Abstract

1. Effective July 1, 1974, and subject to the addition of the amount of each currency listed in paragraph (a), which will be calculated in the manner set out in SM/74/142, dated June 13, 1974, on the last business day before this decision becomes effective, Rule O-3 of the Fund’s Rules and Regulations entitled “Exchange Rates” shall be amended to read as follows:

Appendices

Appendix A. Interim Valuation of the SDR: New Rule O-3

1. Effective July 1, 1974, and subject to the addition of the amount of each currency listed in paragraph (a), which will be calculated in the manner set out in SM/74/142, dated June 13, 1974, on the last business day before this decision becomes effective, Rule O-3 of the Fund’s Rules and Regulations entitled “Exchange Rates” shall be amended to read as follows:

(a) For the purpose of determining the exchange rate in terms of special drawing rights for a currency provided in a transaction between participants or involved in a conversion associated with such a transaction one special drawing right shall be deemed to be equal to the sum of:

article image

(b) One special drawing right in terms of the United States dollar shall be equal to the sum of the equivalents in United States dollars of the amounts of the currencies specified in (a) above, calculated on the basis of exchange rates established in accordance with procedures decided from time to time by the Fund.

(c) One special drawing right in terms of a currency other than the United States dollar shall be determined on the basis of the rate of the special drawing right in terms of the United States dollar as established in accordance with (b) above and an exchange rate for that currency determined as follows:

  • (i) for the currency of a member having an exchange market in which the Fund finds that a representative rate for spot delivery for the United States dollar can be readily ascertained, that representative rate;

  • (ii) for the currency of a member having an exchange market in which the Fund finds that a representative rate for spot delivery for the United States dollar cannot be readily ascertained but in which a representative rate can be readily ascertained for spot delivery for a currency as described in (i), the rate calculated by reference to the representative rate for spot delivery for that currency and the rate ascertained pursuant to (i) above for the United States dollar in terms of that currency;

  • (iii) for any other currency, a rate determined by the Fund.

2. Rule O-3 as amended by this decision shall be reviewed two years from the date of this decision.

Decision No. 4233-(74/67) S

June 13, 1974, as amended by

Decision No. 4261-(74/78) S

July 1, 1974

Appendix B. Rates for Computations and Adjustment of the Fund’s Holdings of Currencies

The following decision is adopted in order to facilitate the conduct of the operations of the Fund involving currencies for which rates are not maintained within the margins under Article IV, Section 3 of the Articles or Executive Board Decision No. 904-(59/32).

1. Computations by the Fund under the Articles of Agreement relating to a member’s currency for which rates within the margins of Article IV, Section 3 or Executive Board Decision No. 904-(59/32) are not maintained will be made on the basis of the representative rate for that currency under Rule O-3 whenever these calculations are made (i) for the purpose of a transaction with the Fund involving the purchase or sale of that member’s currency by another member, and (ii) for such other purposes as the Fund may decide. Computations under this paragraph will be made on the basis of the representative rate for the currency on the day specified in paragraph 2 below.

2. For computations for the purpose of Article V, Sections 1(b) and 8(f) the rate shall be that at which the Fund values its holdings of the currency on the day for which the computation is made. For computations relating to other transactions, including computations involving currency substituted pursuant to Schedule B, paragraph 1(d) and paragraph 1 of Executive Board Decision No. 3049-(70/44), the rate shall be that of three business days before the value date of the transaction and, if this is not possible, the rate of the day closest thereto that is practicable.

3. Whenever a computation relating to a member’s currency is made on the basis of a representative rate in accordance with paragraph 1 above, the Fund will adjust all of its holdings of the currency on the basis of that rate, and such adjustment will take effect as of the day specified for the computation in paragraph 2 above.

