apply to such arrangements or practices maintained or imposed under paragraph 1 of Article XI, in which case the provisions of paragraph 3 of that article shall apply.
3. Exchange contracts which involve the currency of any contracting party and which are contrary to the exchange control regulations of that contracting party maintained or imposed consistently with the Articles of Agreement of the Fund or with the provisions of a special exchange agreement entered into pursuant to paragraph 6 of Article XV of the General Agreement, shall be unenforceable in the territories of ………………… In addition, the Government of …………………. may, by mutual accord with other contracting parties, co-operate in measures for the purpose of making the exchange control regulations of either contracting party more effective, provided that such measures and regulations are consistent with this agreement or with another special exchange agreement entered into pursuant to paragraph 6 of Article XV of the General Agreement or with the Articles of Agreement of the Fund, whichever may be applicable to the contracting party whose measures or regulations are involved.
Article VIII: Controls of Capital Transfers
1. The Government of ……………. may exercise such controls as are necessary to regulate international capital movements, but may not exercise these controls in a manner which will restrict payments for current transactions or which will unduly delay transfers of funds in settlement of commitments, except as provided in Articles IX and XI.
2. The Government of ………………. undertakes that capital outflow will be in accordance with the objectives of this agreement and of the General Agreement.
Article IX: Scarce Currencies
1. The Government of ………………. is authorized to impose temporarily, after consultation with the CONTRACTING PARTIES, limitations on the freedom of exchange operations in a currency which has formally been declared scarce by the Fund in accordance with Article VII, Section 3 (a), of the Articles of Agreement of the Fund. Subject to the provisions of Articles IV and V of this Agreement, the Government of ……………… shall have complete jurisdiction in determining the nature of such limitations, but they shall be no more restrictive than is necessary to limit the demand for the scarce currency to the supply held by, or accruing to, the Government of ………………; and they shall be relaxed and removed as rapidly as conditions permit. The authorization here mentioned shall expire whenever the Fund formally declares the currency in question to be no longer scarce.
2. If the Government of ………………….. is imposing limitations in accordance with paragraph 1, it shall give sympathetic consideration to any representations by the contracting party whose currency has been declared scarce regarding the administration of such restrictions.
3. The Contracting Parties shall request any contracting party against which restrictions may be permitted under this article not to invoke the obligations of any engagement entered into with the Government of ………………….. prior to this agreement in such a manner as will prevent the operation of the provisions of this article.
Article X: Convertibility of Balances Held by Other Contracting Parties
1. The Government of ………………. shall buy balances of its currency held by another contracting party if the latter, in requesting the purchase, represents:
(a) That the balances to be bought have been recently acquired as a result of current transactions; or
(b) That their conversion is needed for making payments for current transactions.
2. The Government of ……………… shall have the option to pay either in the currency of the contracting party making the request or in gold.
3. The obligation under paragraph 1 shall not apply
(a) When the convertibility of the balances has been restricted consistently with Article VII or VIII; or
(b) When the balances have accumulated as a result of transactions effected before the removal by the Government of ………………….. of restrictions maintained or imposed under Article XI; or
(c) When the balances have been acquired contrary to the exchange regulations of the Government of ……………….; or
(d) When the currency of the contracting party requesting the purchase has been declared scarce and the Government of ………………. has been so notified under Article IX; or
(e) With the approval of the Contracting Parties, in any particular circumstance in which the fulfilment of the obligations of paragraph 1 of this article would dangerously threaten exchange stability.
Article XI: Transitional Period
1. In the post-war transitional period the Government of ……………. may, notwithstanding the provisions of any other article of this Agreement, maintain and adapt to changing circumstances 1 restrictions on payments and transfers for current international transactions. The Government of …………………… shall, however, have continuous regard in its foreign exchange policies to the intent of this agreement and of the General Agreement; and, as soon as conditions permit, it shall take all possible measures to develop such commercial and financial arrangements with other contracting parties as will facilitate international payments and the maintenance of exchange stability. In particular, the Government of ………………. shall withdraw restrictions maintained or imposed under this paragraph as soon as it is satisfied that it will be able, in the absence of such restrictions, to settle its balance of payments in a manner which will not unduly impair its external financial position.
