- Joseph Gold
- Published Date:
- December 1982
The publication of Volume XXVI of the Collected Writings of John Maynard Keynes1 provides additional information on the origin of Article VIII, Section 2(b). This information confirms the knowledge derived from the Proceedings and Documents of the Bretton Woods Conference:2 the provision was intended originally to support par values established under the Articles of the Fund by declaring contracts unenforceable if they dealt with the purchase and sale of currencies at exchange rates that were inconsistent with the Articles. The new material clarifies the motivation of the drafters of the first version of Article VIII, Section 2(b), but does not deal with the changes in the provision that occurred during the course of the Bretton Woods Conference. It does nothing, therefore, to confirm or to contradict that the changes were the result of a different motivation.
To explain the new material, it is necessary to say something about the provisions of the original Articles that dealt with exchange rates. Each member was expected to establish a par value for its currency directly or indirectly in terms of gold as a common denominator3 The initial par value was established in agreement with the Fund4 and subsequent changes with its concurrence.5 Article IV, Section 3 provided that exchange rates in exchange transactions in a member’s territories involving the member’s currency and another member’s currency were not to differ from the parity between the two currencies by more than the limits referred to in the provision. Parity was the ratio between the par values of the two currencies. Article IV, Section 4(a) contained an obligation of members in general terms requiring them to collaborate with the Fund to promote exchange stability, to maintain orderly exchange arrangements with other members, and to avoid competitive exchange alterations.
Article IV, Section 4(b), which is most pertinent to this discussion, contained two sentences. The first sentence obliged each member to adopt appropriate measures consistent with the Articles to confine exchange transactions in its territories between its own currency and another member’s currency within the limits defined in Article IV, Section 3. The second sentence, however, declared in effect that if a member’s monetary authorities freely bought and sold gold for their own currency in transactions with the monetary authorities of other members, for the settlement of international transactions, at prices determined by the par value of the currency, plus or minus the margin prescribed by the Fund, the member engaging in this practice was deemed to be fulfilling its obligation with respect to exchange rates for its currency. The theory of the provision was that as par values were established in terms of gold, a member that was maintaining the value of its currency in relation to gold by means of official transactions with other members on the basis of the par value of its currency was maintaining the exchange stability of its currency. Nothing more should be expected of such a member. If exchange transactions involving its currency occurred in its territories outside the permitted limits around parity, these exchange rates had to be attributed to the behavior of the monetary authorities of the other member whose currency was involved in the exchange transactions.
The United States negotiated the inclusion in the Articles of the second sentence of Article IV, Section 4(b). The United States did not intend to centralize exchange transactions, intervene in the exchange markets to keep exchange transactions within the permitted limits, adopt legislation to declare that exchange transactions at exchange rates beyond these limits were illegal, or adopt exchange controls in any form.
The second sentence became the fundamental norm of the par value system because of the undertaking by the United States to engage in gold transactions in accordance with the second sentence of Article IV, Section 4(b). It is remarkable, therefore, that Keynes bitterly regretted his concurrence in the provision:
The history of the matter is as follows. The clause originally ran as follows:
“A member shall undertake not to allow exchange transactions in its market in currencies of other members at rates outside a prescribed range based on the agreed parities.”
We, then, weakly and illogically and mistakenly, allowed the Americans to contract out by the addition of what is now the second sentence, because they wanted to avoid having to bring before Congress a special law such as would be required to make black markets illegal. But they and we failed (inexcusably) to notice that this addition only prevented dealings in the dollar outside the permitted range and would allow black markets in other currencies. But we all assumed that the other members would forbid black markets by law. Finally the lawyers altered the language, as being more tidy and in better form, to what it now is.6
The new illumination appears in a letter dated January 25, 1945 to Keynes from Sir Wilfrid Eady, Second Secretary of the U.K. Treasury and a member of the British delegation at Bretton Woods. The following passage is the relevant one.
… at that time I was terribly preoccupied with the issues in IV (4)(b). I had always assumed that every signatory country would make it an offence against domestic law for its residents to deal in exchanges outside the approved parities. When the Americans said that they would not do that I was very shocked, because it seemed to me that under our ordinary procedure for supporting the exchanges by leaving an open order with the Bank’s agents in New York, if there was any evidence that our exchange was moving to a discount on an individual transaction of importance, or possibly as a temporary trend, the agent would use the reserves to support the exchange. I was fighting against the soothing suggestion of the Americans that if they made black market transactions unenforceable they would in fact have done the trick, and that combined with their own de facto practice of buying and selling gold freely, was enough. In the end, after delivering a horrified lecture to the Americans about New York being the Black Market centre of the world, you thought I was making too much bother about the point, and that as the Americans would not in any case do anything to meet us we had better do the best we could. Out of that wreckage 1 saved IV (4)(a) which of course means nothing,
I am not reviving this infandum dolorem merely in self-defence. I think the material point is that if the Gods are propitious, and we get a chance of making any amendments, we must attack IV (4)(b) as well as VIII (2)(a).7
The language (other than the Latin) that is emphasized in this passage probably refers to the original version of Article VIII, Section 2(b) and explains that it was intended by the U.S. delegation to compensate the British delegation for its disappointment that the U.S. monetary authorities would do nothing else to support exchange rates for sterling in the United States. Nobody deluded himself or others into thinking that an obligation to refuse the enforcement of unperformed contracts calling for exchange rates beyond the limits defined by the Articles was equivalent to positive action to prevent the entry into or to deny the performance of such contracts.
In a letter dated October 6, 1944 to White, Keynes expressed the hope that notwithstanding Article IV, Section 4(b) the United States would legislate.8 It never did.
By what process did Article VIII, Section 2(b) emerge in final form at Bretton Woods? The record begins with a joint proposal by the U.S. and British delegations offered at the opening of the Conference, which suggests that an understanding had been reached at the preparatory conference attended by a limited group of countries at Atlantic City in June 1944. The proposed text appeared in a provision entitled “Foreign Exchange Dealings Based on Par Values” that was the forerunner of Article IV, Sections 3 and 4. The draft contained a provision on the free purchase and sale of gold and also the following sentence:
(c) Exchange transactions in the territory of one member involving the currency of any other member, which evade or avoid the exchange regulations prescribed by that other member and authorized by this Agreement, shall not be enforceable in the territory of any member.9
On July 7, 1944, the delegation of Poland proposed an addition to the provision on foreign exchange dealings. It can be regarded as the ancestor of the second sentence of Article VIII, Section 2(b), but it is also the first record of a provision in this field that refers to controls and restrictions:
SECTION 8. To cooperate with other member countries in order to enable them to render really effective such controls and restrictions as these countries might adopt or continue, with the approval of the Fund, for the purpose of regulating international movements of capital.10
On July 9, 1944, the British delegation submitted a revised version of the original proposal:
(c) Exchange transactions in the territory of one member involving the currency of any other member, which evade or avoid the exchange regulations prescribed by that other member and authorized by this Agreement, shall be an offense in the territories of all members.11
This revision substituted the concept of an offense for the remedy of unenforceability. Keynes remained under the impression even after the Bretton Woods Conference that the purpose of Article IV, Section 4 was to require members, other than the United States, to declare “black markets in weak currencies” illegal. He seems to have regarded this action as the primary “appropriate measure.” 12
On July 11, 1944, the Drafting Committee of Commission I submitted the following language as a possible variant but not as a definite recommendation. This proposed text would still have been included in the provision on foreign exchange dealings:
(c) Exchange transactions in the territory of one member involving the currency of any other member which are outside the prescribed variation from parity set forth in (a) above shall not be enforceable in the territory of any member country.
Each member agrees to cooperate with other members in their efforts to effectuate exchange regulations prescribed by such members in accordance with this Agreement.13
Committee 1 of Commission I discussed three versions on July 12, 1944: the original joint proposal, the British revision, and the Drafting Committee’s variant. The British delegation was willing to resile from its revision if the joint proposal was accepted. The U.S. delegation preferred the Drafting Committee’s text but asked for more time to consider the matter. Committee 1 referred all three texts to Commission I.14
The reporting delegate of Committee 1 emphasized that the Drafting Committee’s text would render not enforceable “only transactions outside the prescribed variation from parity.” He explained also that this text would accomplish the purpose of the proposal made by the Polish delegation. This proposal was then withdrawn.15
Commission I did not make a choice. The Chairman referred the problem to a new Special Committee on July 13, 1944.16 The Special Committee recommended, on July 14, 1944, that the Drafting Committee be asked to reconcile the differences between its language and the original joint proposal in order to clarify that there was no intent to impose criminal rather than civil penalties.17 On the same day, clarification of the problem was still being sought in a meeting of Commission I, and the Drafting Committee was called into action again.18
On July 16, 1944, a Working Draft of the Articles was circulated for the Drafting Committee. For the first time, the provision appears as Article VIII, Section 2(b), and in a form close to the final text:
(b) Exchange contracts, which involve the currency of any member and are contrary to the exchange control regulations of that member maintained or imposed consistently with this Agreement, shall be unenforceable in the territories of any other member.
In addition, members may, by mutual accord, co-operate in measures for the purpose of making the respective exchange control regulations of either member more effective, provided that such measures and regulations are consistent with this Agreement.19
Nothing further appears in the record until July 18, 1944 when a text of the Articles of Agreement was circulated in which the final version of Article VIII, Section 2(b) appeared for the first time. The accompanying second report of the Drafting Committee declares that:
All the material contained in this report has been approved in principle by the Commission at previous sessions. The present report contains, however, a new formulation of certain provisions to which I should specifically draw the attention of the Commission.
2. Paragraph (b) of Section 2 of Article VIII on pages 17 and 18 dealing with the enforceability of exchange contracts contrary to the exchange control regulations of members and measures of cooperation to enforce exchange control regulations.…20
This recorded history of the drafting of Article VIII, Section 2(b) is obviously unsatisfying. The record is silent at the very point at which an explanation of the transfer of the provision from a context dealing with exchange rates to one dealing with the general obligations of members would be invaluable. There has been much speculation about the implications of this transfer. The extrusion of the provision from the context in which it was included for so much of the Conference suggests that the provision was no longer confined to exchange transactions at exchange rates inconsistent with the Articles. This deduction might imply that exchange contracts were not confined to contracts for exchange transactions, but this reading would not be the only one that was possible. The provision could be read to mean that no such radical departure from the earlier drafts was intended, and that the purpose of the new language and the new context was to render unenforceable contracts for exchange transactions that were contrary to exchange control regulations whether they dealt with exchange rates or other aspects of a member’s exchange arrangements.
There are alternative arguments to support the thesis that Article VIII, Section 2(b) went beyond anything that had been agreed already by the Commission. One argument rests on the assumption that the Drafting Committee’s phrase “all the material” was meant to apply to Article VIII, Section 2(b) and the Articles as a whole. On this assumption, the former agreement by the Commission can be taken to have been that only unenforceability was intended and not criminal sanctions. The only evidence of agreement on principle in the record is on this aspect of the provision. The weakness of this explanation is the implication that the Drafting Committee held the view that other aspects of the provision raised no issues of principle that needed to be drawn to the attention of Commission I.
The alternative and better explanation is that the Drafting Committee was conscious of a departure from or extension of what had been approved in principle earlier. This explanation can be supported by comparing the Working Draft of July 16, 1944 prepared for the Drafting Committee with the text of the Articles circulated with the second report of the Drafting Committee dated July 18, 1944. This comparison has force if Commission I took no action to approve changes in principle in the period between circulation of the two documents. There is no record of such action, and some evidence that the Commission did not meet after July 16, 1944 until it met to consider the second report of the Drafting Committee.21
The comparison referred to above involves the six provisions, including Article VIII, Section 2(b), that are listed as new formulations. The comparison shows important differences of principle between the two texts in the content of the six provisions. These differences negate any conclusion that the Drafting Committee was referring to matters of drafting and not substance.
Article V, Section 7 in the Working Draft would have permitted a member to purchase with gold any part of the Fund’s holdings of its currency;22 the later version narrowed this form of repurchase to holdings in excess of a member’s quota.23 This change prevented a member from making its currency scarce in the Fund and transformed the rationale of the provision into a privilege for members to avoid the necessity to pay periodic charges to the Fund on holdings of the member’s currency. The same provision created an additional repurchase obligation for a member because of the receipt of a third member’s currency in transactions with other members. In the earlier version of the provision, this obligation accrued only with the consent of the third member, the issuer of the currency; 24 in the later version, there was no necessity for this consent.25 There are other differences in the repurchase provisions of the two versions.
Article XII, Section 5 on voting in the earlier version contains no modification of computations to take account of a uniform change in par values accompanied by a decision to waive adjustment of the Fund’s holdings of currencies; 26 this modification is included in the later version.27
The earlier version of Article XVI on liquidation of the Fund 28 does not contain the provisions of the later version that authorize the Fund to suspend the operation of certain provisions in the event of an emergency or the development of unforeseen circumstances threatening the operations of the Fund.29
Differences exist between the two versions of Article XIX on the explanation of terms. The definition of current transactions is an outstanding example.30 The definition is crucial in the activities of the Fund.
The last of the listed provisions, Article XX, which sets forth the final provisions, contains variations of substance between the two texts. For example, the later but not the earlier version provides that changes in a par value communicated but not yet established by a member whose metropolitan territory had been occupied by the enemy could be made only by agreement with the Fund.31 Again, only the later version provides that changes in par value agreed under the final provisions were not to be taken into account in calculating the extent to which subsequent changes depart from the initial par value.32
The differences in the two texts of Article VIII, Section 2(b) are minor, but the implication that the Commission had not approved, in whole or in part, the principle of the listed provisions before July 18, 1944 can be drawn for Article VIII, Section 2(b) also. The explanation can still be that the text of the provision presented on July 18, 1944 departed from the last version approved in principle by the Commission or filled a gap that had never been filled by the Commission.
One author 33 has concluded that on July 14, 1944, Commission I had approved the text of Article VIII, Section 2(b) as it appeared in the Working Draft for the Drafting Committee dated July 16, 1944. His conclusion is based on the following passage in the published minutes of a meeting of Commission I on July 14, 1944:
Article VIII, General Obligations of Members, was adopted as presented by the Drafting Committee, with the inclusion of section 2, Exchange Controls on Current Payments, and section 3, Multilateral Clearing, as reworded (see wording in Document 329 and recommendation in Document 374).34
Reference to Documents 329 (July 13, 1944)35 and 374 (July 14, 1944) 36 shows clearly that Article VIII, Section 2(b) had not been “reworded” in the form that appeared in the Working Draft when Commission I met on July 14, 1944. At that meeting, the forerunner of Article VIII, Section 2(b) was still part of the exchange rate provisions. Document 374 refers to Document 343, in which the reporting delegate set forth the joint proposal, the British revision, and the Drafting Committee’s preferred text. All three versions dealt with exchange transactions or exchange rates. Moreover, the published minutes on which the author bases his conclusion show that the draft forerunner of Article VIII, Section 2(b) that was before the Commission was included not in Article VIII, but in Article IV on exchange rates:
In the discussion of article IV a question was raised concerning the application of section 3(c) (Document 343, p. 3), which was referred to the Drafting Committee for clarification.37
Some unpublished informal minutes of Commission I confirm that what the Commission was approving in principle at its meeting of July 14, 1944 was an approach involving a reconciliation of the three versions based on exchange transactions and exchange rates as part of the provisions on exchange rates and in a form that would not call for criminal penalties. The Commission had only these versions before it. The minutes also suggest that there was no further consideration of the provision by the Commission before July 16, 1944:
Delegate from U.S.: I believe that it was the view of the Special Committee last night that that language needed certain further definition to make it perfectly clear that cooperation did not include the necessity for imposing criminal penalties in any country which enforced the regulations of another country. On the other hand, there would be some effort made to express the feeling that we should work out some way of cooperating but not so as to involve any use of criminal penalty.
Delegate from U.S.: I should add that it was the agreement of the Committee in substance. It was also the opinion of this Committee that the appropriate language for this purpose should be prepared by the Drafting Committee.
Chairman: The statement has been made that the recommendation of the Committee was one of substance; that there are, I gather, some changes to be made in form and possibly in language, but in no way is there to be any alteration in form of [sic] substance so that a vote on this at this stage would be either approval or disapproval, and if it be approved, that any change we make in the Drafting Committee would not come before this Commission for another vote unless any member felt redrafting further would involve a change of substance. Am I correct in the recommendation?
The Commission accepted the recommendation.
The deductions drawn by the author mentioned above from his treatment of the travaux préparatoires in support of his interpretation of the provision cannot be accepted. The argument of another author on the basis of the conclusion that the text of July 18, 1944 represented no change in the substance of Article VIII, Section 2(b) is similarly unacceptable.38
The new information in Volume XXVI of Keynes’ papers suggests an explanation of the reason why Article VIII, Section 2(b) was moved from the provisions on exchange transactions and exchange rates and why its substance was changed late in the Conference. The explanation may be that some members of the British delegation became aware during the Conference that the original version of Article VIII, Section 2(b) did nothing to diminish Keynes’ concern about exchange rates for sterling in transactions in the United States, With that realization, it would have become logical to retain the idea of collaboration that was the basis for the provision but to detach it from provisions on exchange transactions and exchange rates and to give it as ample a scope as possible. It was then desirable to draw this change of substance to the attention of Commission I on July 18, 1944. This analysis would be a further reason to doubt the correctness of the English Court of Appeal’s decision in Wilson, Smithett & Cope Ltd. v. Terruzzi.