4. Whenever the Fund adjusts its holdings of a member’s currency in accordance with paragraph 3 above, the Fund shall establish an account receivable or an account payable, as the case may be, in respect of the amount of the currency payable by or to the member under Article IV, Section 8. For the purpose of applying the provisions of the Articles as of any date, the Fund’s holdings of the currency will be deemed to be its actual holdings plus the balance in any such account receivable or minus the balance in any such account payable as of that date. Settlements of accounts receivable or payable shall be made promptly after each April 30 and at other times when requested by the Fund or the member.

5. The suspension of Rule O-3 (i) pursuant to Paragraph II of Executive Board Decision No. 3537-(72/3) G/S is terminated. Executive Board Decision No. 3537-(72/3) G/S and Executive Board Decision No. 321-(54/32), as amended, are terminated.

6. This decision shall be reviewed as necessary.

Decision No. 3637-(72/41) G/S,

May 8, 1972, as amended by

Decision No. 5074-(76/63) G/S,

May 5, 1976

Appendix C. Proposed Second Amendment: Exchange Arrangements and Par Values

Article IV: Obligations Regarding Exchange Arrangements

Section 1. General obligations of members

Recognizing that the essential purpose of the international monetary system is to provide a framework that facilitates the exchange of goods, services, and capital among countries, and that sustains sound economic growth, and that a principal objective is the continuing development of the orderly underlying conditions that are necessary for financial and economic stability, each member undertakes to collaborate with the Fund and other members to assure orderly exchange arrangements and to promote a stable system of exchange rates. In particular, each member shall:

  • (i) endeavor to direct its economic and financial policies toward the objective of fostering orderly economic growth with reasonable price stability, with due regard to its circumstances;

  • (ii) seek to promote stability by fostering orderly underlying economic and financial conditions and a monetary system that does not tend to produce erratic disruptions;

  • (iii) avoid manipulating exchange rates or the international monetary system in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage over other members; and

  • (iv) follow exchange policies compatible with the undertakings under this Section.

Section 2. General exchange arrangements

(a) Each member shall notify the Fund, within thirty days after the date of the second amendment of this Agreement, of the exchange arrangements it intends to apply in fulfillment of its obligations under Section 1 of this Article, and shall notify the Fund promptly of any changes in its exchange arrangements.

(b) Under an international monetary system of the kind prevailing on January 1, 1976, exchange arrangements may include (i) the maintenance by a member of a value for its currency in terms of the special drawing right or another denominator, other than gold, selected by the member, or (ii) cooperative arrangements by which members maintain the value of their currencies in relation to the value of the currency or currencies of other members, or (iii) other exchange arrangements of a member’s choice.

(c) To accord with the development of the international monetary system, the Fund, by an eighty-five percent majority of the total voting power, may make provision for general exchange arrangements without limiting the right of members to have exchange arrangements of their choice consistent with the purposes of the Fund and the obligations under Section 1 of this Article.

Section 3. Surveillance over exchange arrangements

(a) The Fund shall oversee the international monetary system in order to ensure its effective operation, and shall oversee the compliance of each member with its obligations under Section 1 of this Article.

(b) In order to fulfill its functions under (a) above, the Fund shall exercise firm surveillance over the exchange rate policies of members, and shall adopt specific principles for the guidance of all members with respect to those policies. Each member shall provide the Fund with the information necessary for such surveillance, and, when requested by the Fund, shall consult with it on the member’s exchange rate policies. The principles adopted by the Fund shall be consistent with cooperative arrangements by which members maintain the value of their currencies in relation to the value of the currency or currencies of other members, as well as with other exchange arrangements of a member’s choice consistent with the purposes of the Fund and Section 1 of this Article. These principles shall respect the domestic social and political policies of members, and in applying these principles the Fund shall pay due regard to the circumstances of members.

Section 4. Par values

The Fund may determine, by an eighty-five percent majority of the total voting power, that international economic conditions permit the introduction of a widespread system of exchange arrangements based on stable but adjustable par values. The Fund shall make the determination on the basis of the underlying stability of the world economy, and for this purpose shall take into account price movements and rates of expansion in the economies of members. The determination shall be made in light of the evolution of the international monetary system, with particular reference to sources of liquidity, and, in order to ensure the effective operation of a system of par values, to arrangements under which both members in surplus and members in deficit in their balances of payments take prompt, effective, and symmetrical action to achieve adjustment, as well as to arrangements for intervention and the treatment of imbalances. Upon making such determination, the Fund shall notify members that the provisions of Schedule C apply.