2. The Government of shall notify the Contracting Parties, within thirty days after it accepts this agreement whether it intends to avail itself of the transitional arrangements in paragraph 1, or whether it is prepared to accept the obligations of Articles VII and X. If the Government of …………….. avails itself of the transitional arrangements, it shall notify the Contracting Parties as soon as it is prepared to accept the above-mentioned obligations.
3. Not later than 1 March 1950, and in each year thereafter, the Contracting Parties shall report on the restrictions still in force under paragraph 1. Not later than 1 March 1952, and in each year thereafter, if the Government of …………. still retains any restrictions inconsistent with Article VII or X, it shall consult with the Contracting Parties as to their further retention. The Contracting Parties may, if they deem such action necessary in exceptional circumstances, make representations to the Government of that conditions are favourable for the withdrawal of any particular restriction, or for the general abandonment of restrictions, inconsistent with the provisions of any other article of this agreement. The Government of ………………. shall be given a suitable time to reply to such representations. If the Contracting Parties find that the Government of ……………….. persists in maintaining restrictions which are inconsistent with the intent of this agreement, the Government of ……………. shall be deemed to have failed in carrying out its obligations under this agreement.
4. It is recognised that the post-war transitional period is one of change and adjustment, and when decisions are being made on requests occasioned thereby which are presented by the Government of …………………. that government shall given the benefit of any reasonable doubt.
Article XII: Furnishing of Information
1. The Government of …………………. shall furnish the Contracting Parties with such information as they may require in accordance with paragraph 8 of Article XV of the General Agreement.
2. In requesting information under paragraph 8 of Article XV of the General Agreement, the Contracting Parties shall take into consideration the varying abilities of contracting parties to furnish the data requested. The Government of ………………. shall be under no obligation to furnish information in such detail that the affairs of individuals or corporations are disclosed. The Government of ……………….. undertakes, however, to furnish the desired information in as detailed and accurate a manner as is practicable, and, so far as possible, to avoid mere estimates.
Article XIII: Miscellaneous Provisions
1. The relevant explanation of terms contained in Article XIX of the Articles of Agreement of the Fund shall apply to this agreement.
2. The Contracting Parties shall at all times have the right to communicate their views informally to the Government of …………….. on any matter arising under this agreement.
3. The Contracting Parties shall suspend the operation of Articles IV and V of this agreement for the same period of time and to the same extent as the Fund suspends the operation of corresponding provisions of its Articles of Agreement in accordance with Article XVI, Section 1, of the Articles of Agreement of the Fund.
4. Without prejudice to Article XXIII of the General Agreement, whenever in the opinion of the Contracting Parties the Government of ………………… fails to observe any of the provisions of this agreement, the Contracting Parties shall make representations to the Government of ………………. The Government of ……………. shall be given reasonable time to reply to such representations.
5. The Contracting Parties shall seek an understanding with the Fund to the effect that,
(a) Whenever the Contracting Parties consult the Fund on exchange matters particularly affecting the Government of ……………, the latter will be offered an opportunity to present its case directly to the Fund, and
(b) The Government of ……………… may initiate direct consultation between itself and the Fund in appropriate cases, provided that it shall notify the Chairman of the Contracting Parties upon such occasion that it avails itself of this right.
Article XIV: Acceptance, Entry Into Force and Termination
1. This agreement shall be signed on behalf of the Contracting Parties by their Chairman and shall be deposited with the Secretary-General of the United Nations, who is hereby authorized to register this agreement.
2. The Government of ……………… may accept this agreement by depositing an instrument of acceptance with the Secretary-General of the United Nations. The Secretary-General will inform the Contracting Parties of the date of deposit of such instrument of acceptance.
3. This agreement shall enter into force thirty days after the Government of …………….. deposits an instrument of acceptance in accordance with paragraph 2.
4. The provisions of this agreement, entered into pursuant to Article XV of the General Agreement, shall be deemed to be included within that article.
5. This Agreement shall terminate on the day on which the Government of………………… becomes a member of the Fund or ceases to be a contracting party.
In Witness Whereof, the Chairman of the Contracting Parties has signed this agreement.
Done at …………….., this ……………….. day of …………….., one thousand nine hundred and ………………
II. Exchange of Letters Between the Ambassador of Switzerland to the United States and the Managing Director of the Fund
June 11, 1964
The Managing Director
International Monetary Fund
19th and H Streets, N.W.