Finally, what can be said of Article VIII, Section 2(b) in relation to the Second Amendment of the Fund’s Articles? In the fourteenth installment of the Fund Agreement in the Courts39 it is said that nothing bearing on the interpretation of the provision should be read into the fact that the provision was not modified. It was not examined during the drafting of the Second Amendment and no proposal was made to amend it. Nevertheless, there is one inference that can be drawn from this fact. It has been seen that the provision had its origin in the par value system and was designed to encourage respect for exchange rates consistent with that system in exchange transactions. If the Fund had held the view that there was an indissoluble tie between the exchange rates of a par value system and Article VIII, Section 2(b), it would have been necessary to modify the provision because of the abrogation of the par value system.
Even those who advocate a narrow interpretation of “exchange contracts,” however, do not assert that the provision applies only if contracts for exchange transactions are contrary to those exchange control regulations that prescribe limits on exchange rates for exchange transactions. The retention of Article VIII, Section 2(b) without modification supports this interpretation, but retention is neutral on the question whether the provision is or is not confined to contracts for exchange transactions.
Keynes. Vol. XXVI.
Proceedings and Documents.
Article IV, Section 1(a).
Article XX, Section 4.
Article IV, Section 5.
Keynes, Vol. XXVI, p. 138. See also Dennis Robertson (ibid., p. 127) on the original clause referred to by Keynes: “The intention of this clause was that the Americans should undertake to lighten the task of supporting the pound, the franc etc. against depreciation in terms of the dollar by forbidding anybody to deal in those currencies at a discount in the New York market: but the clause as amended specifically exempts them from giving any such undertaking.”
Ibid., pp. 170–71 (emphasis added).
“I take this opportunity to point out that the second sentence of IV 4(b) by which, in effect, the U.S. contracts out of this clause, is in fact illogical. For, whilst gold convertibility prevents the dollar from depreciating, it does not prevent other currencies from depreciating in the New York market. Thus unless you legislate to the contrary, New York will become, as Einzig has been eager to point out, the chartered black market where all dubious transactions and weak currency deals will be concentrated. Let us hope that in spite of the Statue of Liberty pointing to New York as, under the Constitution, the proud home of black markets as the symbol of Freedom, you will in fact legislate!” (Ibid., p. 143.)
Proceedings and Documents, pp. 54–55. The draft was discussed by Committee 1 of Commission I on July 6, 1944, and discussion of it “disclosed various difficulties of a legal nature.” The draft was referred to the Drafting Committee (p. 217).
Ibid., p. 230. (See also p. 288.)
Ibid., p. 334. This proposal also was referred to the Drafting Committee of Commission I (pp. 287–88). See also p. 341, in which the language is “be an offense in the territory of any member.”
See, for example, Keynes, Vol. XXVI, p. 136.
Proceedings and Documents, p. 502.
Ibid., p. 543.
Ibid., p. 576.
Ibid., p. 599.
Ibid., p. 605.
Ibid., p. 628.
Ibid., p. 671.
Ibid., p. 808.
Ibid., p. 698.
Ibid., p. 665.
Ibid., p. 775.
Ibid., p. 667.
Ibid., p. 776.
Ibid., p. 680.
Ibid., pp. 789–90.
Ibid., p. 684.
Ibid., pp. 793–94.
Ibid., pp. 687, 797.
Ibid., pp. 690, 800.
Ibid., p. 800.
John S. Williams, “Extraterritorial Enforcement of Exchange Control Regulations Under International Monetary Fund Agreement,” Virginia Journal of International Law, Vol. 15 (1975), pp. 318–96, at 326–28.
Proceedings and Documents, p. 628.
Ibid., pp. 544–46.
Ibid., pp. 604–608.
Ibid., p. 628.
F. A. Mann, The Legal Aspect of Money, Third Edition (Oxford, 1971), p. 435, fn. 1. The history and analysis of Article VIII, Section 2(b) as presented in this Appendix support the conclusions drawn in Gold, Fund Agreement in the Courts (1962), pp. 62–66.
Pp. 257–58 in this volume.
The breakdown of the par value system after the announcement by the President of the United States on August 15, 1971 of the official inconvertibility of the dollar followed by the failure in March 1973 of the system of central rates and wider margins for exchange transactions under the Fund’s decision of December 18, 1971 1 left organizations and courts with no obvious solution of the problem of applying units of account defined in terms of gold. Many of these units of account are to be found in domestic legislation that gives effect to conventions in which the unit of account is the Poincaré franc or the Germinal franc, both of which are defined in terms of a quantity of gold.2
Gold units of account are usually to be found in treaties that limit the liability of an entrepreneur in a particular activity for damage or loss sustained by others as a result of the entrepreneur’s pursuit of that activity. Courts in many countries have been called on to apply these provisions. Gold units of account, however, are not confined to treaties that limit liability.
A mass movement has taken place, and is still continuing, to substitute the SDR for gold as the unit of account in treaties. The amendment of many treaties has been proposed for this purpose, but the problem remains until sufficient acceptances are received to make the amendment effective. Some commentators have expressed doubt that certain of the proposed amendments limiting liability will take effect because inflation has already made the limits on recoveries in the proposals unfairly low. It is probable, however, that, sooner or later, a new unit of account will have to be substituted for gold in all treaties in which the unit of account is defined in terms of gold.
Three developments have been occurring in order to solve the problem of applying a gold unit of account in the period before an amendment does become effective.3 First, when there are administrators of a treaty, they have sometimes taken action, by interpretation or regulation, to require the SDR to be applied as the unit of account. Second, in some countries, the legislature has solved the problem for courts by means of a statute substituting the SDR for a gold franc and prescribing the formula for substitution. In some countries, a department of government has issued orders, binding on the courts, on how a gold franc is to be translated into the domestic currency. The translation is made via the SDR.
When none of these developments has occurred, the courts themselves are faced with the necessity of finding a solution if they have to apply a gold unit of account. The Second Amendment of the Fund’s Articles provides no explicit solution. On the contrary, it has made the problem more acute not only by abrogating the former official price of gold but also by outlawing it for the future as a denominator or common denominator in terms of which the external value of a currency or currencies may be maintained.4
Decisions Before April 1, 1978
As the Second Amendment took effect on April 1, 1978, it is convenient to divide decisions on gold units of account by reference to that date. The division is not clean cut, however, because, as will be seen, it is possible that decisions after April 1, 1978 may have to be made on the basis of events that occurred before that date.
Before the Second Amendment, a few courts based their decisions on the market price of gold,5 and earned the approval of some commentators. 6 Some of the courts have taken intellectual shortcuts to decision. They have said, for example, that the issue was whether the “true price” of gold or the price set by the United States should prevail,7 or that an ambiguous reference to gold should be interpreted liberally in favor of the citizen because a limitation of liability toward him was an encroachment on his rights.8 Often, approval by commentators was based on the thesis that there was no alternative to the market price as the solution that met the test of universal applicability. Some commentators have had additional reasons for endorsing this solution. For example, the market price of gold is regarded as compensation for the inadequacy of limits on liability that results from inflation. Again, the market price is approved because it reduces the great disparity that has developed in some jurisdictions between the damages that can be recovered in domestic death and injury cases and the limits under conventions regulating international activities that result in death and injury.
Other courts faced with the problem before April 1, 1978 rejected the solution of the market price.9 The Supreme Court of the Netherlands took this position in Hornlinie v. Société Nationale des Pétroles Aquitaine (The Hornland) as early as April 14, 1972.10 The issue in the case was the amount of Netherlands guilders to be deposited, at the rate prevailing on May 2, 1969, as the equivalent of an amount of Poincaré francs established by the provisions of the Commercial Code of the Netherlands that gave effect to the Treaty Concerning the Limitation of Liability of Owners of Seagoing Vessels signed at Brussels on October 10, 1957. Under the provisions of the Commercial Code, the amounts to which liability can be limited are expressed as specified numbers of Poincaré francs per ton of the ship’s net tonnage. Translation into guilders is to be made at the rate of the day on which the shipowner-defendant complies with the order of the court to make a deposit or provide security in a proceeding brought to limit liability.
In The Hornland, the shipowner argued that the calculation should be made on the basis of the par value of the guilder as defined in terms of gold on the relevant date. The claimant contended that since the institution of the “two-tier system” of gold markets in 1968, the official price of gold was relevant only for central banks and that for all other purposes the price ruling in the nonofficial market was the only appropriate one. This argument was based on the two-tier system and not on the ineffectiveness of par values after August 15, 1971.
The Supreme Court held that the calculation must be made by reference to the most recent par value of the guilder, which had been established under the Fund’s Articles in 1961. The drafters of the Brussels Convention must have had the monetary character of gold in mind and not its commercial value. Most of the negotiating countries were members of the Fund. They chose an artificial currency rather than a given weight of gold as such. Constancy of purchasing power was not a criterion for choosing between the two contending views of par value and nonofficial market price. Neither of them would achieve this stability of purchasing power. Computations based on the market price would result in higher currency limits on liability, but the amounts yielded in this way would be determined by such influences as speculation and not by changes in the purchasing power of the currency to be deposited. Furthermore, the objective of uniformity that was sought by the Brussels Convention would be better served by the common valuation of gold that most parties to the treaty had accepted by becoming members of the Fund. What survived in this reasoning and affected the later decisions of the Supreme Court that were not based on par values was the rejection of the market price of gold.
German courts also refused to apply the market price of gold in cases decided before the Second Amendment became effective. Transarctic Shipping Corporation, Inc. Monrovia, Liberia v, Krögerwerft (Kröger Shipyard) Company11 involved provisions of the Commercial Code of the Federal Republic that gave effect to the same provisions of the Brussels Convention as were in issue in The Hornland. A provision of the Code declared that the equivalent of amounts of Poincaré francs in deutsche mark were to be calculated by reference to the “parity” of the currency. The most recent par value of the deutsche mark was established under the Articles on October 27, 1969, and in accordance with the law of the Fund was still in effect.12
On June 29, 1973, however, a central rate for the deutsche mark became effective under the Fund’s decision on central rates and wider margins. The central rate for the deutsche mark was expressed in terms of the SDR, which at that time was still defined by reference to gold. The Fund’s decision on the “basket” method of valuing the SDR did not come into operation until July 1, 1974.
The Fund’s decision on central rates and wider margins was an attempt by the Fund to minimize disorder in circumstances in which members were not observing the obligations respecting exchange rates that were imposed on members by the Articles. Central rates and wider margins, however, were not practices that could be validated under the Articles,13 although some observers thought that they had been validated by the decision.
The Hanseatic Higher Regional Court at Hamburg decided on July 2, 1974 that one purpose of requiring calculations to be made on the basis of par values was to avoid the use of market prices for gold, because market prices were subject to severe and often speculative pressures. After the collapse of the system of central rates in March 1973 and the entry into force of the European common margins arrangement (“the snake”), par values had lost most of their practical meaning. The legal provisions requiring the application of par values rested on the assumption that all members of the Fund would respect the provisions. Members were observing central rates and not par values. The application of central rates would promote the underlying objectives of the legal provisions more effectively than would a literal application of the par values to which they referred.
The pragmatism of this decision was carried further by the decision of the Hamburg District Court (Division 64), delivered on December 29, 1976, in the Matter of the Khendrik Kuivas.14 The issue in this case involved the same legal provisions as in the earlier German case, but the Fund’s first decision on the basket method of valuing the SDR was now in effect. The court held that it had to take account of this development in the international monetary system. The court decided that the calculation must be made according to the definition of the SDR in terms of gold in the Fund’s Articles and the definition of the Poincaré franc in terms of gold. According to this formula, the rounded amount of 15 Poincaré francs was equal to one SDR. (This solution will be referred to from time to time as “the SDR solution.”) The value of the deutsche mark in terms of the SDR would be determined by the most recent announcement of it by the Fund.
Decisions After April 1, 1978
The Rotterdam District Court applied the market price of gold in a case decided on May 12, 1978 under provisions of domestic law that gave effect to the Convention on the Contract for the International Carriage of Goods by Road (CMR), which took effect on July 2, 1961. Under the provisions, the compensation payable by a carrier liable for the loss of goods is calculated by reference to the value of the goods at the time and place at which they were accepted for carriage, but compensation is not to exceed 25 Germinal francs per kilogram. The claim in this case was for the nondelivery of goods accepted for delivery in Rotterdam in 1969. The full value of these goods exceeded the maximum amount under the convention when calculated on the basis of the last central rate for the guilder in terms of gold, but was less than the maximum when calculated on the basis of the market price of gold. The court awarded the full value of the goods on the latter basis.15
In the case of The Breda,16 the Amsterdam District Court, on January 10, 1979, came to the same conclusion as had been reached in The Hornlánct, even though in the meantime the Second Amendment had become effective and the Netherlands, by adopting the Act Relating to the Exchange Rate of the Guilder, had repealed, with effect on August 1, 1978, the Act on the Par Value of the Guilder.17 The vessel had collided on August 20, 1978 with an installation owned by the State. The relevant legal provisions were the same as in The Hornlana. The shipowner petitioned to limit its liability according to the formula that 15 Poincaré francs were equal to one SDR. The State, as claimant, argued that in the absence of any official price for gold under the law of the Netherlands or under international law, the limit on liability should be determined by reference to the market price of gold on the day on which the shipowner complied with the order of the court to make a deposit or provide security.
The court recognized that the Second Amendment had made it necessary to repeal the Act on the Par Value of the Guilder. A statute governing the application of gold units of account was in preparation but had not yet become effective. Nor was any rule of international law in force. If the market price were applied because of repeal of the Act on the Par Value of the Guilder, the consequence would be that on August 1, 1978 the limits on liability were increased by 250 percent compared with the limits on July 31, 1978, but there was no reason to believe that the legislature had intended the repeal to have this effect. It was implausible that the new statute when enacted would prefer the market price to the SDR solution in view of the widespread movement to substitute the SDR for gold as a unit of account.
The market price solution would frustrate the intent of the convention, which had assumed that gold would have a monetary function. For the brief period before a new measure was in operation, a solution was required that would not lead to results radically different from those that had prevailed before August 1, 1978 or were likely to prevail in the future. Arguments could be found to support the SDR solution, but that solution would give no role at all to a price for gold.
The Supreme Court decided, after this examination, that the gap in the law had to be filled by applying the central rate for the guilder expressed in terms of gold that was most recently in effect as the result of official action. This solution would apply until the gap was filled in some other way by steps at the national or international level, or until it was demonstrated that special circumstances had occurred that called for some modification of the solution. The court held that its solution was compatible with the language and intent of relevant legal provisions, avoided unreasonable results, did not anticipate a future and still uncertain legislative measure, and was in accordance with the price used in monetary transactions between the central banks of members of the Fund. The court also held that the State’s application of the par value until August 1, 1978 and the absence of direct statutory recognition of the central rate did not weaken the justification for the solution chosen by the court.
The Supreme Court’s reference to the monetary price in gold transactions between the central banks of members of the Fund did not give adequate weight to the impact of the Second Amendment. Until March 31, 1978 the monetary authorities of members continued to be bound, if they dealt in gold between themselves, to respect the par value of the currency for which the currency was bought and sold. The substitution of the central rate for the par value in these gold transactions would not have been in accordance with the Articles.18 Once the Second Amendment became effective, the official price of gold disappeared and members were freed from the obligation to observe any specific price in their transactions.
Three decisions of French courts must be noted. On August 24, 1978, the Le Havre Commercial Court decided a case in which the owner of a Moroccan freighter sought to limit its liability under the Brussels Convention and related provisions of French law after colliding with a Soviet trawler in French waters. The owner of the freighter sought to limit its liability on the basis of the relationship between the Poincaré franc and the most recent par value of the French franc under the Articles. The court held that the correct basis for the calculation was that par value adjusted in accordance with the retail price index for June 1978 as determined by the National Institute for Statistics and Economic Research. This basis for calculation resulted in an amount of French francs that was slightly more than double the amount the owner had proposed to deposit.19 The solution implied the view that the negotiators of the Brussels Convention intended to adopt a unit of account that would reflect stable purchasing power, which was not the view of the Netherlands Supreme Court in The Hornland.
The other two decisions were affected by the fortuitous circumstance that the Convention for the Unification of Certain Rules Relating to International Carriage by Air (the Warsaw Convention) was signed on October 12, 1929 soon after the Poincaré franc had been defined, by the law of June 25, 1928, as the currency of France. The decisions were influenced by the further fortuitous circumstance that the proceedings in the two cases were conducted in French tribunals. Under the Warsaw Convention, as subsequently amended by the Protocol done at The Hague on September 28, 1955, and made effective in France, an air carrier’s liability for loss of checked baggage is limited to a specified number of units per kilogram, and the translation of units into national currencies is to be made according to their gold value at the date of judgment. The unit is equivalent to the Poincaré franc as defined by France’s law of June 25, 1928.