Section 5. Separate currencies within a member’s territories

(a) Action by a member with respect to its currency under this Article shall be deemed to apply to the separate currencies of all territories in respect of which the member has accepted this Agreement under Article XXXI, Section 2(g) unless the member declares that its action relates either to the metropolitan currency alone, or only to one or more specified separate currencies, or to the metropolitan currency and one or more specified separate currencies.

(b) Action by the Fund under this Article shall be deemed to relate to all currencies of a member referred to in (a) above unless the Fund declares otherwise.

Schedule C: Par Values

1. The Fund shall notify members that par values may be established for the purposes of this Agreement, in accordance with Article IV, Sections 1, 3,4, and 5 and this Schedule, in terms of the special drawing right, or in terms of such other common denominator as is prescribed by the Fund. The common denominator shall not be gold or a currency.

2. A member that intends to establish a par value for its currency shall propose a par value to the Fund within a reasonable time after notice is given under 1 above.

3. Any member that does not intend to establish a par value for its currency under 1 above shall consult with the Fund and ensure that its exchange arrangements are consistent with the purposes of the Fund and are adequate to fulfill its obligations under Article IV, Section 1.

4. The Fund shall concur in or object to a proposed par value within a reasonable period after receipt of the proposal. A proposed par value shall not take effect for the purposes of this Agreement if the Fund objects to it, and the member shall be subject to 3 above. The Fund shall not object because of the domestic social or political policies of the member proposing the par value.

5. Each member that has a par value for its currency undertakes to apply appropriate measures consistent with this Agreement in order to ensure that the maximum and the minimum rates for spot exchange transactions taking place within its territories between its currency and the currencies of other members maintaining par values shall not differ from parity by more than four and one-half percent or by such other margin or margins as the Fund may adopt by an eighty-five percent majority of the total voting power.

6. A member shall not propose a change in the par value of its currency except to correct, or prevent the emergence of, a fundamental disequilibrium. A change may be made only on the proposal of the member and only after consultation with the Fund.

7. When a change is proposed, the Fund shall concur in or object to the proposed par value within a reasonable period after receipt of the proposal. The Fund shall concur if it is satisfied that the change is necessary to correct, or prevent the emergence of, a fundamental disequilibrium. The Fund shall not object because of the domestic social or political policies of the member proposing the change. A proposed change in par value shall not take effect for the purposes of this Agreement if the Fund objects to it. If a member changes the par value of its currency despite the objection of the Fund, the member shall be subject to Article XXVI, Section 2. Maintenance of an unrealistic par value by a member shall be discouraged by the Fund.

8. The par value of a member’s currency established under this Agreement shall cease to exist for the purposes of this Agreement if the member informs the Fund that it intends to terminate the par value. The Fund may object to the termination of a par value by a decision taken by an eighty-five percent majority of the total voting power. If a member terminates a par value for its currency despite the objection of the Fund, the member shall be subject to Article XXVI, Section 2. A par value established under this Agreement shall cease to exist for the purposes of this Agreement if the member terminates the par value despite the objection of the Fund, or if the Fund finds that the member does not maintain rates for a substantial volume of exchange transactions in accordance with 5 above, provided that the Fund may not make such finding unless it has consulted the member and given it sixty days notice of the Fund’s intention to consider whether to make a finding.

9. If the par value of the currency of a member has ceased to exist under 8 above, the member shall consult with the Fund and ensure that its exchange arrangements are consistent with the purposes of the Fund and are adequate to fulfill its obligations under Article IV, Section 1.

10. A member for whose currency the par value has ceased to exist under 8 above may, at any time, propose a new par value for its currency.