Washington, D.C. 20431
I have the honor to refer to Mr. Jacobsson’s letter of December 14, 1961 to the President of the Swiss Confederation and to conversations between representatives of the Swiss Confederation and the International Monetary Fund (hereinafter referred to as “the Fund”) concerning the way in which the Swiss Confederation could be associated with the Fund’s General Arrangements to Borrow, and thus contribute to the objectives of those Arrangements. The General Arrangements to Borrow (hereinafter referred to as “the General Arrangements”) are those set forth in Decision No. 1289-(62/l) of January 5, 1962, of the Fund’s Executive Directors, as amended by Decision No. 1362-(62/32) of July 9, 1962 and Decision No. 1415-(62/47) adopted on September 19, 1962.
In the light of the views that have been exchanged, the Swiss Federal Council, on behalf of the Swiss Confederation, is prepared to be associated with the General Arrangements as follows:
(1) The Swiss Confederation is prepared to make resources available to participants in the General Arrangements in accordance with this letter and in amounts not exceeding an outstanding total equivalent to 865,000,000 Swiss francs.
(2) The Swiss Confederation will be prepared to consider the conclusion of agreements (hereinafter referred to as “implementing agreements”) with any of the participants in the General Arrangements if requested by such participants. The implementing agreements will prescribe the terms and conditions in accordance with which the Swiss Confederation will make resources available to the participant or the Swiss Confederation and the participant will make resources available to each other, which shall be on the basis of reciprocal terms if required. Immediately on the conclusion of an implementing agreement, or of any amendment of an implementing agreement, the Swiss Confederation will provide the Managing Director with a copy thereof.
(3) Whenever the Managing Director of the Fund initiates the procedure and makes a proposal for calls pursuant to Paragraphs 6 and 7 of the General Arrangements for the benefit of a participant that has entered into or enters into an implementing agreement, he may propose to the Swiss Confederation, after consultation with the Swiss Confederation, that it shall make a specified amount of resources available to the participant, which amount shall be in accordance with the implementing agreement with that participant. If the proposal for calls becomes effective under Paragraph 7 of the General Arrangements, the Swiss Confederation will make the specified amount of resources available to the said participant in accordance with this letter and with the terms and conditions of the implementing agreement. If, however, the Swiss Confederation gives notice to the Managing Director that in its opinion, based on its present and prospective balance of payments and reserve position, it should not make resources available in accordance with this proposal, or should make available a smaller amount than that proposed, the Swiss Confederation will not be obliged to make any such resources available or more resources than it represents to the Managing Director that it should make available.
(4) If the Swiss Confederation makes resources available to a participant otherwise than in accordance with the procedure of paragraph (3), the Swiss Confederation, after consultation with the Managing Director, may deem such resources to be or to have been made available pursuant to this letter, provided that at the date of such deeming Switzerland has entered into an implementing agreement with that participant, that at the date of such deeming a proposal for calls for the benefit of that participant is in effect under Paragraph 7 of the General Arrangements and provided that the terms and conditions for repayment to Switzerland accord or are made to accord with paragraph (5).
(5) The effect of the terms and conditions for the timing of repayment of resources made available by Switzerland pursuant to this letter will correspond, to the maximum extent practicable, with the repayment provisions of Paragraph 11 of the General Arrangements.
(6) The Fund may, at the request of a party to an implementing agreement, make any determination, or use its good offices, to facilitate the operation of an implementing agreement, subject, however, to paragraph (9).
(7) Whenever the Swiss Confederation makes resources available pursuant to paragraph (3) or deems resources to be or to have been made available pursuant to paragraph (4), the Swiss Confederation will inform the Managing Director of the amount in terms of Swiss francs thus made available. The Swiss Confederation will inform the Managing Director of the amount in terms of Swiss francs of the repayment of any resources made available pursuant to paragraph (3) or (4).
(8) The Swiss Confederation and the Fund will provide each other with the general information necessary to facilitate the operation of this letter and implementing agreements.
(9) The Fund does not accept any responsibility or liability, whether as guarantor or otherwise, in connection with this letter or with respect to the performance of the terms and conditions of an implementing agreement.