In Société Egyptair v. Chamie,20 the Court of Appeal of Paris, on January 31, 1980, decided an appeal from a decision that the tribunal de grande instance of Paris had delivered on October 6, 1978. The passenger’s claim was for baggage lost in the course of a flight on July 26, 1976. The lower court had accepted the passenger’s argument that the Poincaré franc had to be applied by reference to the market price of gold in Paris. The carrier argued that the Warsaw Convention itself rejected the market price and that the Second Amendment could not affect the application of the convention. Therefore, the most recent par value of the French franc, established under the Fund’s Articles on August 10, 1969, was the proper basis for calculating the limits on liability under the convention. The Avocat Général, in his observations, referred to the extravagant consequences of applying the market price.
The Court of Appeal noted that conventions drafted more recently than the Warsaw Convention and the Hague Protocol continued to use the Poincaré franc without adopting the market price of gold by which to value it. (The court did not refer to the even more recent practice in favor of the SDR solution.) The court also noted that France had never established a central rate for the franc. The par value had been abrogated as a result of the Second Amendment. The application of a price index to adapt the last par value was unacceptable to the court because the choice of an index would depend on the court’s subjective preferences. The term in the carrier’s tickets defining its liability by reference to the U.S. dollar could not be applied because that currency was not convertible into gold. For this reason, the term was inconsistent with the Warsaw Convention.21
The Court of Appeal rejected the solution of the market price because the contracting parties to the Warsaw Convention had agreed that the translation of the Poincaré franc into national currencies would be made according to the value of currencies in terms of gold as established by the states issuing the currencies. The market price had no official national or international monetary character and was the result of private transactions motivated by speculation. The court concluded that as the market price was inappropriate and as the abrogation of the par value for the French franc on April 1, 1978 made it impossible to translate the Warsaw unit into the national currency of France, the only solution was to recognize that the current French franc was the successor to the Poincaré franc. One Poincaré franc was to be deemed equal to one current French franc, without relating them to gold. This solution ignores the fact that in the negotiation of the Warsaw Convention the Poincaré franc defined in terms of gold was substituted for the “French franc” because of objections to a national currency.
The court noted that the French franc was recognized as a currency of payment for international obligations. The court, in discussing the term referring to U.S. dollars in the tickets, did not mention that the U.S. dollar had this same quality. Nor did the court regard the inconvertibility of the French franc into gold as an impediment to its decision.
The effect of the decision was that a limit of 250 French francs per kilogram was substituted for an amount somewhat less than the 100 French francs that would have been payable on the carrier’s thesis. The court may have been influenced by the economic inadequacy of the limits in the convention as a result of inflation. It will be recalled, however, that the Supreme Court of the Netherlands refused to assume that the legislature intended the abrogation of the par value of the guilder to bring about an increase of 250 percent in the limits under the Brussels Convention when translated into guilders.
Since the end of June 1975, the monetary authorities of France have valued their gold at the end of each semester according to the average over the preceding three months of the daily U.S. dollar price of gold in London translated into French francs at the franc-U.S, dollar rate in Paris during the same period. The Court of Appeal refused to follow this technique, but in rejecting it the court gave as its reason the official inconvertibility of the French franc. In Linee Aeree Italiane v. Riccioli,22 an Italian court refused to follow the central bank’s practice of relating the valuation of the bank’s gold holdings to the market price, because this technique was no more than an accounting convention. In Florencia Cia Argentina de Seguros S.A. v. Varig S.A.,23 an Argentine court referred to the practice of the central bank in support of the court’s application of the market price.
The Court of Appeal in Société Egyptair v. Chamie did not make the point that the practices of monetary authorities in valuing their gold holdings are so diverse 24 that to follow the method of valuation of the domestic monetary authorities would defeat the objective of a universal and uniform standard of value that inspires the drafters of conventions. The same objection can be made to the solution that assumes the current French franc to be the legal successor to the Poincaré franc as the unit of account chosen by all contracting parties. The objection could be met if all contracting parties were willing to make the same assumption, but there is no evidence of this willingness.
The decision of the Court of Appeal is not compatible with the view expressed in The Hornland that the negotiators of the Brussels Convention had chosen the Poincaré franc because it had become a fictitious currency. They had not wished to link the unit of account to an actual currency, because a link of that character would have made the unit of account subject to the devaluations and revaluations of the currency.
In Linee Aeree Italiane v. Riccioli,25 however, the court declared that the drafters of the Warsaw Convention had chosen a currency as the unit of account, even though the currency was fictitious, in preference to an amount of gold as such. The court drew the conclusion that the drafters had intended a unit of account that was to be applied through the exchange system and not through the gold market. The court could have gone on to recall that the Fund has not regarded the price of gold in any currency as an exchange rate for that currency, and therefore it has not been able, even if it had wished, to approve a market price for gold as a multiple currency practice under Article VIII, Section 3. The Fund defines an exchange rate as the rate at which one currency is exchanged for another currency.
The legal provisions involved in Société Egyptair v. Chamie were the subject of proceedings in the later case of Pakistan International Airlines v. Compagnie Air Inter S.A. et al., decided by the Court of Appeal of Aix-en-Provence on October 31, 1980.26 The claim was for the loss of some packages in the course of transportation by air by a number of carriers in April 1974. One issue was how 13,500 Warsaw units were to be translated into current French francs. The insurance company subrogated to the rights of the consignee argued that it was entitled to 13,500 current French francs. The court referred to an implicit reference by the insurance company to the Jamaica Accord.27 The court held that the Accord had not been submitted to the legislature and did not constitute an international treaty binding on France.
The court was right in its view of the “Accord.” That document was no more than a communiqué that the Interim Committee of the Board of Governors of the Fund on the International Monetary System had issued in Jamaica on June 12, 1975.28 The communiqué included a statement of the principles that the Committee wanted the Executive Board to observe in drafting the provisions of the Second Amendment on gold. One of the principles was that the official price of gold should be abolished. The Court of Appeal decided, correctly, that the Second Amendment was the only legal instrument of the Fund that had to be considered.
The court then made two points, neither of which appears in the judgment delivered in Société Egyptair v, Chamie. First, the Second Amendment “prohibits the fixing of a gold par value as a denominator of the national currency, but … does not intend to prohibit all national regulations that institute, save for exchange regulations, a relation between gold and national currency.”29 This view is correct: the Second Amendment prohibits maintenance by a member of the external value of its currency in terms of gold,30 but does not prohibit the valuation of the currency in terms of gold for other purposes.31 The court deduced from this principle that it was free to decide how to translate a gold unit of account into French francs. The fallacy in this deduction is that it conflicts with the intent of the contracting parties to conventions of the kind in issue to establish a common standard of valuation because such a standard would achieve an equivalence among currencies based on their external value. It should not be assumed that because the Second Amendment does not prohibit a member’s attribution of a gold value to its currency for some purposes, the member is free to choose any value in applying conventions. Unless the chosen value is based on the external value of the currency and is related to some standard that can ensure an equivalence of external value among currencies, the universality and uniformity that are objectives of the conventions will not be achieved.
The Court of Appeal concluded that it was free to attribute to the Poincaré franc a value equivalent to the current French franc 32 and that this solution was not inconsistent with the Second Amendment. There was no inconsistency because the solution did not have the effect of maintaining the external value of the French franc in terms of gold.
The court’s reasoning would lead to strange results if the Germinal franc was the unit of account that was being applied under a treaty and this franc also was treated as equivalent to the current French franc. The Germinal and Poincaré francs were defined in terms of different amounts of gold. The only way to avoid the anomaly referred to would be to regard the Poincaré franc as equivalent to the current French franc and, for the purpose of applying the Germinal franc, to adapt that relationship according to the ratio between the Poincaré and Germinal francs in terms of gold. The justification for considering the Poincaré rather than the Germinal franc as equivalent to the French franc would be that the Poincaré franc was created later than the Germinal franc.
The second point made by the Court of Appeal was that the Second Amendment could have no effect on a contract of carriage entered into in April 1974. In Société Egyptair v. Chamie also, the contract preceded the Second Amendment, but in that case the court did not dwell on dates. On the view taken by the court in the later case, it is difficult to understand why the court complicated its consideration of the case by dealing at all with the Second Amendment.
Finally, the court was not embarrassed in arriving at its decision by any statute that established a par value for the French franc. If there had been a statute, the par value would have been defined in terms of an amount of gold that differed from the definition of the Poincaré franc. France is a country in which the Executive is empowered to determine the external value of the currency.
The decision of the Netherlands Supreme Court in Giants Shipping Corporation v. State of the Netherlands (The Blue Hawk),33 on May 1, 1981, is likely to become a leading case in the Netherlands 34 and to be cited in litigation in the courts of other countries as well. The relevant legal provisions were the same as in The Hornland and The Breda. The proceedings arose out of a collision on December 29, 1978 in which the Blue Hawk collided with some installations owned by the State. The issue was whether the market price of gold or the SDR solution should be adopted. As in The Breda, the State of the Netherlands, the aggrieved party, based its claim on the market price, arguing that no other method of calculation was possible under Netherlands law. The State contended that as a consequence of the statute by which the Netherlands had approved the Second Amendment, application of the last par value of the guilder was prohibited. Similarly, the last central rate could not be applied, because it too was defined, although indirectly, in terms of gold.
In the proceedings in the lower courts, the Rotterdam District Court ruled in favor of the market price of a quantity of gold corresponding to the specified number of Poincaré francs, translated into Netherlands currency at the rate of the day on which the shipowner complied with the court’s ruling. The Court of Appeal reversed the ruling to the extent that it referred to the market price, but the court refrained from deciding what was the correct method of calculation. The reason for the reversal was that it was not known whether or when the shipowner would comply with the District Court’s ruling. The determination in favor of the market price, therefore, was premature. The Court of Appeal probably took into account the possibility that by the time the shipowner complied new legal provisions might be in effect and that they might be retroactive.
The Supreme Court held that the decision on the method of valuation could not be deferred, and it decided in favor of the SDR solution. The court noted that since the date of the decision in The Hornland the Second Amendment and the statute abrogating the par value of the guilder had become effective. For the Netherlands, gold had lost all monetary significance, and therefore gold as a unit of account no longer served the objectives of the Brussels Convention. In these circumstances, a gap existed in the relevant provisions. National or international steps would have to be taken to fill the gap. Agreement on a Protocol to the Brussels Convention had been reached on December 21, 1979 as an international measure, but it was not yet in operation. In the Netherlands, the Lower House of Parliament had adopted the draft of an Act Governing the Conversion of Units of Account Expressed in Gold into Netherlands Currency,35 which would give legislative force to the SDR solution, but the bill had not yet passed into law.
The gap remained, but the courts were not entitled to refrain from deciding the problem of the method of valuation. A standard accepted in international monetary transactions had to be found for determining international uniform limits of liability in accordance with the objectives of the Brussels Convention. The market price of gold did not meet this test, but the SDR did. The SDR had been adopted by members of the Fund. It had been defined formerly in terms of gold. A link had been created between the SDR and gold, because, when the basket method of valuing the SDR had been introduced, the Fund ensured that the value of the SDR in terms of currencies would be the same immediately before and immediately after the transition to the new method of valuation. The SDR solution would be compatible with the changes that had been made or were being made in international conventions and national laws, including the draft law that was being proposed in the Netherlands.
The State advanced an argument in favor of applying the practice that the Netherlands Bank followed in valuing its gold holdings. The central bank values its gold at 70 percent of the lowest average annual price in the preceding three years. In principle, this method of valuation is applied at the end of every three years. The State argued that the central bank’s formula would overcome the objections based on the extreme escalation of the market price and the fluctuations in it. Moreover, recognition of the formula would be consistent with the spirit of the decision in The Breda by recognizing “the official gold price.”
The central bank’s formula, it should be noted, was a national measure that has not been endorsed by the Fund or by other international action. When the Supreme Court of the Netherlands applied the central rate for the guilder in The Breda, the court attached importance to the Fund’s recognition of the central rate. Moreover, the Fund’s decision on central rates rested on the assumption of a common method of valuing gold.36 In The Blue Hawk, the Supreme Court made no reference to the central bank’s formula. It is fair to infer that the court found the State’s argument in favor of it unpersuasive.
The Supreme Court took note of the State’s objection that valuation of the Poincaré franc at 1/15 of the SDR meant lower effective limits on liability because of the decline in the purchasing power of the SDR compared with the purchasing power of the amount of gold in the definition of the Poincaré franc. The court held that the inadequacy of limits on liability because of the decline in purchasing power was a problem for the negotiators of conventions and amendments of them and for national legislators, but not for the courts. International action had been taken already in the form of the proposed Convention on Liability for Maritime Claims that had been adopted in London on November 19, 1976. The convention, when effective, would establish much higher limits of liability, expressed in SDRs, for the purposes of the Brussels Convention. This dismissal of the argument based on purchasing power made it unnecessary for the court to point out that there is no systematic connection between the market price of gold and the loss of purchasing power of currencies or the SDR.
Although the Supreme Court held, as it had in The Breda, that there was a gap in the law, the court was not content to find a solution that might have no more than temporary efficacy.37 The forcefulness of the decision is even greater than it would have been in any event because the process for finding a legislative solution was already in train. The State had contended that the SDR solution would be objectionable as an “anticipatory interpretation.”
The court did not deal with the argument that the market price of gold might defeat one of the objectives of conventions that limit liability. This objective is to reduce litigation and encourage speedier recoveries by aggrieved parties, while at the same time protecting entrepreneurs against unpredictable and possibly ruinous losses. The prospects for achieving this objective depend on the ability of an entrepreneur that must pay damages to compare, with reasonable certainty, the loss that has been suffered and the amount that must be deposited as a condition of limiting the entrepreneur’s liability. The fluctuating price of gold might increase the difficulty of making this comparison. The inducement to limit liability might be lessened, and entrepreneurs might prefer to litigate issues of liability and the extent of loss. The SDR solution also produces fluctuations in the amounts of recoveries, but the fluctuations tend to be more moderate than those resulting from the market price of gold.
A General View of the Cases
The courts have adopted a variety of solutions for the problem of translating a gold unit of account into a currency of recovery: the last par value of the currency, the last central rate of the currency, the last par value adapted according to an index, the market price of gold, the present French franc, and the SDR. The central bank’s method of valuing its gold holdings has been referred to in order to support the solution of the market price. All solutions other than the market price specifically reject the market price.
The Second Amendment has provided a more obvious legal basis for applying the SDR solution, although that solution could be followed even in a case that has to be decided by reference to the state of affairs after July 1, 1974 and before April 1, 1978. During that period, the Fund applied a basket valuation of the SDR for the purpose of operations and transactions in SDRs and also as the Fund’s unit of account for general purposes. The Fund’s action necessarily implied the legal fiction of a gold value for the SDR basket during this period. The justification for this fiction was that the efficacy of the Articles demanded a solution in circumstances in which no currency could be said to have a gold value.
The main opponent of the SDR solution, although a weakening one, remains the market price solution. There is no need to rehearse in detail the legal arguments for, and the practical advantages of, the SDR solution. An objection to the market price, however, that does not seem to be sustainable is that the market price could not provide an approach toward the uniformity that is an objective of the conventions in which gold is still the unit of account. An approach to uniformity would be achieved if there were to be agreement among the contracting parties to a convention on the solution of the market price and on the method of selecting and applying a market price.38 Gold, however, is no longer recognized by the monetary authorities of most countries in the world as an acceptable unit of account. The unilateral or multilateral actions of countries in favor of the SDR solution show how unlikely it is that general agreement could be reached on a gold unit of account.
Uniformity has been one objective in choosing gold as a unit of account; stability has been another. An argument made in some proceedings in opposition to the SDR is that it fluctuates in value and therefore has no claim to acceptance that is superior to the market price of gold. The fluctuation of the SDR, however, is determined by exchange rates for currencies and in accordance with systematic principles. Moreover, a degree of stability is achieved because the basket method of valuing the SDR mitigates the variability of exchange rates for individual currencies. The market price of gold has neither of these characteristics.
The case for the SDR differs in at least one respect from the former case for gold as a unit of account. A reason for the choice of gold in the past was that many countries defined the value of their currencies in terms of gold either by usage or under the compulsion of the Articles of Agreement once the Articles had become effective. Countries are free under the Second Amendment to define the value of their currencies in terms of the SDR, and some members do so, but the practice is not widespread.
The case for the SDR as the unit of account does not depend on the argument that gold has lost all monetary significance. Gold has lost much of its former legal status in the international monetary system, but it would go too far to hold that it has no monetary significance whatsoever. The Executive Board’s Report to the Board of Governors on the Proposed Second Amendment referred to “the objective of the gradual reduction of the role of gold in the system”39 and not to the immediate or total elimination of its role. Gold continues to be held in the monetary reserves of members. It may be accepted by the Fund from members instead of SDRs or currency in operations or transactions authorized by the Articles, although at a price agreed, on the basis of market prices, for each operation or transaction,40 and provided that the decision to accept gold is supported by a majority of 85 percent of the total voting power.41 Gold continues to have practical importance as a reserve asset, but its practical role and its residual legal position in international monetary law have not preserved the function of gold as a standard of value accepted by monetary authorities for international purposes.