11. Notwithstanding 6 above, the Fund, by a seventy percent majority of the total voting power, may make uniform proportionate changes in all par values if the special drawing right is the common denominator and the changes will not affect the value of the special drawing right. The par value of a member’s currency shall, however, not be changed under this provision if, within seven days after the Fund’s action, the member informs the Fund that it does not wish the par value of its currency to be changed by such action.

Appendix D. Surveillance over Exchange Rate Policies

1. The Executive Board has discussed the implementation of Article IV of the proposed second amendment of the Articles of Agreement and has approved the attached document entitled Surveillance over Exchange Rate Policies. The Fund shall act in accordance with this document when the second amendment becomes effective. In the period before that date the Fund shall continue to conduct consultations in accordance with present procedures and decisions.

2. The Fund shall review the document entitled Surveillance over Exchange Rate Policies at intervals of two years and at such other times as consideration of it is placed on the agenda of the Executive Board.

General Principles

Article IV, Section 3(a) provides that “The Fund shall oversee the international monetary system in order to ensure its effective operation, and shall oversee the compliance of each member with its obligations under Section 1 of this Article.” Article IV, Section 3(b) provides that in order to fulfill its functions under 3(a), “the Fund shall exercise firm surveillance over the exchange rate policies of members, and shall adopt specific principles for the guidance of all members with respect to those policies.” Article IV, Section 3(b) also provides that “The principles adopted by the Fund shall be consistent with cooperative arrangements by which members maintain the value of their currencies in relation to the value of the currency or currencies of other members, as well as with other exchange arrangements of a member’s choice consistent with the purposes of the Fund and Section 1 of this Article. These principles shall respect the domestic social and political policies of members, and in applying these principles the Fund shall pay due regard to the circumstances of members.” In addition, Article IV, Section 3(b) requires that “Each member shall provide the Fund with the information necessary for such surveillance, and, when requested by the Fund, shall consult with it on the member’s exchange rate policies.”

The principles and procedures set out below, which apply to all members whatever their exchange arrangements and whatever their balance of payments position, are adopted by the Fund in order to perform its functions under Section 3(b). They are not necessarily comprehensive and are subject to reconsideration in the light of experience. They do not deal directly with the Fund’s responsibilities referred to in Section 3(a), although it is recognized that there is a close relationship between domestic and international economic policies. This relationship is emphasized in Article IV which includes the following provision: “Recognizing … that a principal objective (of the international monetary system) is the continuing development of the orderly underlying conditions that are necessary for financial and economic stability, each member undertakes to collaborate with the Fund and other members to assure orderly exchange arrangements and to promote a stable system of exchange rates.”

Principles for the Guidance of Members’ Exchange Rate Policies

A. A member shall avoid manipulating exchange rates or the international monetary system in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage over other members.

B. A member should intervene in the exchange market if necessary to counter disorderly conditions which may be characterized inter alia by disruptive short-term movements in the exchange value of its currency.

C. Members should take into account in their intervention policies the interests of other members, including those of the countries in whose currencies they intervene.

Principles of Fund Surveillance over Exchange Rate Policies

1. The surveillance of exchange rate policies shall be adapted to the needs of international adjustment as they develop. The functioning of the international adjustment process shall be kept under review by the Executive Board and Interim Committee and the assessment of its operation shall be taken into account in the implementation of the principles set forth below.

2. In its surveillance of the observance by members of the principles set forth above, the Fund shall consider the following developments as among those which might indicate the need for discussion with a member:

(i) protracted large-scale intervention in one direction in the exchange market;

(ii) an unsustainable level of official or quasi-official borrowing, or excessive and prolonged short-term official or quasi-official lending, for balance of payments purposes;

(iii)

  • (a) the introduction, substantial intensification, or prolonged maintenance, for balance of payments purposes, of restrictions on, or incentives for, current transactions or payments, or

  • (b) the introduction or substantial modification for balance of payments purposes of restrictions on, or incentives for, the inflow or outflow of capital;

(iv) the pursuit, for balance of payments purposes, of monetary and other domestic financial policies that provide abnormal encouragement or discouragement to capital flows; and

(v) behavior of the exchange rate that appears to be unrelated to underlying economic and financial conditions including factors affecting competitiveness and long-term capital movements.