(10) This letter will remain effective for four years from October 24, 1962, provided that the Swiss Confederation may rescind this letter, with immediate effect, within one month after an amendment of the General Arrangements becomes effective pursuant to Paragraph 15 of the General Arrangements. This letter may be amended or rescinded at any time if the Swiss Confederation and the Fund shall so agree.
(11) Any question of interpretation or application of these understandings will be settled to the mutual satisfaction of the Swiss Confederation and the Fund.
(12) For the purposes of this letter, references to participants shall be deemed to include the official institution of a participant with which an implementing agreement is made, even though such institution is not a “participating institution” under the General Arrangements.
(13) All communications by or to the Swiss Confederation pursuant to this letter shall be made by or to the Swiss National Bank.
I propose that, if this letter is approved by the International Monetary Fund, this letter and your reply constitute an agreement between the Swiss Federal Council and the International Monetary Fund, which shall enter into force on the date of your reply. I hereby declare that the Swiss Confederation has taken all steps necessary to implement the exchange of letters.
Accept, Sir, the assurances of my highest consideration.
Ambassador of Switzerland
June 11, 1964
I am pleased to acknowledge receipt of your letter of June 11, 1964.
I have been authorized to inform you that the understandings set forth in your letter are accepted by the International Monetary Fund. Accordingly, your letter and this reply constitute an agreement between the International Monetary Fund and the Swiss Federal Council, which will enter into force on the date of this reply.
Accept, Sir, the assurances of my highest consideration.
Very truly yours,
Ambassador of Switzerland
2900 Cathedral Avenue, N.W.
Washington, D.C. 20008
International Monetary FUND Pamphlet Series
(All pamphlets have been published in English, French, and Spanish, unless otherwise stated)
*l. Introduction to the Fund, by J. Keith Horsefield. First edition, 1964. Second edition, 1965. Second edition also in German.
*2. The International Monetary Fund: Its Form and Functions, by J. Marcus Fleming. 1964. In English only.
3. The International Monetary Fund and Private Business Transactions: Some Legal Effects of the Articles of Agreement, by Joseph Gold. 1965.
4. The International Monetary Fund and International Law: An Introduction, by Joseph Gold. 1965.
*5. The Financial Structure of the Fund, by Rudolf Kroc. First edition, 1965. Second edition, 1967.
6. Maintenance of the Gold Value of the Fund’s Assets, by Joseph Gold. First edition, 1965. Second edition, 1971.
7. The Fund and Non-Member States: Some Legal Effects, by Joseph Gold. 1966.
8. The Cuban Insurance Cases and the Articles of the Fund, by Joseph Gold. 1966.
9. Balance of Payments: Its Meaning and Uses, by Poul H0st-Madsen. 1967.
*10. Balance of Payments Concepts and Definitions. First edition, 1968. Second edition, 1969.
11. Interpretation by the Fund, by Joseph Gold. 1968.
12. The Reform of the Fund, by Joseph Gold. 1969.
13. Special Drawing Rights, by Joseph Gold. First edition, 1969. Second edition, with subtitle Character and Use, 1970.
14. The Fund’s Concepts of Convertibility, by Joseph Gold. 1971.
15. Special Drawing Rights: The Role of Language, by Joseph Gold. 1971.
16. Some Reflections on the Nature of Special Drawing Rights, by J.J. Polak. 1971.
17. Operations and Transactions in SDRs: The First Basic Period, by Walter Habermeier. 1973.
18. Valuation and Rate of Interest of the SDR, by J.J. Polak. 1974.
19. Floating Currencies, Gold, and SDRs: Some Recent Legal Developments, by Joseph Gold. 1976. Also in German.
20. Voting Majorities in the Fund: Effects of Second Amendment of the Articles, by Joseph Gold. 1977.
21. International Capital Movements Under the Law of the International Monetary Fund, by Joseph Gold. 1977.
22. Floating Currencies, SDRs, and Gold: Further Legal Developments, by Joseph Gold. 1977. Concluding section also in German.