A fundamental change has occurred in the circumstances existing at the time of the conclusion of the conventions in which gold is the unit of account. It is not suggested that parties have invoked, or should invoke, the change as a ground for terminating or withdrawing from a convention. These actions could be taken only by contracting parties. The criteria, according to Article 62 of the Vienna Convention on the Law of Treaties, that would justify action by contracting parties are that the circumstances in which change has occurred were an essential basis of the consent of parties to be bound by the treaty and that the effect of the change is radically to transform the extent of obligations under the treaty. Changes of this character do not authorize courts to hold that treaties are no longer binding, but the changes have influenced courts to find solutions that are not dictated by a defunct monetary system. The Blue Hawk, Miliangos v. George Frank (Textiles) Ltd.,42 Matter of the Khendrik Kuivas, and Lively Ltd. and Another v. City of Munich43 are examples of this judicial realism.
The problem of applying the gold unit of account in the Warsaw Convention is before a number of courts in the United States.44 Plaintiffs are advancing claims on the basis of the market price of gold and are arguing that any other solution requires amendment of the convention. Defendants are relying on the SDR solution, but in default of its adoption by the court are averring that an appropriate solution would be the last official price of gold or the current French franc. The defendant’s case in favor of the SDR is strengthened by the fact that the Fund itself moved to the SDR, defined in relation to a basket of currencies, as its unit of account before the Second Amendment and at a time, therefore, when the Articles still referred to gold as the unit of account and defined the SDR in terms of gold.
On November 6, 1981 the United States District Court for the Southern District of New York decided in favor of the last official price of gold in the United States, although the court declared that if it had been writing on a clean slate it would have found the arguments in favor of the SDR solution most persuasive. The court relied on two considerations in arriving at its decision. First, internal memoranda of the Civil Aeronautics Board, obtained by attorneys under the Freedom of Information Act, appeared to favor the solution adopted by the court. The Civil Aeronautics Board was the government agency most intimately concerned with the issue, and its view, therefore, came as close as anything to a governmental interpretation. Second, the printed tariffs of all domestic carriers, including the defendant in this case, based the dollar value of the limitation amounts in the Warsaw Convention on the last official price of gold. The court seemed to imply that, for this reason, the interpretation was a contractual one between the parties.45
Some parties in these cases have stressed the inequity of applying solutions other than the market price of gold, because of the decline in the purchasing power of currencies and of the SDR. These solutions are said to ignore the stability that the drafters of conventions sought by defining a unit of account in terms of gold. The argument assumes that the drafters were intent upon ensuring stability in the purchasing power of the limits imposed on recoveries. The likelihood, however, is that the drafters were seeking stability in exchange value among currencies rather than stability in the purchasing power of individual currencies. The former kind of stability could be achieved, but the latter kind would have required a further technique. It would have been necessary, for example, to adopt not only a unit of account but also an index to achieve the objective of stable purchasing power. The negotiators of conventions drafted during the life of the par value system under the Articles might have assumed that changes would be made in par values to reflect persistent changes in the purchasing power of currencies.
Selected Decisions, Eighth Issue, pp. 14–17. For the revised decision, see pp. 18–21.
Poincaré franc = 65.5 milligrams, nine-tenths fine. Germinal franc = 10/31 gram, nine-tenths fine.
These various developments are discussed in detail in the following pamphlets by Joseph Gold: Pamphlet No. 19; Pamphlet No. 22; SDKs, Cold, and Currencies: Third Survey of New Legal Developments, IMF Pamphlet Series, No. 26 (Washington, 1979); SDRs, Currencies, and Cold: Fourth Survey of New Legal Developments, IMF Pamphlet Series, No. 33 (Washington, 1980); SDRs, Currencies, and Cold: Fifth Survey of New Legal Developments, IMF Pamphlet Series, No. 36 (Washington, 1981). (Hereinafter cited as Gold, Pamphlet No. 26, No. 33, and No. 36, respectively.)
Article IV, Section 2(b); Schedule C, par. 1.
For example, Zakoupolos v. Olympic Airways Corp., Judgment No. 256/1974 of the Court of Appeals, Athens, Greece, February 15, 1974 (in which the price of gold on the Athens Stock Exchange was applied under an interpretation of statutes of 1937 and 1946, and not because of international monetary developments); Re Motor Ship “Saga,” Lower Court, Göteborg, Sweden, October 2, 1973 (Gold, Pamphlet No. 19, pp. 30–31, fns. 54–56); Balkan Bulgarian Airlines v. Tammaro, T. Treves, “Sulla Conversione in Moneta Nazionale Dei Limiti Di Responsabilità In Franchi Oro Della Convenzione Di Varsàvia,” II Diritto Marittimo (1978), pp. 83–91, decided October 25, 1976 by a Milan court (Gold, Pamphlet No. 33, pp. 90–92); Reed v. Wiser, 555 F. 2d 1079 (2d Cir.), certiorari denied 434 U.S. 922 (1977); Florencia Cia Argentina de Seguros S.A. v. Varig S.A., decided by the National Court of Appeals, Buenos Aires, August 27, 1976 ( Uniform Law Review 198) (in which the court was influenced by earlier decisions applying what it considered to be the most realistic rate of exchange when there were multiple rates of exchange for the domestic currency); Télé-Montage Inc. v. Air Canada (1976) C.S. (Recueils de Jurisprudence du Québec) 228 (without discussion of the issue); Miller v. American Airlines, Inc., County Court of Judicial District of York, Toronto, Ontario, October 4, 1977.
See authors cited in Gold, Pamphlet No. 19, p. 30, fn. 53; Marc S. Moller, “Gold Up—Warsaw Damage Limitations Down,” New York Law Journal, October 17, 1980, pp. 1–2; Aleksander Tobolewski, “The Special Drawing Right in liability conventions: An acceptable solution?” Lloyd’s Maritime and Commercia Law Quarterly, May 1979, pp. 169–80; Paul P. Heller, “Converting the Goldfranc—a reply from an unconverted,” Air Law, Vol. 5 (1980), pp. 33–34. For some early cases rejecting the market price, see Gold, Fund Agreement in the Courts (1962), pp. 6–8.
Florencia Cia Argentina de Segusos S.A. v. Varig S.A.  Uniform Law Review 198.
Miller v. American Airlines, Inc. (See fn. 5 supra.)
See, for example, Companhia de Seguros Maritimos v. Varig, decided by the Federal Court of Appeals, Brazil, June 3, 1975 (Civil Appeal No. 35, 737-Guana-bara).
Nederlandse Jurisprudentie, 1972, No. 269, pp. 728–38. (Gold, “Fund Agreement in the Courts—XI,” pp. 177–82 in this volume.)
European Transport law, Vol. 9 (1974), pp. 701–10. (Gold, Pamphlet No. 19, pp. 17–22.)
Gold, “Fund Agreement in the Courts—XIII,” pp. 232–33 in this volume.
Ibid., pp. 235–36.
Gold, Pamphlet No. 22, pp. 56–59.
Avandero N.V. v. Westeuropese Transportmaatschappij Wetram N.V., Schip en Schade, 1979, Vol. 23, No. 5, p. 162. The market price was applied by the Court of the Principal Civil Judge, Bangalore, India, on August 11, 1978 (Kuwait Airways Corporation v. Sanghi, Regular Appeal No. 54/77). The par value of the rupee established under the Articles was rejected on the ground that neither the Warsaw Convention nor Indian legislation giving effect to it stated that the par value was to apply. Although the case was decided after April 1, 1978, the issue was taken to be the price of gold on April 22, 1977 when the lower court delivered its judgment. At that date, the rupee still had a par value in terms of gold under the Articles.
Koninklijke Nederlandse Stoomboot Maatschappij B.V. v. State of the Netherlands, Schip en Schade, 1979, No. 29, pp. 76–79.
See Gold, Pamphlet No. 33, p. 82.
See Gold, Pamphlet No. 32, p. 37. See the Invitation to Bid in the Fund’s gold auctions that began in May 1976. Until the Second Amendment became effective, one term provided that “No bid may be submitted by the governmental or monetary authorities of a member of the Fund or by an agent acting on behalf of these authorities at a price inconsistent with the Articles of Agreement of the Fund, but the Bank for International Settlements may submit bids.” (See, for example, IMF Survey, Vol. 5 (May 17, 1976), p. 150.)
P.Y. Nicolas, “La conversion du ‘franc’ des conventions internationales de droit privé maritime,” Droit maritime français 1980, Vol. 32, pp. 579–88, at 581–82.
Droit maritime français 1980, Vol. 32, pp. 285–94.
Article 23 of the Warsaw Convention prohibits terms that tend to relieve the carrier of liability or to reduce the limits laid down in the convention, but not terms that increase the carrier’s liability (Peter Martin, “The Price of Gold and the Warsaw Convention,” Air Law, Vol. 4 (1979), p. 74; Praveen M. Singh, “International Air Charter Transportation in Australia,” Air Law, Vol. 5 (1960), pp. 221,227). Moreover, increased limits expressed in SDRs have been approved, or not objected to, by civil aviation authorities (see, e.g., U.S. Civil Aeronautics Board’s Order 81-3-143, March 24, 1981). Whether or not there is an increase, or the amount of the increase, depends on a determination of how the Poincaré franc must be valued.
Judgment 609/197, November 14, 1978.
See fn. 5 supra.
Gold, Pamphlet No. 22, pp. 52–55; No. 26, pp. 32–35; No. 33, pp. 87–90.
See fn. 22 supra.
La Compagnie d’Aviation “Pakistan International Airlines” v. La Compagnie Air Inter S.A., La Société Transport et Groupages de France, La Société Helvetia Saint Gall, La Société KLM Royal Dutch Airlines, et autres, No. 79/2278.
The Court of Appeal of Paris in Société Egyptair v. Chamie referred to the Jamaica Accord (“accords de la Jamaïque”) as follows:
“Considering that the Jamaica accords, which France signed, eliminated from April 1, 1978 all reference to gold for the determination of the official value of national currencies and, therefore, that of the present French franc;….” (Translation)
There was no signature of the Jamaica Accord by anyone.
IMF Press Release No. 75/22; reproduced in Annual Report, 1975, pp. 99–101.
Translation of: “… interdit la fixation d’une parité or prise comme dénominateur de la monnaie nationale, mais que cette disposition n’a pas pour effet de prohiber tous les règlements nationaux instituant, en dehors des dispositions de change, une relation entre l’or et la monnaie nationale; ….”
Article IV, Section 2(b).
Gold, Pamphlet No. 22, pp. 3–5; No. 26, pp. 51–57; No. 33, pp. 81–83.
According to the defendant’s memorandum of law (p. 42) referred to in fn. 34 infra, the solution according to which the Poincaré franc is deemed to be equivalent to the current French franc was approved by dictum in Kinney Shoe Corporation v. Alitalia Airlines (United States District Court, Southern District of New York, 1980) and adopted by a decision of the same court in Wood v. British West Indian Airways (July 7, 1980). Both cases are unreported.
Rechtspraak van de Week, May 30, 1981, pp. 321–30. In their briefs, both parties and the Attorney General of the Supreme Court made extensive use of the pamphlets cited in fn. 3 supra.
The confusing state of jurisprudence in the Netherlands before the decision is illustrated further by two decisions in early 1979 not discussed in this article. On January 18, 1979, the Roermond Court adopted the market price solution (Schip en Schade, 1979, 45), and on March 9, 1979, the Groningen Court adopted the SDR solution (Schip en Schade, 1979, 90).
The SDR solution was adopted by the Civil Court of Rome for the purposes of the Warsaw Convention in Linee Aeree Italiane v. Riccioli (November 14, 1978; Judgment 609/1979), on the grounds that there was no way in which the equivalence between the Italian lira and the Poincaré franc could be calculated, and that the SDR solution approximated an official value. An earlier decision of the same court (Fida Cinematografica v. Pan American World Airways, October 13, 1976) adopted the market price, but both parlies appear to have accepted it. (Defendant’s memorandum of law in Franklin Mint Corporation et al. v. Trans World Airlines, Inc., United States District Court, Southern District of New York, July 31, 1981, pp. 32–34.)
No mention was made of the Riccioli case in Cosida S.p.A. v. British Airways European Division (Court of Appeals of Milan, June 9, 1981), in which the court refused to reverse a decision of October 3, 1977 based on the average market price of gold in the London and Zurich markets (because there was no free market in Italy). For another case in which the court was willing to apply the market price, see Salvati e Santori v. Alitalia (Court of Appeals of Rome, June 29, 1981).
Session II, 1978/1979, Bill No. 15459.
The second of the Fund’s decisions on central rates (see fn. 1 supra) did not rest on this assumption.
The State had argued that The Breda was wrongly decided because the foundation on which it rested—the international currency arrangement? under the Fund’s decision on central rates—had ceased to exist in 1978. Furthermore. The Breda could be distinguished because it was based on the supposition, which had proved to be unfounded, that the gap in the law would be temporary.
Even so, no more than an approach to uniformity would be achieved because of the spread of “special contracts” increasing the limits on liability under the Warsaw Convention (see fn. 21 supra). Some countries require their national airlines to enter into special contracts, but the amounts are not uniform. These differences, however, do not support the case for either the market price or the SDR solution.
Proposed Second Amendment, Part II, Chapter I, Section 1, p. 43. See also Joseph Gold, “Gold in International Monetary Law: Change, Uncertainty, and Ambiguity,” Journal of International Law and Economics, Vol. 15 (1981), pp. 323–70.
Article V, Section 12(d).
Article V, Section 12(b).
 3 AH E.R. 801.
 3 All E.R. 851.
See fn. 32 supra for some earlier cases.
Franklin Mint Corporation et al. v. Trans World Airlines, Inc., 81 Civ. 1700 (WK); 525 F. Supp. 1288; 16 Av. Cas. 18,024.
Because the benefits of Article VIII, Section 2(b) are available only to members, an effort has been made to impose a similar obligation on nonmembers of the Fund that become contracting parties to the GATT.
Article XV, paragraph 4 of the GATT inspired this effort. The provision declares that contracting parties to the GATT “shall not, by exchange action, frustrate the intent of the provisions of the Articles” of the Fund. Under paragraph 6 of the provision, a nonmember of the Fund must enter into “a special exchange agreement” with the Contracting Parties to the GATT to give effect to the obligation to avoid exchange action that frustrates the intent of the Fund’s Articles. Obligations under a special exchange agreement become part of the obligations imposed by the GATT. The Fund and the Contracting Parties collaborated on the preparation of a model special exchange agreement.1 The model contains the following provision (Article VII, paragraph 3), which obviously is based on Article VIII, Section 2(b) of the Fund’s Articles:
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.
The beneficiaries of this provision are members of the Fund and nonmembers that enter into a special exchange agreement. The provision applies to the exchange control regulations of a member of the Fund that are consistent with the Fund’s Articles or the exchange control regulations of a nonmember that are consistent with its special exchange agreement as a contracting party to the GATT. The obligation under the provision quoted above is undertaken by the signatory of a special exchange agreement. Nothing in the Articles or the GATT or the special exchange agreement binds a member of the Fund to treat exchange contracts as unenforceable because they are contrary to the exchange control regulations of the signatory of a special exchange agreement. The signatory does benefit, however, from the obligations undertaken by the signatories of other special exchange agreements.
Only a few special exchange agreements have been entered into, and none has been in operation since April 1954. It proved to be impractical to expect countries that had decided not to become members of the Fund or that had withdrawn from it to enter into detailed agreements that imposed obligations comparable to those imposed by the Articles. Furthermore, the signatories of special exchange agreements did not receive the rights of membership. For many years, therefore, the Contracting Parties have exercised their authority to grant waivers of obligations under the GATT by exempting nonmembers of the Fund from the obligation to sign a special exchange agreement. Instead, a nonmember that becomes a contracting party signs a Protocol for Accession that deals with its position under the GATT and its relations with the Contracting Parties. A Protocol contains language along the following lines:
… so long as——is not a member of the International Monetary Fund, it will act in exchange matters in accordance with the intent of the General Agreement and in a manner fully consistent with the principles laid down in the text of the [model] special exchange agreement.…
If, on the complaint of a contracting party, the Contracting Parties find that a nonmember has taken exchange action contrary to the intent of the GATT, they may decide that the nonmember shall sign a special exchange agreement.2
It is not known whether courts in nonmember countries have refused to enforce contracts that were contrary to the exchange control regulations of members of the Fund as the result of a special exchange agreement or a Protocol for Accession.3
Although the signatory of a special exchange agreement would not get the benefit of Article VIII, Section 2(b) for its exchange control regulations in the courts of a member, it would receive a different benefit. A member that applied exchange restrictions against the contracting party might be acting in violation of its obligations under the Articles. Article XI declares that nothing in the Articles affects the right of a member to impose restrictions on exchange transactions with nonmembers or with persons in their territories unless the Fund finds that such restrictions prejudice the interests of members and are contrary to the purposes of the Fund. Under the Fund’s Rules and Regulations, if the Fund finds that restrictions imposed by a member on exchange transactions with a nonmember or with persons in its territories are prejudicial to the interests of members and contrary to the purposes of the Fund, the Fund must present a report to the member. The report must set forth the Fund’s views and may request the member to abolish or modify the restrictions.4 Under another Rule,5 the Fund has decided that there would be prejudice to members and inconsistency with the purposes of the Fund if a member were to impose restrictions on exchange transactions with a nonmember that had entered into a special exchange agreement or against persons in its territories. This finding would not apply if the member would be authorized by the Articles, in similar circumstances, to apply restrictions against members and persons in their territories. The Rule also declares that a member may request the Fund to approve in advance restrictions on exchange transactions with a nonmember or persons in its territories.6
These Rules might have an effect on the attitudes of courts to the exchange control regulations of a member that affect a nonmember. Suppose that Patria, a member of the Fund, imposes exchange restrictions against Regio, a nonmember, and that these restrictions are deemed by the Fund to be prejudicial to the interests of members and contrary to the purposes of the Fund. Suppose further that suit is brought in the courts of Terra, a member, to enforce an exchange contract that is contrary to the exchange control regulations of Patria that are directed against Regio. Article VIII, Section 2(b) would not be applied by the courts of Terra because the exchange control regulations would not be maintained or imposed consistently with the Articles.