3. The Fund’s appraisal of a member’s exchange rate policies shall be based on an evaluation of the developments in the member’s balance of payments against the background of its reserve position and its external indebtedness. This appraisal shall be made within the framework of a comprehensive analysis of the general economic situation and economic policy strategy of the member, and shall recognize that domestic as well as external policies can contribute to timely adjustment of the balance of payments. The appraisal shall take into account the extent to which the policies of the member, including its exchange rate policies, serve the objectives of the continuing development of the orderly underlying conditions that are necessary for financial stability, the promotion of sustained sound economic growth, and reasonable levels of employment.

Procedures for Surveillance

I. Each member shall notify the Fund in appropriate detail within thirty days after the second amendment becomes effective of the exchange arrangements it intends to apply in fulfillment of its obligations under Article IV, Section 1. Each member shall also notify the Fund promptly of any changes in its exchange arrangements.

II. Members shall consult with the Fund regularly under Article IV. The consultations under Article IV shall comprehend the regular consultations under Articles VIII and XIV. In principle such consultations shall take place annually, and shall include consideration of the observance by members of the principles set forth above as well as of a member’s obligations under Article IV, Section 1. Not later than three months after the termination of discussions between the member and the staff, the Executive Board shall reach conclusions and thereby complete the consultation under Article IV.

III. Broad developments in exchange rates will be reviewed periodically by the Executive Board, inter alia in discussions of the international adjustment process within the framework of the world economic outlook. The Fund will continue to conduct special consultations in preparing for these discussions.

IV. The Managing Director shall maintain close contact with members in connection with their exchange arrangements and exchange policies, and will be prepared to discuss on the initiative of a member important changes that it contemplates in its exchange arrangements or its exchange rate policies.

V. If, in the interval between Article IV consultations, the Managing Director, taking into account any views that may have been expressed by other members, considers that a member’s exchange rate policies may not be in accord with the exchange rate principles, he shall raise the matter informally and confidentially with the member, and shall conclude promptly whether there is a question of the observance of the principles. If he concludes that there is such a question, he shall initiate and conduct on a confidential basis a discussion with the member under Article IV, Section 3(b). As soon as possible after the completion of such a discussion, and in any event not later than four months after its initiation, the Managing Director shall report to the Executive Board on the results of the discussion. If, however, the Managing Director is satisfied that the principles are being observed, he shall informally advise all Executive Directors, and the staff shall report on the discussion in the context of the next Article IV consultation; but the Managing Director shall not place the matter on the agenda of the Executive Board unless the member requests that this procedure be followed.

VI. The Executive Directors shall review annually the general implementation of the Fund’s surveillance over members’ exchange rate policies.

Decision No. 5392-(77/63)

April 29, 1977

Appendix E. Gold Clause Joint Resolution

[Public Resolution—No. 10—73d Congress]

[H.J. Res. 192]

Joint Resolution

To assure uniform value to the coins and currencies of the United States.

Whereas the holding of or dealing in gold affect the public interest, and are therefore subject to proper regulation and restriction; and

Whereas the existing emergency has disclosed that provisions of obligations which purport to give the obligee a right to require payment in gold or a particular kind of coin or currency of the United States, or in an amount in money of the United States measured thereby, obstruct the power of the Congress to regulate the value of the money of the United States, and are inconsistent with the declared policy of the Congress to maintain at all times the equal power of every dollar, coined or issued by the United States, in the markets and in the payment of debts. Now, therefore, be it

Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That (a) every provision contained in or made with respect to any obligation which purports to give the obligee a right to require payment in gold or a particular kind of coin or currency, or in an amount in money of the United States measured thereby, is declared to be against public policy; and no such provision shall be contained in or made with respect to any obligation hereafter incurred. Every obligation, heretofore or hereafter incurred, whether or not any such provision is contained therein or made with respect thereto, shall be discharged upon payment, dollar for dollar, in any coin or currency which at the time of payment is legal tender for public and private debts. Any such provision contained in any law authorizing obligations to be issued by or under authority of the United States, is hereby repealed, but the repeal of any such provision shall not invalidate any other provision or authority contained in such law.