23. Use, Conversion, and Exchange of Currency Under the Second Amendment of the Fund’s Articles, by Joseph Gold. 1978.
24. The Rise in Protectionism, by Trade and Payments Division. 1978.
25. The Second Amendment of the Fund’s Articles of Agreement, by Joseph Gold. 1978.
26. SDRs, Gold, and Currencies: Third Survey of New Legal Developments, by Joseph Gold. 1979. Concluding section also in German.
27. Financial Assistance by the International Monetary Fund: Law and Practice, by Joseph Gold. First edition, 1979. In English only. Second edition, 1980.
28. Thoughts on an International Monetary Fund Based Fully on the SDR, by J.J. Polak. 1979.
29. Macroeconomic Accounts: An Overview, by Poul H0st-Madsen. 1979.
30. Technical Assistance Services of the International Monetary Fund. 1979.
31. Conditionality, by Joseph Gold. 1979.
32. The Rule of Law in the International Monetary Fund, by Joseph Gold. 1980.
33. SDRs, Currencies, and Gold: Fourth Survey of New Legal Developments, by Joseph Gold. 1980.
34. Compensatory Financing Facility, by Louis M. Goreux. 1980.
35. The Legal Character of the Fund’s Stand-By Arrangements and Why It Matters, by Joseph Gold. 1980.
36. SDRs, Currencies, and Gold: Fifth Survey of New Legal Developments, by Joseph Gold. 1981.
37. The International Monetary Fund: Its Evolution, Organization, and Activities. First edition, 1981. Fourth edition, 1984.
38. Fund Conditionality: Evolution of Principles and Practices, by Manuel Guitian. 1981.
39. Order in International Finance, the Promotion of IMF Stand-By Arrangements, and the Drafting of Private Loan Agreements, by Joseph Gold. 1982.
40. SDRs, Currencies, and Gold: Sixth Survey of New Legal Developments, by Joseph Gold. 1983. In English. French and Spanish in preparation.
41. The General Arrangements to Borrow, by Michael Ainley. 1984. In English. French and Spanish in preparation.
42. The International Monetary Fund: Its Financial Organization and Activities, by Anand G. Chandavarkar. 1984. In English. French and Spanish in preparation.
43. The Technical Assistance and Training Services of the International Monetary Fund. In English. French and Spanish in preparation.
*Out of print. Photographic or microfilm copies of all English editions, including numbers that are out of print, may be purchased direct from University Microfilms International, 300 North Zeeb Road, Ann Arbor, Michigan 48106, U.S.A., or, for those living outside the Western Hemisphere, from University Microfilms Limited, 30/32 Mortimer St., London, WIN 7RA, England.
Copies (unless out of print) may be requested from:
External Relations Department, Attention: Publications
International Monetary Fund, Washington, D.C. 20431, U.S.A.
Telephone number: 202 623-7430
Cable address: Interfund
Also reproduced in Appendix II.
Sir Gerald Fitzmaurice, Fifth Report on the Law of Treaties (Treaties and Third States), International Law Commission, Twelfth Session, A/CN.4/130, 21 March 1960, Introduction, pars. 2, 5.
Ibid., par. 3.
See the authorities cited by Finn Seyersted, “International Personality of Intergovernmental Organizations,” Indian Journal of International Law, Vol. IV (1964), p. 236, fn. 254, and Fitzmaurice, op. cit., par. 82 et seq.
Article XV, Section 3: “Settlement of accounts with members with drawing.—When a member withdraws from the Fund, normal transactions of the Fund in its currency shall cease and settlement of all accounts between it and the Fund shall be made with reasonable despatch by agreement between it and the Fund. If agreement is not reached promptly, the provisions of Schedule D shall apply to the settlement of accounts.”
See also General Arrangements to Borrow, Paragraph 17, in Selected Decisions of the Executive Directors and Selected Documents (3rd issue, 1965, hereinafter referred to as Selected Decisions), p. 64.
Schedule D, paragraph 5: “Any member desiring to obtain the currency of a member which has withdrawn shall acquire it by purchase from the Fund, to the extent that such member has access to the resources of the Fund and that such currency is available under 4 above.”
Schedule D, paragraph 6: “The withdrawing member guarantees the unrestricted use at all times of the currency disposed of under 4 and 5 above for the purchase of goods or for payment of sums due to it or to persons within its territories. It shall compensate the Fund for any loss resulting from the difference between the par value of its currency on the date of withdrawal and the value realized by the Fund on disposal under 4 and 5 above.”