The foregoing discussion of restrictions against a member and persons in its territories under Article XI and the Fund’s Rules and Regulations applies only to restrictions on exchange transactions. Other exchange restrictions or exchange control regulations would not be affected by the legal provisions that have been discussed.
A nonmember is free to take action to support the exchange controls of other countries for whatever reason it sees fit, which may be the protection of its reputation as a financial center. The Swiss National Bank, for example, has entered into an Agreement on the Prudence Required in Accepting Funds and on the Handling of Bank Confidentiality with almost all domestic banks and quasi-bank finance companies. Among the objectives of the Agreement, which entered into force on July 1, 1977, is the prevention of prohibited acts made possible by an improper use of the confidentiality of banking, the acceptance of funds that banks can recognize as having stemmed from punishable activities, and the aiding and abetting of capital flight or deception practiced on domestic or foreign authorities. An Arbitration Commission is empowered to investigate and punish violators of the Agreement. It has imposed fines for violations, and has turned the proceeds over to the Red Cross. The tribunal’s decisions are subject to appeal to the Zurich Superior Court. The Agreement is in force until June 30, 1982 and can be extended for one further year.7
Abetting capital flight is a violation of the Agreement when three conditions are satisfied:
the bank gives active support to a transaction, especially by organizing meetings with clients abroad for the purpose of accepting funds;
the law of the country in which the client is domiciled restricts the investment of funds abroad; and
a capital transfer out of that country has occurred.
In contrast to Article VIII, Section 2(b), which deals with exchange contracts that are executory (not yet performed or not yet performed in full), the Agreement deals with contracts involving capital flight that have been executed (performed).8
For the text, see GATT, Basic Instruments and Selected Instruments (Geneva, May 1952), Vol. II, pp. 115 et seq., and Gold, Membership and Nonmembership, pp. 536–45.
For a more detailed account of special exchange agreements, see Gold, Membership and Nonmembership, pp. 426–45.
No such decisions were referred to by Ivan Meznerics in his discussion in 1963 of the application of foreign exchange laws of other countries by the courts of socialist states (“Application of Foreign Exchange Laws by Foreign Courts,” Acta Juridica Academiae Scientiarum Hungaricae, Vol. V, Fasc. 1–2 (1963), pp. 74–77). For a sympathetic attitude to the exchange control regulations of other countries, with certain qualifications, under the law apart from Article VIII, Section 2(b), see F.A. Mann, “The Private International Law of Exchange Control in General,” Ch. XII in The Legal Aspect of Money, Third Edition (Oxford, 1971), pp. 399–430.
Rule M-5, By-Laws, Rules and Regulations, Thirty-Seventh Issue (Washington, January 1, 1981), p. 47.
Rule M-6, ibid., pp. 47–48.
Gold, Membership and Nonmernbership, pp. 446–51.
Neue Zürcher Zeitung, November 28, 1980, p. 19. It has been reported that the agreement is to be extended (Journal of Commerce, December 23, 1981, p. 6A). The banks in Liechtenstein have entered into a similar agreement with their Government.
“Kapitaiflucht, Identitatsprufung, Täuschungsmanöver, Herkunft von Geldern (“Capital Flight, Identity Check, Deceptive Practices, Origin of Funds”), Der Schweizer Treuhänder, Vol. 55 (March 1981), pp. 26–28. This article discusses some of the Commission’s cases. See also New York Times, November 28, 1980, pp. D1, 4.
An arbitrator has adopted an interpretation of Article VIII, Section 2(b) that is uniquely in error.1 The award has not been published but has been made available to the author of a book on commercial arbitration who has discussed the effect of the Articles on the award.2 This Appendix is based solely on his discussion of the award.
A dispute arose from a contractual relationship concluded in 1964, under which a Pakistani cement manufacturer, PPCI, undertook to repay a debt owed to the plaintiff, an Indian corporation, by delivering, over a period of years, defined quantities of cement. A separate but related contract was entered into between the plaintiff and the defendant, a Pakistani bank, under which the defendant agreed to pay to the plaintiff 94 Pakistani rupees in respect of each ton of cement not delivered by PPCI under its contract with the plaintiff. Hostilities broke out between the two countries in 1965, and both adopted legislative measures impeding commercial intercourse.
PPCI failed to make the deliveries required for the first three years (1965–67), and the plaintiff invoked the arbitration clause in the guarantee contract. The plaintiff claimed damages in respect of PPCI’s failure to deliver. The defendant relied on various defenses, among which only the one relating to the Articles need be mentioned.
The author of the book referred to above discusses this defense as follows:
The defendant contended that to enforce the guarantee contract would require him to make payment out of Pakistan contrary to Pakistani currency legislation. This would not only violate the public policy of Pakistan, but would also be contrary to Article VIII of the Agreement on the International Monetary Fund which provided that sovereign States would respect the exchange controls of other States. This last contention the arbitrator rejected because only a State could invoke the provisions of an international agreement. The arbitrator stated:
“The Agreement on the International Monetary Fund is an international treaty which is only binding on States. Private persons or legal entities are not admitted to invoke the provisions of a treaty between States. The Defendant cannot rely in the present proceedings on an alleged or intended violation by the State of India of Pakistani Exchange Control Regulations because:
any such intended violation would be directed against the provisions of a treaty between States, provisions which are not directly applicable in regard to either the Defendant or the Claimant.”3
There is no principle that private parties cannot invoke the provisions of a treaty. The question whether rights or obligations have been affected by the provisions of a treaty must not be confused with the question whether one of the contracting parties to the treaty has violated it. If a treaty purports to affect the rights or obligations of private parties and if these effects are automatically, or have been made, binding on the courts, the parties may rely on the provisions of the treaty and the courts must apply them. If a contracting party to the treaty has violated it, the remedy for the violation will have to be sought at the international level. The remedy cannot be pursued by private parties. Nevertheless, they may be able to invoke a violation in proceedings between them. For example, Article VIII, Section 2(b) is intended to affect the rights and obligations of private parties, and members must ensure that the provision is effective. If members fail to take any necessary step for this purpose, other members can complain to the Fund, and the Fund may react to the violation. A plaintiff in judicial proceedings, however, may reply to the defendant’s reliance on Article VIII, Section 2(b) that the member in whose courts the proceedings are brought has failed to give the provision the necessary force of law.
Both India4 and Pakistan5 have adopted measures to give the force of law to Article VIII, Section 2(b). They have done so because the provision is intended to affect the rights and obligations of private parties, and the measures they have taken are necessary under their laws to make the provision effective. The contract that was the subject of the arbitration discussed above seems to have been governed by the law of India.6
A question of interpretation can arise about the intent of a provision. Is it intended to affect the rights and obligations of private parties? Keynes was concerned about a question of interpretation of Article VIII, Section 2(a) that raised this issue.7 His attitude was influenced by the consideration that virtually all rights and obligations under the Articles are between members. There has never been any doubt, however, that Article VIII, Section 2(b) affects the rights and obligations of private parties.
The parties to an arbitration may choose the law that is to govern the arbitrator. If they choose a particular law, does the reference to the chosen law include the international obligations of the chosen legislator? There is authority that the obligations are included in the absence of an express exclusion of them.8 On this proposition, a reference to the law of India as the governing law of a contract that an arbitrator is to apply would require the arbitrator to respect Article VIII, Section 2(b). But the authority referred to would also permit the parties to exclude the provision. The Fund’s interpretation of Article VIII, Section 2(b) declares that members must ensure that their judicial and administrative authorities will apply Article VIII, Section 2(b),9 but the interpretation is not necessarily comprehensive in this respect.
The answer to the question whether an arbitrator can heed an agreement by the parties that Article VIII, Section 2(b) or other international obligations shall not be applied by him as part of the governing law would depend on whether the autonomy of the will of the parties is the exclusive principle for the choice of law by an arbitrator. Among the theories on the legal basis of arbitration is the jurisdictional theory, according to which the power of the state is recognized to control and regulate all arbitrations that take place within its jurisdiction.10
It is possible, moreover, that an arbitrator would refuse to respect the parties’ exclusion of Article VIII, Section 2(b) on the ground that it violated international public policy.11 It is possible also that a court called upon to enforce an arbitral award that had ignored Article VIII, Section 2(b) would refuse enforcement on the ground that its public policy had been flouted.12
International Chamber of Commerce (ICC) Award, No. 1664, Doc. No. 410/2104, March 15, 1972.
Julian D.M. Lew, Applicable Law in International Commercial Arbitration, A Study in Commercial Arbitration Awards (New York and the Netherlands. 1976), pp. 405–409. See also pp. 545–46. Professor David Flint of the Faculty of Law, The New South Wales Institute of Technology, has drawn the author’s attention to the arbitration and Mr. Lew’s book.
Lew, op. cit., p. 409.
Ordinance No, XLVII of 1945 to implement the International Monetary Fund and Bank Agreements, Section 5 and Schedule, Part I, Gazette of India, December 24, 1945.
Act No. XLIII of 1950 to implement the International Monetary Fund and Bank Agreements, Section 5 and Schedule, Part I, Gazette of Pakistan, July 8, 1950.
Lew, op. cit., p. 337.
Gold, Occasional Paper No. 6.
Lew, op. cit., pp. 89–90.
Selected Decisions, Ninth Issue, p. 201.
Lew, op. cit., pp. 52 et seq. See also pp. 111 et seq.
Ibid., p. 104.
Ibid., pp. 561–65.
International Monetary Fund, Annual Report of the Executive Directors for the Fiscal Year EndingJune30, 1947 (Washington, 1947), and Annual Report of the Executive Directors for the Fiscal Year EndedApril30, 1958, 1972, 1974, and 1975 (Washington, 1958, 1972, 1974, and 1975).
International Monetary Fund, Balance of Payments Manual,Third Edition (Washington, 1961) and Fourth Edition (Washington, 1977).
The Fund’s Concepts of Convertibility, IMF Pamphlet Series, No. 14 (Washington, 1971).
Membership and Nonmembership in the International Monetary Fund: A Study in International Law and Organization (Washington, 1974).
The Multilateral System of Payments: Keynes, Convertibility, and the International Monetary Fund’s Articles of Agreement, IMF Occasional Paper No. 6 (Washington, 1981).
The International Monetary Fund and Private Business Transactions, IMF Pamphlet Series, No. 3 (Washington, 1965).
Maintenance of the Gold Value of the Fund’s Assets, IMF Pamphlet Series, No. 6 (Washington, 1965; Second Edition, 1971).
Interpretation by the Fund, IMF Pamphlet Series, No. 11 (Washington, 1968).
Floating Currencies, Gold, and SDRs: Some Recent Legal Developments, IMF Pamphlet Series, No. 19 (Washington, 1976).
Floating Currencies, SDRs, and Gold: Further Legal Developments, IMF Pamphlet Series, No. 22 (Washington, 1977).
SDRs, Gold, and Currencies: Third Survey of New Legal Developments, IMF Pamphlet Series, No. 26 (Washington, 1979).
The Rule of Law in the International Monetary Fund, IMF Pamphlet Series, No. 32 (Washington, 1980).
SDRs, Currencies, and Gold: Fourth Survey of New Legal Developments, IMF Pamphlet Series, No. 33 (Washington, 1980).
SDRs, Currencies, and Gold: Fifth Survey of New Legal Developments, IMF Pamphlet Series, No. 36 (Washington, 1981).
Legal and Institutional Aspects of the International Monetary System: Selected Essays (Washington, 1979).
Voting Majorities in the Fund: Effects of the Second Amendment of the Articles, IMF Pamphlet Series, No. 20 (Washington, 1977).
The International Monetary Fund, 1945–1965: Twenty Years of International Monetary Cooperation (Washington, 1969).
International Monetary Fund, International Financial News Survey,Vol. 23 (1971).
International Monetary Fund, Balance of Payments Concepts and Definitions, IMF Pamphlet Series, No. 10 (Washington, 1968; Second Edition, 1969).
International Monetary Fund, By-Laws, Rules and Regulations,Thirty-Second Issue (Washington, July10, 1974) and Thirty-Seventh Issue (Washington, January1, 1981).
International Monetary Fund, Eighth Annual Report on Exchange Restrictions (Washington, 1957), Eleventh Annual Report on Exchange Restrictions (Washington, 1960), Twelfth Annual Report on Exchange Restrictions (Washington, 1961), Thirteenth Annual Report on Exchange Restrictions (Washington, 1962), and Fifteenth Annual Report on Exchange Restrictions (Washington, 1964).
International Monetary Fund, Selected Decisions of the Executive Directors and Selected Documents,Fifth Issue (Washington, July10, 1971).
International Monetary Fund, Trade and Payments Division (Bahram Nowzad, Chief), The Rise in Protectionism, IMF Pamphlet Series, No. 24 (Washington, 1978).
Moggridge, Donald, (ed)ed., The Collected Writings of John Maynard Keynes, Vol. XXVI: Activities 1941–1946, Shaping the Post-War World, Bretton Woods, and Reparations (Macmillan and Cambridge University Press,for the Royal Economic Society, 1980).
Proceedings and Documents of the United Nations Monetary and Financial Conference, Bretton Woods, New Hampshire,July1–22, 1944, Department of State Publication 2866, International Organization and Conference Series I, 3 (Washington, 1948).
International Monetary Fund, Proposed Second Amendment to the Articles of Agreement of the International Monetary Fund: A Report by the Executive Directors to the Board of Governors (Washington, March1976).
International Monetary Fund, Selected Decisions of the Executive Directors,Second Issue (Washington, September1963).
International Monetary Fund, Selected Decisions of the Executive Directors and Selected Documents,Third Issue (Washington, January1965).
International Monetary Fund, Selected Decisions of the International Monetary Fund and Selected Documents,Sixth Issue (Washington, September30, 1972).
International Monetary Fund, Selected Decisions of the International Monetary Fund and Selected Documents,Seventh Issue (Washington, January1, 1975).
International Monetary Fund, Selected Decisions of the International Monetary Fund and Selected Documents,Eighth Issue (Washington, May10, 1976).
International Monetary Fund, Selected Decisions of the International Monetary Fund and Selected Documents,Ninth Issue (Washington, June15, 1981).
International Monetary Fund, Summary Proceedings of the Sixth Annual Meeting of the Board of Governors,September1951 (Washington, 1951), Summary Proceedings of the Twenty-Sixth Annual Meeting of the Board of Governors,September27–October1, 1971 (Washington, 1971), and Summary Proceedings of the Thirty-Fifth Annual Meeting of the Board of Governors,September30–October3, 1980 (Washington, 1980).