(b) As used in this resolution, the term “obligation” means an obligation (including every obligation of and to the United States, excepting currency) payable in money of the United States; and the term “coin or currency” means coin or currency of the United States, including Federal Reserve notes and circulating notes of Federal Reserve banks and national banking associations.

Sec. 2. The last sentence of paragraph (1) of subsection (b) of section 43 of the Act entitled “An Act to relieve the existing national economic emergency by increasing agricultural purchasing power, to raise revenue for extraordinary expenses incurred by reason of such emergency, to provide emergency relief with respect to agricultural indebtedness, to provide for the orderly liquidation of joint-stock land banks, and for other purposes”, approved May 12, 1933, is amended to read as follows:

“All coins and currencies of the United States (including Federal Reserve notes and circulating notes of Federal Reserve banks and national banking associations) heretofore or hereafter coined or issued, shall be legal tender for all debts, public and private, public charges, taxes, duties, and dues, except that gold coins, when below the standard weight and limit of tolerance provided by law for the single piece, shall be legal tender only at valuation in proportion to their actual weight.”

Approved, June 5, 1933, 4.40 p.m.

International Monetary FUND Pamphlet Series

*1. Introduction to the Fund, by J. Keith Horsefield. (First edition in English, 1964; in French and Spanish, 1965. Second edition in English, 1965; in French and Spanish, 1966; in German, 1967)

*2, The International Monetary Fund: Its Form and Functions, by J. Marcus Fleming (in English, 1964)

3. The International Monetary Fund and Private Business Transactions: Some Legal Effects of the Articles of Agreement, by Joseph Gold (in English and Spanish, 1965; in French, 1966)

4. The International Monetary Fund and International Law: An Introduction, by Joseph Gold (in English, 1965; in French, 1966; in Spanish, 1967)

*5. The Financial Structure of the Fund, by Rudolf Kroc. (First edition in English, French, and Spanish, 1965. Second edition in English, French, and Spanish, 1967)

6. Maintenance of the Gold Value of the Fund’s Assets, by Joseph Gold. (First edition in English, 1965; in French and Spanish, 1967. Second edition in English, 1971; in French and Spanish, 1972)

7. The Fund and Non-Member States: Some Legal Effects, by Joseph Gold (in English, 1966; in French, 1967; in Spanish, 1968)

8. The Cuban Insurance Cases and the Articles of the Fund, by Joseph Gold (in English, 1966; in Spanish, 1968; in French, 1970)

9. Balance of Payments: Its Meaning and Uses, by Poul H0st-Madsen (in English, French, and Spanish, 1967; in German, 1968)

10. Balance of Payments Concepts and Definitions. (First edition in English, French, and Spanish, 1968. Second edition in English, French, and Spanish, 1969)

11. Interpretation by the Fund, by Joseph Gold (in English, 1968; in French and Spanish, 1969)

12. The Reform of the Fund, by Joseph Gold (in English, 1969; in French and Spanish, 1970)

13. Special Drawing Rights, by Joseph Gold. (First edition in English and Spanish, 1969; in French, 1970. Second edition, with subtitle Character and Use, in English, 1970; in French and Spanish, 1972)

14. The Fund’s Concepts of Convertibility, by Joseph Gold (in English and Spanish, 1971; in French, 1972)

15. Special Drawing Rights: The Role of Language, by Joseph Gold (in English, 1971; in Spanish, 1972; in French, 1973)

16. Some Reflections on the Nature of Special Drawing Rights, by J. J. Polak (in English, 1971; in French and Spanish, 1972)

17. Operations and Transactions in SDRs: The First Basic Period, by Walter Habermeier (in English, French, and Spanish, 1973)