“Gold purchases based on par values.—The Fund shall prescribe a margin above and below par value for transactions in gold by members, and no member shall buy gold at a price above par value plus the prescribed margin, or sell gold at a price below par value minus the prescribed margin.”
Rule F-4 of the Rules and Regulations establishes the margin: “For transactions in gold by a member the margin above and below par value shall be, at the option of the member, either:
1. One quarter of one per cent plus the following charges:
(a) The actual or computed cost of converting the gold transferred into good delivery bars at the normal center for dealing in gold of either the buying member or the member whose currency is exchanged for the gold;
(b) The actual or computed cost of transporting the gold transferred to the normal center for dealing in gold of either the buying member or the member whose currency is exchanged for the gold;
(c) Any charges made by the custodian of the gold transferred for effecting the transfer; or
2. One per cent, which one per cent shall be taken to include all of the charges set forth in 1 above.”
Article IV, Section 3: “Foreign exchange dealings based on parity.—The maximum and the minimum rates for exchange transactions between the currencies of members taking place within their territories shall not differ from parity
(i) in the case of spot exchange transactions, by more than one percent; and
(ii) in the case of other exchange transactions, by a margin which exceeds the margin for spot exchange transactions by more than the Fund considers reasonable.”
Article IV, Section 4(b): “Each member undertakes, through appropriate measures consistent with this Agreement, to permit within its territories exchange transactions between its currency and the currencies of other members only within the limits prescribed under Section 3 of this Article. A member whose monetary authorities, for the settlement of international transactions, in fact freely buy and sell gold within the limits prescribed by the Fund under Section 2 of this Article shall be deemed to be fulfilling this undertaking.”
Article I (iii): “To promote exchange stability, to maintain orderly exchange arrangements among members, and to avoid competitive exchange depreciation.”
Article IV, Section 4(a): “Each member undertakes to collaborate with the Fund to promote exchange stability, to maintain orderly exchange arrangements with other members, and to avoid competitive exchange alterations.”
The text has not been encumbered with mention of a third purpose of the Fund in Article I (iii), i.e., to maintain orderly exchange arrangements “among members” and the corresponding undertaking of members in Article IV, Section 4(a). The words “among members” do not limit the scope of the other purposes. Nor are they as restrictive as they may sound at first impression. Exchange practices between a member and a non-member might well lead to disorderly exchange arrangements among members.
All the quotations are from Hearings Before the Committee on Banking and Currency of the U.S. Senate on H.R. 3314 (79th Cong., 1st Sess.), 1945, pp. 217-18.
The Fund has adopted the following Rules and Regulations:
“M-l. The Fund may request the cooperation of any member with a view to the application of appropriate measures to prevent transactions with non-members or with persons in their territories, contrary to the provisions of the Agreement or the purposes of the Fund.
“M-2. When the Fund finds that a member or any of its fiscal agencies referred to in Article V, Section 1, engages in any transaction with or cooperates in practices with a non-member or with persons in a non-member’s territory, contrary to the provisions of the Agreement or the purposes of the Fund, it shall present to the member a report setting forth its views and may request the cessation or modification of the transactions or practices.”
See, e.g., Selected Decisions, pp. 80-81, and in particular the following paragraph in the Fund’s Decision on Discrimination for Balance of Payments Reasons: “Notwithstanding the extensive moves toward convertibility, a substantial portion of the current receipts of some countries is still subject to limitations on convertibility, particularly in payments relations with state-trading countries. In the case of these countries the Fund will be prepared to consider whether balance of payments considerations would justify the maintenance of some degree of discrimination, although not as between countries having externally convertible currencies. In this connection the Fund wishes to reaffirm its basic policy on bilaterialism as stated in its decision of June 22, 1955.”
Annual Report (1947), Appendix XII, pp. 78-79.
Article XV, Section 1: “Right of members to withdraw.—Any member may withdraw from the Fund at any time by transmitting a notice in writing to the Fund at its principal office. Withdrawal shall become effective on the date such notice is received.”
Article XVII (b)(i): “(b) Notwithstanding (a) above, acceptance by all members is required in the case of any amendment modifying (i) the right to withdraw from the Fund (Article XV, Section 1);….”