Index A. Provisions of Articles of Agreement Cited
|I||3, 49, 89, 217, 414|
|I(iii)||26, 34, 166, 314, 323, 324|
|IV||1||181, 237, 315, 322, 367|
|IV||3||33, 36, 38, 100, 167, 174, 213, 216, 241, 311, 389, 429, 430|
|IV||4||33, 216, 311, 389|
|IV||4(a)||26, 103, 168, 236, 250, 324, 429|
|IV||4(b)||38, 100, 167, 174, 175, 232, 237, 241, 430|
|IV||5||165, 233, 237, 429|
|IV||6||239, 253, 310, 323|
|IV||8||129, 175, 234, 239, 323, 324, 325–26, 327, 328|
|IV||8(b)||166, 168, 324|
|VI||1||147, 208, 268|
|VI||3||80, 84, 85–86, 87, 89, 93, 125, 135–36, 208, 209–10, 212, 224, 268, 301, 413, 414, 418–19, 421, 427|
|VII||3(b)||136, 142, 147, 209, 268, 366, 419|
|VIII||11, 45, 289, 301, 462|
|VIII||2||14, 45, 52, 79, 80, 130, 137, 191, 207, 208, 409|
|VIII||2(a)||13, 45, 79, 80, 85, 125, 126, 129, 137, 142, 147, 148, 191, 194, 195, 205, 206, 207, 208, 212, 213, 215, 216, 217, 276, 296, 357, 366, 368, 369, 409, 411, 413, 415, 416, 417, 419, 420, 421, 423, 426, 463|
|VIII||2(b)||2, 3–4, 7, 9, 10–11, 13, 14, 16–17, 18–19, 20, 22–23, 25–30, 43, 45, 49–50, 53–55, 57, 59, 61–78, 79, 81, 85, 87, 88, 89–92, 93–94, 95, 104, 108–109, 110–13, 115–16, 118, 120, 122, 125, 126–27, 131, 133, 138–41, 142, 143, 144–45, 147, 148–60, 189–90, 191, 192–93, 195–99, 202–203, 204, 205, 208, 209, 210–11, 212, 213, 214, 215, 216, 217, 218–23, 225–26, 228–29, 257–66, 267, 269–74, 275, 276, 277, 279–83, 284, 292, 294, 295–98, 300, 302, 331–34, 336–40, 342–49, 352–56, 357, 358–59, 371, 373–74, 376–80, 382, 386–87, 389, 392–95, 399, 400–404, 406–408, 409, 410, 411–12, 413, 415, 417, 418, 421, 422, 423, 424–25, 426, 427, 458, 459, 460, 461, 462, 463, 464|
|VIII||3||36, 45, 52, 79–80, 130, 137, 174, 191, 207, 267, 268, 327, 392, 409, 413, 414, 418, 449|
|VIII||4||45, 52, 79–80, 130, 137, 191, 207, 409|
|XIV||2||45, 85–86, 94, 126, 130, 136, 142, 147, 207, 208, 209, 224, 225, 268, 366, 419|
|XIV||3||45, 52, 206|
|XVIII||94, 110, 143, 203|
|XIX(i)||80, 81, 86, 137, 205, 212, 215, 275, 420|
|I||3, 217, 414|
|IV||3||167, 174, 213, 216, 241, 389|
|IV||4(a)||168, 236, 250|
|IV||4(b)||167, 174, 175, 232, 237, 241|
|IV||8||175, 234, 239|
|VI||1||147, 208, 268|
|VI||3||135–36, 208, 209–10, 212, 224, 268, 301, 413, 414, 418–19, 421, 427|
|VII||3(b)||136, 142, 147, 209, 268, 366, 419|
|VIII||289, 301, 462|
|VIII||2||137, 207, 208|
|VIII||2(a)||137, 142, 147, 148, 195, 205, 206, 207, 208, 212, 213, 215, 216, 217, 276, 296, 357, 368, 369, 409, 411, 413, 415, 416, 417, 419, 420, 421, 423, 426|
|VIII||2(b)||2, 3–4, 7, 131, 133, 138–41, 142, 143, 144–45, 147, 148–53, 189, 195–96, 198–99, 202–203, 204, 205, 208, 209, 210–11, 212, 213, 214, 215, 216, 217, 218–23, 225–26, 228–29, 257–66, 267, 269–74, 275, 276, 277, 279–83, 284, 292, 294, 295–98, 300, 302, 331–34, 336–40, 342, 344–49, 352–56, 357, 359, 360, 371, 373–74, 376–80, 382, 386–87, 389, 392–95, 399–404, 406–408, 409, 410, 411–12, 413, 415, 418, 421, 422, 423, 424–25, 426, 427, 458, 459, 460, 461, 462, 463, 464|
|VIII||3||137, 174, 207, 267, 268, 392, 413, 414, 418, 449|
|XIV||2||136, 142, 147, 207, 208, 209, 224, 225, 268, 366, 419|
|XVIII||143, 203, 289|
|XIX(i)||137, 205, 212, 215, 275|
|IV||2(b)||251, 391, 440, 450|
|VI||3||268, 301, 413, 414, 418–19, 421, 427|
|VII||3(b)||268, 366, 419|
|VIII||289, 301, 462|
|VIII||2(a)||276, 296, 357, 368, 369, 409, 411, 413, 415, 416, 417, 419, 420, 421, 423, 426|
|VIII||2(b)||2, 3–4, 7, 257–58, 261–64, 267, 269–71, 276, 277, 279–83, 284, 292, 294–98, 300, 302, 331–34, 336, 338–40, 342, 344–49, 352–56, 357, 359, 360, 371, 373–74, 376–80, 382, 386–87, 389, 392–95, 399–404, 406–408, 409, 410, 411–12, 413, 415, 418, 421, 422, 423, 424–25, 426, 427, 438, 458, 460, 461, 462, 463, 464|
|VIII||3||255, 267, 268, 392, 413, 414, 418, 449|
|XIV||2||268, 269, 414, 419|
|XXIX||7, 289, 291|
|C||249, 251–52, 254–56|
|C||6||252, 255, 288|
|C||7||252, 253, 255, 290|
|C||8||254, 255, 290|
Index B. Rules and Regulations Cited
Index C. Decisions of Executive Board Cited
|December 11, 1947||233-2||103|
|April 14, 1948||298-3||390|
|June 10, 1949||446-4||44, 66, 94, 110, 118, 126, 190, 258, 279, 358, 464|
|September 28, 1951||75-(705)||103|
|August 14, 1952||144-(52/51)||79, 125, 147, 296, 361, 363, 365, 366, 367, 368, 369, 376, 411, 413, 415, 416, 417, 418, 423, 426|
|May 4, 1953||201-(53/29)||212|
|June 22, 1955||433-(55/42)||212|
|July 25, 1956||541-(56/39)||268, 414|
|June 26, 1957||649-(57/33)||37, 102, 130, 207|
|July 24, 1959||904-(59/32)||175|
|October 23, 1959||955-(59/45)||212|
|June 1, 1960||1034-(60/27)||14, 79, 130, 191, 208, 212, 269, 340, 409|
|October 26, 1970||3153-(70/95)||212|
|August 20, 1971||3399-(71/90)||167|
|December 18, 1971||3463-(7l/l26)||169, 185, 235, 250, 303, 304, 305, 439, 45;|
|January 4, 1972||3537-(72/3) G/S||177, 235|
|May 8, 1972||3637-(72/41) G/S||186, 235|
|February 16, 1973||3865-(73/12) G/S||235|
|November 5, 1973||4078-(73/102) S||235|
|November 7, 1973||4083-(73/104)||185, 235, 250|
|February 1, 1974||4145-(74/6) S||235|
|June 13, 1974||4233-(74/67) S||235|
|June 13, 1974||4234-(74/67) S||235|
|July 1, 1974||4261-(74/68) S||235|
Index D. Table of Cases Cited
Florencia Cia Argentina de Seguros S.A. v. Varig S.A. National Court of Appeals, Buenos Aires, August 27, 1976  Uniform Law Review, 198 441, 448
Catz and Lips v. S.A. Union Versicherung Jurisprudence du Port d’Anvers, Vols. 7–8 (1949), 321 84
Ceulemans v. Jahn and Barbier Jurisprudence commerciale de Belgique, 1968, n. 11–12, Pt. IV, 765;
Pasicrisie Belge, 1969, Pt. III, 22 226, 229, 272
Cobrazil, Cia. de Mineraçao de Metalurgia Brazil (Brazil Metallurgy Mining Co.) Contribuinte Fiscal, Vol. 7, No. 82, Rio de Janeiro, October 5, 1963, 346 35
Companhia de Seguros Maritimos v. Varig Federal Court of Appeals, June 3, 1975, Civil Appeal No. 35, 737-Guanabara 441
Colmenares v. Imperial Life Assurance Co. of Canada (1965) 51 D.L.R. (2d) 122;
(1966) 54 D.L.R. (2d) 386 43
Miller v. American Airlines Inc. County Court of Judicial District of York, Toronto, Ontario, October 4, 1977 441
Télé-Montage Inc. v. Air Canada (1976) C.S. Recueils de Jurisprudence du Québec, 228 441
Ahmed Bey Naguib v. Heirs of Moise Abner Journal des Tribunaux Mixtes, No. 4003, Nov. 24/25, 1948, 2 58, 65
Batra v. Ebrahim (see Sing Batra v. Ebrahim, infra)
Cebora S.N.C. v. S.I.P. (Industrial Products) Ltd.  1 Lloyd’s Rep. 271 (C.A.) 221, 222
Foster v. Driscoll  1 K.B. 470 (C.A.) 229
Fothergill v. Monarch Airlines Ltd.  2 All E.R. 696 5, 6
Frankman v. Anglo-Prague Credit Bank  1 All E.R. 337;
 2 All E.R. 1025 58
Government of India v. Taylor  1 All E.R. 292 24
Re Helbert Wagg & Co., Ltd.  1 All E.R. 129 15, 147
Holman v. Johnson 1 Cowp. 341;
 98 E.R. 1120 24
Ironmonger and Co. v. Dyne 44 T.L.R. 497 (1928) 211
James Buchanan & Co. Ltd. v. Babco Forwarding and Shipping (U.K.) Ltd.  3 All E.R. 1048;
 A.C. 141 6, 263
Kahler v. Midland Bank, Ltd.  1 All E.R. 811;
 2 All E.R. 621 110, 138, 228
Lively Ltd. and Another v. City of Munich  3 All E.R. 851 236, 241–42, 247, 248–49, 317, 325, 456
Re Lord Cable (deceased)  3 All E.R. 417 200, 230
Miliangos v. George Frank (Textiles) Ltd.  3 All E.R. 801 210, 222, 228, 262, 456
Power Curber International Ltd. v. National Bank of Kuwait S.A.K.  1 W.L.R. 1233 386
Regazzoni v. K.C. Sethia, Ltd.  3 All E.R. 286 200, 228, 229, 344
Regina v. Governor of Pentonville Prison, ex parte Khubchandani The Times (London), February 15, 1980, p. 25 297
Sharif v. Azad  1 Q.B. 605;
 3 W.L.R. 1285;
 3 All E.R. 785, C.A. 107, 145–47, 158, 210–11, 220, 222, 261, 302, 303, 335–36, 342–47
Sing Batra v. Ebrahim The Times (London), May 3, 1977, p. 11;
Halsbury’s Laws of England: Annual Abridgment, 1977 (London, 1978), 453, paragraph 1906 258, 262, 264, 335–36, 344, 346, 349, 352
Trendex Trading Corporation v. Central Bank of Nigeria  3 All E.R. 437;
The Times (London), January 18, 1977, p. 11 197
United City Merchants (Investments) Ltd. and Glass Fibres and Equipments Ltd. v. Royal Bank of Canada, Vitrorefuerzos S.A., and Banco Continental S.A. (“The American Accord”)  1 Lloyd’s Rep. 267 299, 331–32
United City Merchants (Investments) Ltd. and Glass Fibres and Equipments Ltd. v. Royal Bank of Canada and Others (No. 2)  2 Lloyd’s Rep. 498;
 3 W.L.R. 242 332, 399
United Railways of Havana and Regla Warehouses, Ltd., In re  2 All E.R. 322;
 A.C. 1007 210, 262
Wilson, Smithett & Cope Ltd. v. Terruzzi  1 All E.R. 817;
 1 Q.B. 683;
 1 Q.B. 703 (C.A.) 111, 202, 211, 216, 218, 220, 222, 261–64, 267, 275, 277, 291, 302, 333–34, 339, 340, 349, 350, 407, 408, 422, 438
Zivnostenska Banka National Corporation v. Frankman  2 All E.R. 671 58, 65, 138
Achour v. Perrot and Bouderghouma Journal du Droit International, Vol. 105 (1978), 99 265
Basso v. Janda Recueil Dalloz Sirey, July 3, 1968, Jurisprudence, 445 142, 153, 155, 226
Cassan v. Koninklijke Nederlandsche Petroleum Maatschappij International Law Reports, ed. by E. Lauterpacht, Vol. 47 (London, 1974), 58 225
Central Bank of the Iranian State, Bank Markazi Iran v. Citibank Paris Revue critique de droit international privé, Vol. 69 (1980), 382 370
Citibank Paris v. Central Bank of the Iranian State, Bank Markazi Iran Gazette du Palais, March 12–13, 1980, 8;
Journal du Droit International, Vol. 107 (1980), 330 371
Constant v. Lanata Revue critique de droit international privé, Vol. 59, No. 3 (1970), 464 155, 265, 266, 270, 272
Daiei Motion Picture Co. Ltd. v. Zavicha La Semaine Juridique, No. 21, May 26, 1971, II Jurisprudence, 16751;
Judgment of March 16, 1974 of the Paris Court of Appeal, Fourth Chamber/B and Judgment of May 19, 1976 of the Court of Cassation, First Civil Chamber 190, 191, 197, 208, 222, 281
French Constitutional Council, Judgment of April 29, 1978 Journal Officiel, April 30, 1978, 1942 284
Le Havre, Judgment of Commercial Court, August 24, 1978 Droit maritime français (1980), 579 446
Moojen v. Von Reichert Journal du Droit International, Vol. 85 (1958), 1050;
Revue critique de droit international privé, Vol. 51 (1962), 67 65, 77
Pakistan International Airlines v. Compagnie Air Inter S.A. et al. Judgment No. 79/2278 of Court of Appeals, Aix-en-Provence, October 31, 1980 449
Plichon v. Société Koninklijke Nederlandsche Petroleum Maatschappij International Law Reports, ed. by. E. Lauterpacht, Vol. 47 (London, 1974), 67 225
Société Egyptair v. Chamie Droit maritime français (1980), 285 446, 448–51
Statni Banka and Banque d’Etat Tchécoslovaque v. Englander International Law Reports, ed. by E. Lauterpacht, Vol. 47 (London, 1974), 157 197, 223, 275
Zavicha Blagojevic v. Banque du Japon Revue critique de droit international privé, Vol. 66, No. 2 (April/June 1977), 359 281
Germany, Federal Republic of
Federal Supreme Court, Judgment of December 17, 1959 Neue Juristische Wochenschrift, Vol. 13 (June 10, 1960), 1101 294
Federal Supreme Court, Judgment of April 9, 1962 Wertpapier-Mitteilungen, No. 21 (May 26, 1962), 601 18, 294
Federal Supreme Court, Judgment of May 21, 1964 VII ZR 23/64, Aussenwirtschaftsdienst des Betriebs-Beraters: Recht der Internationalen Wirtschaft, No. 7 (July 1964), 228 158–59, 266
Federal Supreme Court, Judgment of March 11, 1970 BGH, Urt. v. 11.3. 1970-VIII ZR 147/68 (Düsseldorf), Neue Juristische Wochenschrift, Vol. 23 (May 27, 1970), 1002 151, 294
Federal Supreme Court, Judgment of April 27, 1970 BGH, Urt. v. 27.4. 1970—II ZR 12/69 (Oldenburg), Neue Juristische Wochenschrift, Vol. 23 (August 20, 1970), 1507 139, 149, 262, 294, 337
Federal Supreme Court, Judgment of February 17, 1971 BGH, Urt. v. 17.2. 1971—VIII ZR 84/69 (Frankfurt), Neue Juristische Wochenschrift, Vol. 24 (June 1, 1971), 983;
Wertpapier-Mitteilungen, No. 14 (April 3, 1971), 411 149, 276, 294
Federal Supreme Court, Judgment of December 21, 1976 III ZR 83/74, WM: Zeitschrift für Wirtschafts und Bankrecht, Jahrg. 31, No. 12 (March 19, 1977), 332 272, 294
Federal Supreme Court, Judgment of March 8, 1979 VII ZR 48/78, Cologne 294, 422
Hamburg Court of Appeals (Oberlandesgericht), Judgment of July 7, 1959 Entscheidungen zum Interzonalen Privatrecht, 1958–59, No. 135A 9, 18
Lessinger v. Mirau Jahrbuch für Internationales Recht, Vol. 5, Part I (1955), 113 90, 145, 159
Loeffler-Behrens v. Beermann Karlsruhe Regional Court of Appeals (Oberlandesgericht), December 15, 1965 116, 261
Matter of the Khendrik Kuivas Hamburg District Court, Div. 64, Ref. No. 64 SRV 6/76 242, 443, 456
Transarctic Shipping Corporation, Inc. Monrovia, Liberia v. Krögerwerft (Kröger Shipyard) Company European Transport Law, Vol. 9 (1974), 701 228, 242, 442
Zakoupolos v. Olympic Airways Corp. Judgment No. 256/1974 of Court of Appeals, Athens, February 15, 1974 440