18. Valuation and Rate of Interest of the SDR, by J. J. Polak (in English, 1974; in French and Spanish, 1975)

19. Floating Currencies, Gold, and SDRs: Some Recent Legal Developments, by Joseph Gold (in English, French, and Spanish, 1976)

20. Voting Majorities in the Fund: Effects of Second Amendment of the Articles, by Joseph Gold (in English, 1977; French and Spanish in preparation)

21. International Capital Movements Under the Law of the International Monetary Fund, by Joseph Gold (in English, 1977; French and Spanish in preparation)

22. Floating Currencies, SDRs, and Gold: Further Legal Developments, by Joseph Gold (in English, 1977; French and Spanish in preparation)

International Monetary Fund, Washington, D.C. 20431, U.S.A.

Telephone number: 202 393 6362

Cable address: Interfund

Notes

Introduction

1.

Decision No. 3463-(71/126), December 18,1971, Selected Decisions of the International Monetary Fund and Selected Documents, Eighth Issue (Washington, 1976), pp. 14–17. (Hereinafter referred to as Selected Decisions, 8th.) See also Joseph Gold, Floating Currencies, Gold, and SDRs: Some Recent Legal Developments, IMF Pamphlet Series, No. 19 (Washington, 1976), pp. 5–6. (Hereinafter referred to as Gold, Floating Currencies, Gold, and SDRs.)

2.

See Joseph Gold, “The Legal Structure of the Par Value System,” in Law and Policy in International Business, Vol. 5 (1973), pp. 190–200. (Hereinafter referred to as Gold, “Par Value System.”)

3.

Decision No. 4083-(73/104), November 7, 1973, Selected Decisions, 8th, pp. 18–21; Gold, Floating Currencies, Gold, and SDRs, pp. 5–6.

4.

Decision No. 4233-(74/67)S, June 13, 1974, as amended by Decision No. 4261-(74/78)S, July 1, 1974; Annual Report of the Executive Directors for the Fiscal Year Ended April 30, 1974, pp. 116–17 (see Appendix A of this pamphlet).

5.

Article XXI, Section 2, first.

6.

Decision No. 3637-(72/41)G/S, May 8, 1972, as amended by Decision No. 5074-(76/63)G/S, May 5, 1976, Selected Decisions, 8th, pp. 32–33 (see Appendix B of this pamphlet).

7.

Article XVII(a), original; Article XVII(a), first.

8.

Gold, Floating Currencies, Gold, and SDRs (cited n. 1).

9.

Proposed Second Amendment to the Articles of Agreement: A Report by the Executive Directors to the Board of Governors (Washington, 1976), Part II, Chap. C, sec. 6. (Hereinafter referred to as Report on Second Amendment.)

Floating Currencies

10.

P. L. 94–564, 94th Cong., Bretton Woods Agreements Act, Amendments, 90 Stat. 2660.

11.

Ibid., sec. 7. A proposal of the Committee on Banking, Housing and Urban Affairs of the U.S. Senate that the provision should be amended to provide that no loan or credit to a foreign government or entity could be extended by or through the Exchange Stabilization Fund for more than 6 months in any 12-month period unless the President provided Congress with justification was not accepted (Report No. 94–1295, p. 24). The purpose of the proposal was to place primary reliance on the IMF for balance of payments assistance in order to ensure adjustment (ibid., at p. 11).

12.

P.L. 73–87, sec. 10(a), 48 Stat. 337.

13.

P.L. 94–564, sec. 7, amending sec. 10(a) of P.L. 73–87.

14.

U.S. Congress, House, Committee on Banking, Currency and Housing, Subcommittee on International Trade, Investment and Monetary Policy, To Provide for Amendment of the Bretton Woods Agreements Act, Hearings on HR. 13955, 94th Cong., 2d Sess., June 1 and 3, 1976 (Washington, 1976), p. 43.

15.

1977 c. 6.

16.

Resolution No. 31–2, March 22, 1976, Selected Decisions, 8th, pp. 222–24.