Article XV of GATT established not only a general obligation of non-members of the Fund to enter into a special exchange agreement, but also a specific obligation to furnish such information “within the general scope” of Article VIII, Section 5, of the Fund’s Articles as the Contracting Parties “may require in order to carry out their functions” under GATT (paragraph 8). “Specific requests should be prepared in consultation with the Fund and transmitted to the contracting parties concerned by the Chairman. Copies of all information received should be transmitted promptly to the International Monetary Fund.” See General Agreement on Tariffs and Trade, Basic Instruments and Selected Documents (hereinafter referred to as BISD), Vol. II (May 1952), pp. 116-17.
It was contemplated that a similar special exchange agreement would be used in connection with the proposed International Trade Organization, and the Fund’s collaboration covered this project also.
BISD, Vol. II, p. 115 et seq. The text is reproduced in Appendix I of this pamphlet.
One consequence of this is that Article XXIII of GATT, which deals with the remedies of nullification or impairment of benefits under GATT, can be applied to failures to observe the provisions of the special exchange agreement.
Special exchange agreement, Article XIII, paragraph 5, reproduced in Appendix I.
BISD, Vol. II, p. 128 et seq.
BISD, Third Supplement (June 1955), p. 13.
For the period, see BISD, Vol. II, pp. 17-18 and 115-16.
BISD, Vol. II, pp. 18-19. The question was considered whether Liberia fell under this resolution (BISD, Vol. II, p. 127).
BISD, Third Supplement, pp. 42-43. For amendment of the original decision, see BISD, Sixth Supplement (March 1958), pp. 32-34 and 38.
BISD, Third Supplement, pp. 43-44. For amendment of the original decision, see BISD, Sixth Supplement, pp. 28-29 and 38.
BISD, Thirteenth Supplement (July 1965), pp. 23-24.
See BISD, Fifth Supplement (January 1957), pp. 40-46.
BISD, Seventh Supplement (February 1959), pp. 19-20.
BISD, Tenth Supplement (March 1962), p. 58. On April 1, 1966 the Contracting Parties agreed to Switzerland’s full accession to GATT (GATT/954, 2 April 1966).
It does not follow from the fact that members may impose restrictions on exchange transactions with non-members or persons in their territories that they may impose restrictions on payments and transfers for current international transactions in non-member currencies with members or persons in their territories.
Rule M-5: “When the Fund finds that the restrictions imposed by a member on exchange transactions with non-members or with persons in their territories are prejudicial to the interests of members and contrary to the purposes of the Fund, it shall present to the member a report setting forth its views and may request the abolition or modification of the restrictions.”
See the discussion of Rule M-6, pages 29-30.
See page 9.
140 N.Y.S. (2d) 323 (1955).
See 140 N.Y.S. (2d), pp. 326-27 and Joseph Gold, The Fund Agreement in the Courts (Washington, D.C., 1962), pp. 77-78.
19 Fla. Supp. 167; 154 So.2d 200; 155 So.2d 695 (Sup. Ct. of Fla.).
379 U.S. 871 (1964). See also Varas v. Crown Life Insurance Company, 203 A.2d 505 (Superior Court of Pennsylvania, 1964). “We agree that the currency laws of Cuba must be honored by the government of the United States and by our courts if Cuban law is applicable. The power of a sovereign state over its currency is absolute. This was especially true when both countries were signatories to the Breton (sic) Woods Agreement, a treaty of the United States and therefore a part of the supreme law of the land. The Breton Woods agreement specifically requires the recognition and honoring of Cuba’s currency laws. The Breton Woods agreement brought into being the ‘International Monetary Fund Agreement’, 60 Stat. 1401-1411, 1945. However, Cuba has withdrawn from membership so that a new look must perchance be taken at the cases based on the fund agreement when membership was held by both countries …” (p. 510).
Gold, op. cit., pp. 139-42.
However, it has been argued that Article VIII, Section 2(b), and the cases involving it have exerted a “favourable influence by increasing respect for the foreign exchange laws of non-member States” (I. Meznerics, “Application of Foreign Exchange Laws by Foreign Courts,” Acta Juridica Academiae Scientiarum Hungaricae, T. [Vol.] V, Fasc. 1-2, 1963, pp. 56 and 64). The author, Head of the Legal Department of the National Bank of Hungary, cites no cases in support of this proposition. He criticizes the German case referred to above.