White v. Roberts 33 Hong Kong Law Reports (1949), 231 90, 159, 356
Kuwait Airways Corporation v. Sanghi Regular Appeal No. 54/77, Court of Principal Civil Judge, Bangalore, August 11, 1978 444
Balkan Bulgarian Airlines v. Tammaro Judgment of October 25, 1976, Milan II Diritto Marittimo (1978), 83 440
Cosida S.p.A. v. British Airways European Division Court of Appeals of Milan, June 9, 1981 451
Fida Cinematografica v. Pan American World Airways Civil Court of Rome, October 13, 1976 451
Linee Aeree Italiane v. Riccioli Civil Court of Rome, Judgment 69/197, November 14, 1978 448, 449, 451
Salvati e Santori v. Alitalia Court of Appeals of Rome, June 29, 1981 451
Tomita v. Inoue Saiko Saibansho Hanrei-Shu (Supreme Court Reporter), Vol. 19, Pt. 2 (1965), 2306 193–94
Avandero N.V. v. Westeuropese Transportmaatschappij Wetram N.V. Judgment of May 12, 1978, Schip en Schade, Vol. 23, No. 5 (May 1979), 162 444
Frantzmann v. Ponijen Nederlandse Jurisprudentie (1960), No. 290 90
Giants Shipping Corporation v. State of the Netherlands (“The Blue Hawk”) Rechtspraak van de Week (May 30, 1980), 321 451, 453, 456
Hornlinie v. Société Nationale des Pétroles d’Aquitaine (“The Hornland”) Nederlandse Jurisprudentie (1972), No. 269, 728 177, 182, 184, 188, 228, 242, 441, 442, 444, 446, 448, 451–52
Indonesian Corporation P.T. Escomptobank v. N.V. Assurantie Maatschappij de Nederlanden van 1845 Nederlands Tijdschrift voor Internationaal Recht (Netherlands International Law Review), Vol. XIII, No. 1 (1966), 58 120
Kharagjtsingh v. Sewrajsingh Revue critique de droit international privé, Vol. 69 (January–March 1980), 68 353–54
Kjellberg Elektroden and Maschinen G.m.b.H. v. N.V. Nederlandse Kjellberg Elektroden Fabrick NEKEF Nederlands Tijdschrift voor Internationaal Recht, Vol. XIII, No. 2 (1966), 203 124
Koninklijke Nederlandse Stoomboot Maatschappij B.V. v. State of the Netherlands (“The Breda”) Schip en Schade (1979), No. 29, 76 444, 451, 453–54
Bacolod Murcia Milling Co., Inc. v. Central Bank of the Philippines Judgment No. L-12610, summarized in Complete Monthly Digest of Supreme Court Decisions, Quezon City, No. 10, October 1963, 364;
Official Gazette, Republic of the Philippines, Vol. 60, No. 36 (September 7, 1964) 31, 127, 128
Chamber of Agriculture and Natural Resources of the Philippines, et al. v. Central Bank of the Philippines 128
People v. Tan L-9275, June 30, 1960 129
Re Motor Ship “Saga” Judgment of the General Average Assessor, Götenborg, October 2, 1973 440
Aguirregaviria Zabaleta v. Pan American Life Insurance Co. 221 F. Supp. 219 (1963) 50, 51, 65, 76
Banco do Brasil, S.A. v. A.C. Israel Commodity Co., Inc. 216 N.Y.S. 2d 669 (1961);
12 N.Y. 2d 371, 190 N.E. 2d 235, 239 N.Y.S. 2d 872 (1963);
376 U.S. 906, 84 S. Ct. 657 (1964) 12, 22, 27, 70, 197, 198, 199–202, 211, 218, 220, 229, 280, 422
Banco Frances e Brasileiro S.A. v. Doe 36 N.Y. 2d 592, 331 N.E. 2d 502, 370 N.Y.S. 2d 534 (1975) 197–98, 218, 222, 229
Banco Nacional de Cuba v. Sabbatino 376 U.S. 398, 84 S. Ct. 923 (1964) 58, 126–27, 132–34, 138
Catlin v. United States 65 S. Ct. 631, 324 U.S. 229 (1945) 41
Cermak et al. v. Bata Akciova Spolecnost 80 N.Y.S. 2d 782 (1948) 58, 65, 142
Chase Manhattan Bank, N.A. v. The State of Iran, et al. Iranian Assets Litigation Reporter, February 22, 1980, 194 387, 392
City of Philadelphia v. Cohen 11 N.Y. 2d 401, 230 N.Y.S. 2d 188, 184 N.E. 2d 167 (1962) 24–25
Confederation Life Association v. Brandao 173 So. 2d 515 (1964) 75
Confederation Life Association v. Ugalde 151 So. 2d 315 (1963);
163 So. 2d 343 (1964);
164 So. 2d 1 (1964);
379 U.S. 915, 85 S. Ct. 263 (1964) 59, 61, 72, 75–76, 77, 78, 81, 84, 87, 92, 154–55
Confederation Life Association v. Vega y Arminan 207 So. 2d 33 (1968);
211 So. 2d 169 (1968);
393 U.S. 980 (1968) 154
Crown Life Insurance Co. v. Calvo 151 So. 2d 687 (1963);
163 So. 2d 345 (1964);
164 So. 2d 813 (1964) 75
de Sayve v. de la Valdene 124 N.Y.S. 2d 143 (1953) 79, 119
Energetic Worsted Corporation v. The United States Customs Appeal No. 5160 (April 7, 1966);
224 F. Supp. 606 (1963) 104
Federal Maritime Commission v. Australia/U.S. Atlantic & Gulf Conference et al. 337 F. Supp. 1032 (1972), Federal Maritime Commission, Docket No. 72–5, January 28, 1972 161, 162, 323
Federal Trade Commission v. Compagnie de Saint-Gobain-Pont-à-Mousson 636 F. 2d 1300 (1980) 376
Franklin Mint Corporation et al. v. Trans World Airlines, Inc. No. 81 Civ. 1700 (WK), United States District Court, Southern District of New York, 525 F. Supp. 1288;
16 Av. Cas. 18,024, November 6, 1981 451, 457
French v. Banco Nacional de Cuba 295 N.Y.S. 2d 433, 23 N.Y. 2d 46 (1968) 131, 155, 220, 226, 229
Irving Trust Company v. Mamidakis (New York) 78 Civ. 0265-CLB, October 18, 1978, U.S. District Court, Southern District of New York 277
John Loughran v. United States 317 F. 2d 896 (1963), U.S. District Court for D.C., Docket No. 29–62 (1963) 40, 42
Kelley v. Société Anonyme Belge d’Exploitation de la Navigation Aérienne 242 F. Supp. 129 (1965) 179
Kinney Shoe Corporation v. Alitalia Airlines (New York) U.S. District Court, Southern District of New York, 1980 450
Kolovrat v. Oregon 81 S. Ct. 922, 366 U.S. 187 (1961) 27–30, 56, 200, 222
Koninklijke Luchtvaart Maatschappij N.V. KLM v. Tuller 292 F. 2d 775 (1961) 179
Kraus v. Zivnostenska Banka 64 N.Y.S. 2d 208, 187 Misc. 681 (1946) 58, 65, 138
Lorido y Diego v. American National Insurance Co. 221 F. Supp. 219 (1963) 50, 51, 65
In the Matter of Heddy Brecher-Wolff Title Claim No. 41668, Docket No. 1698 (1955), U.S. Dept. of Justice, Office of Alien Property 138
Menendez v. Aetna Insurance Co. 311 F. 2d 437 (1962) 56, 58
Menendez v. Saks and Company 485 F. 2d 1355 (1973) 217
Menendez Rodriguez v. Pan American Life Insurance Co. 311 F. 2d 429 (1962);
376 U.S. 799, 84 S. Ct. 1130 (1964) 53, 56, 58
Pan American Life Insurance Co. v. Blanco 311 F. 2d 424 (1962);
221 F. Supp. 219 (1963);
362 F. 2d 167 (1966) 48–50, 51, 54, 57, 65, 68, 72, 73, 76, 78, 80, 88, 89, 92, 155
Pan American Life Insurance Co. v. Conill 221 F. Supp. 219 (1963) 50, 51, 65
Pan American Life Insurance Co. v. Lorido 19 Fla. Supp. 167, 154 So. 2d 200 (1963);
155 So. 2d 695 (1963);
379 U.S. 871, 85 S. Ct. 15 (1964) 87
Pan American Life Insurance Co. v, Raij 156 So. 2d 785 (1963);
164 So. 2d 204 (1964);
379 U.S. 920, 85 S. Ct. 275 (1964) 58, 68, 69, 72, 76
Pan American Life Insurance Co. v. Recio 154 So. 2d 197 (1963) 58
Penn Mutual Life Insurance Co. v. Lederer 252 U.S. 523, 40 S. Ct. 397 (1920) 83
Perutz v. Bohemian Discount Bank in Liquidation 110 N.Y.S. 2d 446 (1952);
304 N.Y. 533, 110 N.E. 2d 6 (1953) 24, 25, 29–30, 138, 200, 223
Pierre v. Eastern Air Lines 152 F. Supp. 486 (1957) 179
Reed v. Wiser 555 F. 2d 1079 (2d Cir.), cert. den. 434 U.S. 922 (1977) 440–41
Southwestern Shipping Corporation v. National City Bank of New York 173 N.Y.S. 2d 509 (1958);
178 N.Y.S. 2d 1019 (1958);
190 N.Y.S. 2d 352 (1959);
361 U.S. 895, 80 S. Ct. 198 (1959) 91, 115, 116, 158, 266, 342, 343
Stephen v. Zivnostenska Banka National Corporation 31 Misc. 2d 45, 140 N.Y.S. 2d 323 (1955) 64, 65, 87, 88, 142, 226
Sun Life Assurance Co. of Canada v. Klawans 162 So. 2d 704 (1963);
165 So. 2d 166 (1964) 75
Theye y Ajuria v. Pan American Life Insurance Co. 154 So. 2d 450 (1963);
161 So. 2d 70 (1964);
377 U.S. 997, 84 S. Ct. 1922 (1964) 43, 54, 63, 65, 68, 69, 72, 204
Trujillo v. Sun Life Assurance Co. of Canada 166 So. 2d 473 (1964) 75
U.S.A. v. All of Square 59 U.S. District Court for D.C., Docket No. 4–61 (1961) 40
Varas v. Crown Life Insurance Co. 83 Montg. Co. L.R. 71 (1963);
204 Pa. Super. 176;
203 A. 2d 505 (1964);
382 U.S. 827, 86 S. Ct. 62 (1965) 59, 76, 87, 90–91, 115, 158, 159, 266
Vento Jaime v. Pan American Life Insurance Co. 311 F. 2d 429 (1962);
376 U.S. 779, 84 S. Ct. 1130 (1964) 53
Wood v. British West Indian Airways (New York) July 7, 1980, U.S. District Court, Southern District of New York 450
J. Zeevi and Sons, Ltd., et al. v. Grindlays Bank (Uganda) Limited 37 N.Y. 2d 220, 333 N.E. 2d 168, 371 N.Y.S. 2d 892 (1975) 219, 222, 266, 272, 277–80, 337, 339, 422
Adriática Venezolana de Seguros S.A. v. The First National City Bank of New York Revista de la Facultad de Derecho (Caracas), Vol. 21 (1961), 287 96
Arbitral Tribunal for the Agreement on German External Debts
The Government of the Kingdom of Belgium, the Government of the French Republic, the Swiss Federal Council, the Government of the United Kingdom of Great Britain and Northern Ireland, the Government of the United States of America, Applicants v. the Government of the Federal Republic of Germany, Respondent International Legal Materials, Vol. 19 (November 1980), 1357;
Revue Générale de Droit International Public, Vol. 84 (1980), 1157;
Annuaire Français de Droit International, Vol. XXVI (1980), 250;
German Yearbook of International Law, Vol. 23 (1980), 401 and 414 306
European Communities, Court of Justice of
Cöoperatieve vereniging “Suiker Unie” UA and Others v. Commission of the European Communities Joined Cases 40 to 48, 50, 54 to 56, 111, 113 and 114/73  E.C.R. 2026 244
Director of Public Prosecutions v. Henn  2 C.M.L.R. 229 6
Fabrizio Gillet v. Commission of the European Communities Case 28/74  E.C.R. 463 242
Fratelli Zerbone S.N.C. v. Amministrazione delle Finanze dello Stato Case 94/77  E.C.R. 99 303
Gesellschaft für Getreidehandel AG v. Einfuhr- und Vorratsstelle für Getreide und Futtermittel Common Market Law Reports, Vol. 13 (February 1974), 186;
Recueil de la Jurisprudence de la Cour, Vol. 18 (No. 7, 1972), 1071 171
Société anonyme générale Sucrière v. Commission of the European Communities Joined Cases 41, 43, and 44/73  E.C.R. 445 243, 248
International Chamber of Commerce
International Chamber of Commerce Award, No. 1664, Doc. No. 410/2104, March 15, 1972 462
Permanent Court of International Justice
Case Concerning the Payment of Various Serbian Loans Issued in France (“Serbian Loans Case”)  P.C.I.J., Series A, Nos. 20/21, 5 391
Index E. Authors
References to the author’s works have not been included in this Index. A number of his works that have been referred to have been listed in the Selected Bibliography.
Allison, Richard C. 47
Asser, T.M.C. 188
Aufricht, Hans 37
Baker, Keith L. 277
Baker, R.K. 31
Battifol, Henri 281
Beadles, W.T. 82
Beglin, Brian D. 258
Biermann, Dirk T. 338
Campbell, Alan 171, 173, 174
Camps, Miriam 221
Carnahan, C.W. 74
Carreau, Dominique 288, 289
Carswell, Robert 365, 376, 383, 398
Corbin, Arthur Linton 260
Cutler, Lloyd N. 384
Day, William H.L. 251
de Pardieu, C.H. 394, 411
de Vries, Margaret G. 366
Doi, Teruo 194
Driscoll, Richard J. 338
Durry, Georges 192, 193
Eady, Sir Wilfrid 431
Eck, Jean-Pierre 192, 196, 218
Edwards, Richard W., Jr. 381, 382, 394, 403, 404–408, 410–11, 413–14, 417–18
Fearon, Richard 380
Feinberg, Kenneth R. 377
Feldman, Mark B. 383–84
Flowe, Benjamin H., Jr. 377
Gavalda, M. Christan 386, 418–19, 421
Getz, Herbert A. 338
GIanviti, François 193, 195, 306, 369, 375–76, 386, 393, 395, 396, 397–403, 408–10
Gordon, Edward 382
Greider, J.E. 82
Haberler, Gottfried 166
HamON, LéO 285, 290, 293
HEINinGER, Patrick 391
Heller, Paul P. 182, 441
Hoffman, John E., Jr. 372, 374, 382, 383
Horsefield, J. Keith 166, 366
Jackson, John H. 417
Jacmettt, Marco A. 395, 396–97, 398
Jones, David Lloyd 377
Juillard, Patrick 193
Kahn, Ph. 197
Keynes, John Maynard 2, 3, 429, 431, 432, 433, 438
Lafferty, Michael 391
Lauterpacht, E. 223, 275
Lew, Julian D.M. 462, 463, 464
Lissakers, Karin 364, 365, 380
Lowe, A.V. 377
Lowenfeld, Andreas F. 258, 377, 383, 392
Malaurie, Philippe 194
Mann, F.A. 71, 78, 375, 379, 384, 385, 437, 459
Martin, Peter 447
Mayer, Pierre 271
Mendelsohn, Allan I. 182
Meng, Werner 377
Meyer, Bernards. 82
Meznerics, Iván 459
Mocgridge, Donald 2
Moller, Marc S. 441
Nicolas, P.Y. 446
Nowzad, Bahram 4
Nussbaum, Arthur 78, 96, 100, 106, 409
Paradise, Richard R. 44, 84, 126
Pohn, G.W. 31
Pritchard, John F. 380
Robertson, Dennis 431
Roessler, Frieder 242
Rooij, René van 354
Rosenthal, Douglas E. 377
Royer, S. 184
Ruzié, David 289
Santana, Eloy Ruiloba 263
Schmitz, Wolfgang 166
Schneider, Hannes 386, 387, 421, 422
Seidl-Hohenveldern, Ignaz 307
Simon, Natalie A. 412, 413, 415
Singh, Nagendra 178
Singh, Praveen M. 447
Sommerfield, Stanley 380, 381, 384
Steele, Robert D. 380, 408, 411
Swidrowski, Jozef 412
Symons, Edward L., Jr, 338
Tobolewsri, Aleksander 441
Treves, T. 440
Trickey, F. David 30
Unger, J. 74
Wallace, Rebecca M.M. 243
Wallace, Henry C. 400
Westrick, Klaus 386, 411
Wilford, D. Sykes 402
Williams, John S. 220
Index F. Subjects
References in this index are to the first page only of a discussion that extends through several pages.