Selected Decisions, pp. 69-72. Reproduced in Appendix II.
Selected Decisions, pp. 56-68.
“In order to enable the International Monetary Fund to fulfill more effectively its role in the international monetary system in the new conditions of widespread convertibility, including greater freedom for short-term capital movements.…” (Preamble of the General Arrangements to Borrow, Selected Decisions, p. 56).
“Measures to replenish the Fund’s holdings of scarce currencies.—The Fund may, if it deems such action appropriate to replenish its holdings of any member’s currency, take either or both of the following steps:
(i) Propose to the member that, on terms and conditions agreed between the Fund and the member, the latter lend its currency to the Fund or that, with the approval of the member, the Fund borrow such currency from some other source either within or outside the territories of the member, but no member shall be under any obligation to make such loans to the Fund or to approve the borrowing of its currency by the Fund from any other source.
(ii) Require the member to sell its currency to the Fund for gold.”
Normally, the Fund cannot hold the currency of a non-member. Under Article V, Section 7(b), a member’s obligations to repurchase its currency from the Fund where the Fund holds more of it than 75 per cent of the member’s quota depends on increases in its monetary reserves, and under Article XIX (a) the Fund may specify the currency of a non-member for inclusion in the calculation of the monetary reserves of members. However, Schedule B, paragraph 2, provides that nevertheless the Fund shall not acquire the currency of a non-member under Article V, Section 7(b). But, of course, the Fund could hold the currency of a non-member country as a result of the withdrawal of that country from membership in the Fund. Again, a member may have a common currency with a non-member.
Annex Prepared by Deputies to Ministerial Statement of the Group of Ten, August 1964, paragraph 2: “… The discussions also benefited from the presence of representatives of the Swiss National Bank, as decided by Ministers following completion of the legislation looking to Swiss cooperation with the General Arrangements to Borrow.”
See in general Message du Conseil fédéral à l’ Assemblée fédérale concernant la collaboration de la Suisse aux mesures monétaires internationales (No. 8698, of March 1, 1963).
Feuille Fédérale, 1963, Vol. II, p. 796.
See Appendix II.
Art. 20: “(1) Where a treaty expressly confers rights or benefits on, or makes provision for the exercise of rights or faculties, or for the enjoyment of facilities or benefits by a third State, in such a way as to indicate that the parties meant to create legal rights for the third State, or to bind themselves to grant them, or to create a legal relationship between themselves and the third State, the third State concerned thereby acquires a legal right to claim the benefit of the provisions in question.…
“(3) … the claiming third State has a direct right of recourse against the parties to the treaty, acting in its own name and of its own motion, if the provisions of the treaty concerning the third State are not carried out—provided always that the third State has complied, or is willing to comply, with any conditions attached by these provisions to the grant.” (See Fitzmaurice, op. cit., pp. 42-43; discussed in pars. 82-90.)
ICJ Reports 1949, pp. 174-219.
“The Organization shall enjoy in the territory of each of its Members such privileges and immunities as are necessary for the fulfillment of its purposes” (Article 105(1)).
ICJ Reports 1949, p. 185. For a full study, see Seyersted, op. cit.
Cf. Article IX, Section 10: “Application of Article.—Each member shall take such action as is necessary in its own territories for the purpose of making effective in terms of its own law the principles set forth in this Article and shall inform the Fund of the detailed action which it has taken.”
Entered into force on July 1, 1946. United Nations Treaty Series, Vol. 1, p. 163.
The first paragraph of the preamble shall be replaced by the following text in the case of a contracting party which has ceased to be a member of the Fund:
“Whereas paragraph 6 of Article XV of the General Agreement on Tariffs and Trade (hereinafter referred to as ‘the General Agreement’) provides that any contracting party which ceases to be a member of the International Monetary Fund (hereinafter called ‘the Fund’) shall forthwith enter into a special exchange agreement with the Contracting Parties.”
In the case of a government whose territories have been occupied by the enemy, insert after the word “circumstances” in the fourth line of paragraph 1 of Article XI the words “and introduce where necessary”.