Act of State, 3, 43, 53, 121, 123, 126, 131, 229
Acts Abroad, Illegal, 226, 229, 272, 375
Appreciation, 165, 304, 312, 322
Arbitration, 236, 306, 462
Argentina, 441, 448
Articles of Agreement of Fund
Amendment of: domestic steps for acceptance of, 285, 292;
national sovereignty and, 287, 293;
unanimity in, 293
And bilateral treaties, 122, 156, 267
And private international law, 3
And private parties, 3, 462–64
Article VIII, Section 2(b):and private international law, 346;
legislative history, 429
As constituting international monetary system, 316, 325, 328
As declaratory of public international law, 136
Authoritative interpretation by Fund, 4, 5, 110, 143;
request for, 7;
rescission or modification of, 8
Binding force of amendment of, 286
Exchange rates under, 33, 36
Informal interpretation by Fund, 8
Interpretation: competence of national courts on, 291;
economic approach to, 3, 12, 145, 263, 406
Second Amendment, 2;
and Sixth General Review of Quotas, French constitutional problem relating to, 285
Transitional arrangements, 130, 414
Atlantic City Conference, 86, 419
Balance of Payments Manual, 83, 145, 274, 401
Bank for International Settlements, 307, 310, 329
Belgium, 5, 218, 226, 272
Bonnes mœurs, 227
Bretton Woods Conference, 14, 154, 216, 225, 253, 429
Brussels Convention, 1957, 177, 441, 448, 452
Capital and Current Account Payments, 79, 126, 137, 196
Insurance and, 81
Capital Controls, 13, 80, 86, 125, 135, 208, 224, 418, 421, 427
Capital Transfers, 14, 80, 84, 93, 125, 135, 208, 224, 265, 275, 301, 414, 419, 421
Carriage of Goods by Road Convention, 444
Central Rates, 167, 184
And wider margins, 164, 185, 235, 250, 303, 443
Certificate by Fund, 414
Comity, 200, 345, 464
Articles the standard in relation to exchange control, 345
Exchange control and nonmembers, 352
Promotion of, 344
Committee of Board of Governors on Interpretation, 8
Common Agricultural Policy, 171, 243
Condemnation of Property for Benefit of Fund, 40
Confiscation, 126, 128, 133, 220, 225
Confiscatory Laws, 227
Contracts, Illegal, 156
Conversion Factors, 102
Convertibility of Currencies, 14
Countervailing Duties, 104
Cours forcé, 78, 119
Court of Justice of European Communities, 171, 241, 303
Cuban Insurance Cases, 1, 43, 217
Currency, Least Depreciated, 306
Debt, Situs of, 73
Decisions of Foreign Courts, 6, 218, 337
Definition of Payments for Current Transactions, 420
Definition of Terms in Articles, 214
Delay in Settlement of Commitments, 85, 126, 419
Denominator for External Value of Currency, 251
Depreciation, 129, 165, 312, 322
Devaluation, 129, 161, 165, 312, 322
Discriminatory Currency Arrangements, 220, 267, 327, 414
And capital transfers, 268
And payments for current transactions, 268
Dollar-Clearing Procedure, 374, 404
England, 5, 107, 202, 222, 236, 258, 291, 299, 302, 317, 325, 331, 333, 342, 372, 399, 422, 456
Eurodollar Deposits, 375, 398, 405
Eurodollar Loans, 277
European Common Margins Arrangement (“Snake”), 187
Exchange Agreements Under GATT, Special, 458
Exchange Alterations, Competitive, 324
Exchange Arrangements, General, 251
Exchange Control, 221
And act of state, 131
And nationalization, 120
And public international law, 134
ExchangeControl andDelict, Foreign, 190
Exchange Control Regulations, 120, 339, 403, 408
Evasion of, 198, 299, 349
“Foreign” and “internal,” 356
Legislative jurisdiction, 376
Motives for, 137, 139, 147, 150, 264, 295, 364, 409, 412
Mutual accord to make effective, 228, 296
Of Algeria, 155, 265;
Brazil, 116, 197;
Cuba, 45, 132;
Czechoslovakia, 154, 223;
France, 149, 225;
Netherlands, 139, 151;
Pakistan, 114, 462;
Peru, 300, 333;
Saar Territory, 10;
Surinam (Suriname), 354;
United States, 360;
Exchange Controls, Official Convertibility and, 235, 421
Exchange Depreciation, Competitive, 323
Exchange License, Undertaking to Obtain, 260
Exchange Rates, 62, 95, 117, 171, 303, 449
Effective, 37, 100, 129
Fixed and floating, 232
Governmental action on, 163
Legal and illegal, 103
Margins, 34, 36, 171, 174
Exchange Restrictions, 32
And exchange controls, 191, 409, 414
And nonmembers, 460
Under transitional arrangements, 269
Exchange Surrender Requirements, 13, 22, 31, 48, 127
Exchange rates, 31, 128
National authority, 32, 127
Exchange Transactions, Margins for, 429
Exchange Value, Foreign, 168, 175, 234, 325
Executive Board Decision No. 144-(52/51), 361, 365, 411, 417
Implications of no response under, 369
Financial Centers, 219, 222, 272, 278
Fiscal Laws, 227
Floating (Fluctuating) Currencies, 175, 326
Forum non conveniens, 53
Fragmentation of Agreements, 91, 108, 112, 115, 158, 266
France, 5, 17, 153, 155, 190, 218, 223, 225, 265, 275, 284, 370, 446, 449
French Constitution, 284
Freeze of Assets and Articles, U.S., 2, 360
Effect of concurrence of Executive Director in, 107
Effect of concurrence of member in, 106, 164
Fund Privileges and Immunities, 40
Fund Quotas, 284
General Agreement on Tariffs and Trade (GATT), 14, 103, 212, 416
And nonmembers of Fund, 2, 458
Protocol for accession, 459
Special exchange agreement, 458
Germany, Federal Republic of, 5, 9, 18, 116, 139, 149, 151, 218, 261, 272, 294, 337, 422, 442, 443, 456
Germinal Franc, 184, 439, 444, 450
Abrogation of official price of, 440
Free purchase and sale of, 234, 326, 420
Gradual reduction in role of, 455
Official price of, 2
Present monetary significance of, 455
Role of, 325
Under Second Amendment, 450
Valuation by monetary authorities, 448, 453
Gold Markets, Two-Tier, 442
Gold Units of Account, 2, 3, 177, 242, 439
Application of, 177
Decisions after Second Amendment, 443
Decisions before Second Amendment, 440
For domestic purposes, 250
Judicial application of, 439
Substitution of SDR for, 439
Gold Value of Currency Holdings, Maintenance of, 168, 170, 175, 325
Governing Law Under Private International Law, 65, 118, 140, 151, 192, 265, 278, 357
HIckenlooper amendment, 134
Hong Kong, 356
Immunity from Suit, 197
Inheritance, Rights of, 27, 222
Interbank Clearing Procedure, 373
Interpretation by Fund of Articles of Agreement, 5
Competence of national courts on, 291
Economic approach to, 3, 12, 145, 263, 406, 407
Request for, 7
Rescission or modification of, 8
Intervention in Exchange Markets, 169
Iranian Assets, U.S. Freeze of, 2, 360
Italy, 440, 448, 451
Jamaica Accord, 449
Judgments, Foreicn, 3
Legal Tender, 46, 48, 62, 78, 117
Legislative History, 2, 86, 419, 429
Legislative Jurisdiction, 376
Coexistence of, 387
Currency as basis for, 391
Evidence of Articles, 389
Relevance of “Concordat,” 390
Letters of Credit
Defective bills of lading, 348
Fraud in underlying contract and Article VIII, Section 2(b), 335
London Debt Acreement, 236, 306
Maritime Claims Commission, 453
Membership Resolution, 207
Monetary Compensatory Amounts, 303
Multiple Currency Practices, 327, 449
And judgments, 100
Multiple Exchance Rates, 35, 96, 104, 128
And countervailing duties, 104
Narrow Margins, 186
National Sovereignty and Amendment of Articles of Agreement, 287, 293
Nationalization, 47, 120
Netherlands, 120, 177, 353, 441, 443, 444, 451, 456
Nonmember, Support for Members’ Exchance Control Regulations by, 461
Oil Pollution Conventions, 181
Organization for Economic Cooperation and Development, 221
Par Values, 31, 99, 128, 165, 167, 171, 242, 315
Abrogation of, 249
And exchange rates, 38, 231, 237, 429;
under Articles, 101
And parities, 237, 429
Application of ineffective, 239, 243, 304, 442
Before Second Amendment, 323, 429
Comparison of Schedule C with provisions before Second Amendment, 252, 289
Competitive exchange depreciation, 323
“In force,” 238, 247, 316
Unauthorized change of, 233, 252, 310
Under Articles of Agreement, 99, 172, 180
Under Second Amendment of Articles, 249
Parity Relationship, Effective, 169, 305
Payments Agreements, 225, 241, 327
Payments for Current Account Transactions, 80
Undue delay of transfers in settlement of commitments, 85, 209, 418
Penal Laws, 227
Philippines, 31, 127
Poincaré Franc, 177, 183, 439, 442, 443, 446, 447, 450
Practice of Fund as Source of Law, 187
Private International Law, 52, 57, 61, 64, 77, 375
Application of lex situs, 354, 357
Privileges and Immunities of Fund, 40
Public Laws, 140, 200
Public Policy, 3, 5, 25, 27, 29, 35, 77, 106, 116, 124, 125, 126, 138, 150, 155, 196, 221, 222, 224, 225, 227, 229, 279, 347, 349, 464
Purposes of Fund, 216
Quasi-Contract, 159, 192
Restatement of the Law (Second): Foreign Relations Law of the United States, 279
Restitution, 156, 265, 272
Restrictions onTransactions and on Payments, 339
Revaluation, 165, 312, 322
Revenue Laws, 3, 24, 25, 27, 199, 227, 415
Rules and Regulations, 460
Rules H-2 and H-3, procedure under, 367
Saar Territory, 17
Sabbatino Doctrine, 126, 132, 138
Security Restrictions, 366, 416
Smithsonian Agreement, 163, 167, 182, 235, 303
Sovereign Immunity, 197, 225
Special Drawing Right (SDR), 2, 8, 164, 175, 252, 439, 443, 451
“Basket” valuation, 188, 443, 454, 455
Equal value, 175
Exception to equal value, 187
Transfers of, 175
Unit of account, 2
Valuation of, 170, 175, 188, 443, 454, 455
Surrender Requirements, Exchange, 13, 22, 48, 127
Exchange rates, 31, 128
National authority, 32, 127
Telephone and Telegraph Regulations, 184
Territoriality, 70, 109, 117, 121, 156, 265, 379, 391
Tort, 3, 190, 198, 280
Tourist Allowances, 213
Promotion of, 344
Categories of, 215
Transfers in Settlement of Commitments, Undue Delay in, 136
Transitional Arrangements, Exchange Restrictions Under, 130, 269
Translation of Currencies, 102
Treaty of Rome, 171, 243
Unanimity in Amendment of Articles of Agreement, 293
Unenforceability of Certain Exchange Contracts, 2, 3, 4, 9, 43, 55, 107, 116, 133, 138, 139, 149, 151, 153, 155, 190, 202, 219, 258, 266, 272, 277, 294, 299, 331, 353, 360, 458, 462
Acknowledgment of indebtedness, 273
Ambiguity of monetary transaction in disguise, 350
And private international law, 65, 122, 153
And Second Amendment, 257
Authoritative interpretation of Article VIII, Section 2(b), 4, 7, 110, 203;
binding effect of, 143
Balance of payments and exchange resources, 148
Bills of exchange, 139, 275, 336
Broadening of restrictive interpretation, 350
Burden of proof, 144, 205, 334
Capital and current account payments, 79, 208
Capital controls, 80, 418
Capital movements, 13, 274
Capital transfers, 215, 275, 421
Certificate by Fund, 49, 80, 191, 301, 334;
requested by court, 118
Checks, 108, 112, 157, 259, 335, 343
Consistency of exchange control regulations with Articles, 15, 45, 79, 122, 147, 205, 334, 413
Contracting parties to GATT, 458
Courts of third countries, 147
Currency involved, 11, 25, 68, 70, 146, 192, 204, 214, 266, 336, 338, 377, 395;
discharge in domestic currency, 297, 396
Currency of payment, 69, 209
Current international transactions, 13, 213
Date of relevant facts, 16, 17, 64, 88, 140, 150, 152, 160, 262, 274, 276, 298, 355
Dependent territories, 17, 354
Deposit contracts, 394;
discharge in domestic currency, 394
Discriminatory currency arrangements, 219, 267
Domestic and foreign currency, 11
Duty of court to raise objection of unenforceability, 144, 159, 260, 261, 298, 334
Duty to obtain license, 193, 280
Effect of withdrawal of member, 44, 87, 142
Effect on balance of payments, 147, 263, 274, 295, 336, 400
Effect on exchange resources, 70, 74, 139, 150, 295, 336, 400, 404
Enforceability of contracts, 139, 153, 201
Eurodollar contracts, 398
Exchange contracts, 11, 13, 20, 22, 68, 111, 145, 192, 202, 210, 219, 262, 267, 295, 302, 333, 337, 393
Exchange control and delict, foreign, 190, 197
Exchange control regulations, 13, 15, 16, 78, 120, 196, 208, 296, 403, 408;
evasion of, 115, 155, 158, 213, 214, 226;
interpretation of, 114;
“maintained” or “imposed,” 205, 413;
of lex fori, 111, 146, 260, 264;
under transitional arrangements, 207
Exchange controls, official convertibility and, 421
Exchange resources, 12
Exchange restrictions, 13, 409;
and exchange controls, 209
Executed contracts, 23, 342, 346, 350, 355
Governing law, 18, 118, 140, 151, 192, 265, 278, 357
Governments and private parties, 462
Importance of Article VIII, Section 2(b), 347
Insurance contracts, 69
Legal tender, 78
Legislative history, 24, 217
Legislative jurisdiction, 70, 81, 148, 376;
and currency involved, 377, 382, 405
Letters of credit, 219, 299, 331
Local assets, 226, 274
Meaning of Article VI, Section 3, 418
Merchandise contracts, 9, 20, 149, 202, 275, 299
Monetary transactions in disguise, 213, 214, 302, 333, 350
Moral issues, 221
Motives for exchange control regulations, 125, 296, 364
Nonmembers, 153, 204, 217, 226, 458
Partial recovery permitted, 347
Payments for current transactions, 80
Place of performance, 73
Private international law, 19, 64, 109
Promotion of trade, 216
Public law and, 120
Quasi-contract, 60, 70, 90
Reciprocity, 89, 229, 422
Regions and dependencies, 355
Relationship to private international law, 64, 109, 141
Restriction on entry into contract, 195, 208, 211, 339
Restrictions, 13, 15
Restrictive interpretation, 202, 219, 262, 349, 355, 393, 422
Retroactive exchange control regulations, 16
Revenue laws, 24, 199
Securities or merchandise contracts, 340
Security restrictions, 147, 361, 366
Series of contracts constituting exchange contract, 341, 399
Severability of contracts, 4, 61, 62, 91, 108, 112, 115, 158, 266, 302, 337, 345, 350, 399
Situs of debt, 73
Speculation in futures, 202
Summary of conclusions or principles, 91, 281, 291, 358, 423
Territorial scope of Article VIII, Section 2(b), 353
Text of authoritative interpretation of Article VIII, Section 2(b), 94
Trade controls, 15
Transaction of business and payments, 194, 208
Types of economic transaction, 145
Undertaking not to impose exchange control, 122
Unenforceability, 22, 201;
and acknowledgment of indebtedness, 273;
and illegality, 110, 157, 260;
and invalidity, 88, 140, 144, 152, 194, 260, 345, 352;
and unjustified enrichment, 273;
and voidness, 193;
under Article VIII, Section 2(b) and private law, 144;
under domestic law, 260
Use of blocked capital balances, 418
Withdrawal of Fund member from IBRD, 88
Withdrawal of member from Fund, 87, 225
Uniform Interpretation of Articles, 5, 218, 262
And reciprocity, 423
Unit of Account Not a Currency, 245
United States, 5, 12, 22, 40, 48, 50, 53, 54, 58, 59, 61, 87, 104, 131, 161, 197, 219, 222, 223, 228, 229, 272, 277, 337, 342, 387, 422, 440, 450, 451, 456
U.S. Freeze of Iranian Assets
Dollar-clearing procedure, 374, 404
Legislative jurisdiction: English views, 384;
French views, 386;
German views, 386;
U.S. views, 380
November 1979, 360
Orders and regulations, 360
Security restrictions, 361, 366
Unjust Enrichment, 3, 159
Vienna Convention on the Law of Treaties, 313, 314, 318, 320, 456
Warsaw Convention, 178, 182, 446, 447, 446, 4S6
Withdrawal of Member from Fund, 2, 87, 133, 153, 224, 293
Index G. Summary of Conclusions or Principles
Cuban Insurance Cases: Summary 91
Fund Agreement in the Courts—XIV: Questionnaire 261
Competence of National Courts on Interpretation: Principles 291
Fund Agreement in the Courts—XVII: Further Questionnaire 358
The Articles and the U.S. Freeze of Assets: Points of Principle 423
Sir Joseph Gold is a graduate of the Law Schools of the Universities of London and Harvard. He was a member of the staff of the Legal Department of the International Monetary Fund from October 1946 to July 1979 and was the General Counsel of the Fund and Director of its Legal Department from 1960 to 1979. He is now Senior Consultant of the Fund. He is the author of the following books published by the Fund: The Fund Agreement in the Courts, Volume I (1962), The Stand-By Arrangements of the International Monetary Fund (1970). Voting and Decisions in the International Monetary Fund (1972), Membership and Nonmemhership in the International Monetary Fund (1974), and Legal and Institutional Aspects of the International Monetary System: Selected Essays (1979). He has contributed numerous pamphlets to the Fund’s Pamphlet Series, including a series devoted to new legal developments involving SDRs, currencies, and gold, and has contributed a study of the Fund’s constitutional development to The International Monetary Fund, 1945–1965, published by the Fund in 1969. He has contributed numerous articles to the Fund’s periodicals Staff’ Papers and Finance & Development. His publications outside the Fund include Aspectos legales de la reforma monetaria internacional (Mexico, 1979) and numerous articles in law journals in many countries.