17.

1975 c. 19.

18.

Cf. Section 14(2)(g) of Canada’s Currency and Exchange Act, under which SDRs “in” the Fund, and Section 14(2)(a) of Bill C-5 to amend that Act, under which SDRs “issued” by the Fund, are deemed to be “securities” for the purposes of the Act. (Canada, House of Commons, Thirtieth Parliament, 2nd Sess., 25 Elizabeth II, 1976, Bill C-5, An Act to Amend the Currency and Exchange Act and to Amend Other Acts in Consequence Thereof, First reading, October 21, 1976.)

19.

United Kingdom, International Finance, Trade and Aid Act, 1977, Schedule 1.

20.

See Gold, “Par Value System,” pp. 176–77; Report on Second Amendment, Part II, Chap. C, sec. 11.

21.

Article IV, Section 4, second.

22.

Report on Second Amendment, Part II, Chap. C, sec. 6.

23.

Schedule C, second; Report on Second Amendment, Part II, Chap. C, sec. 7.

24.

[1976] 3 All E.R. 851.

25.

Case 28/74 [1975] E.C.R. 463.

26.

Ibid., p. 464.

27.

Ibid., p. 473.

28.

Ibid., p. 474. Cf. pp. 479–80. Comptoir National Technique Agricole (CNTA) S.A. v. E. C. Commission (Case 74/ 74), decided by the Court of Justice of the European Communities on May 14, 1975 [1977] 1 C.M.L.R. 171, involved the question of the legal effect of Regulation No. 974/71 of the Council of Ministers of May 12, 1971. The Regulation was adopted to authorize charges to be made on imports and grants made on exports of products under the common agricultural policy if, for the purposes of commercial transactions, a member “allows the exchange rate of [its] currency to fluctuate by a margin wider than [is] permitted by international rules.” The plaintiff claimed damages for the loss it sustained under the contracts entered into before the effective date of rescission by the Commission of compensatory amounts payable on certain products that it exported. The court held that the objective of the system of compensatory amounts was to protect the proper functioning of the common market organizations from the effects of monetary instability and not to protect individual traders against the risks of changes in exchange rates, with the consequence that traders could not limit the right of the Commission to rescind the compensatory payments if it concluded that they were not necessary to protect the market. Nevertheless, the system avoided exchange risks and might induce a trader to forgo the protection he might otherwise arrange. The court decided that this consideration was a basis for awarding damages in respect of contracts irrevocably entered into on the basis of export licenses fixing the amount of the subsidy in circumstances in which the trader could no longer protect himself against exchange risks. The case illustrates the necessity to reconcile public policy and private interests under regulations inspired by monetary instability. See also Case 7/76, IRC A v. Amministrazione delle Finanze dello Stato [1976] E.C.R. 1213.

29.

See Bruno Oppetit, “L’adaptation des contrats internationaux aux changements de circonstances: la clause de ‘hardship’,” Journal du Droit International, 101st Year (1974), No. 1, pp. 794–814.

30.

“Hardship clauses, “Droit et Pratique du Commerce International, Vol. 2, No. 1 (March 1976), pp. 51–88, at p. 58. See also “Contrats économiques internationaux: Les Hardship clauses,” Droit et Pratique du Commerce International, Vol. 1, No. 3 (September 1975), pp. 512–18.

31.

The report quotes the preamble to certain hardship clauses. For example: “In entering into this long-term Contract the parties hereto agree that it is impracticable to make provision for every contingency which may arise during the term thereof; and the parties hereby agree it to be their intention that this Contract shall operate between them with fairness and without prejudice to the interests of either.”—Droit et Pratique du Commerce International, Vol. 2, No. 1 (March 1976), p. 61. This language recalls the opening words of Article IV, Section 2(b) of the proposed second amendment of the Articles: “Under an international monetary system of the kind prevailing on January 1, 1976, exchange arrangements may include…” Article IV, Section 2(c) reads as follows: “To accord with the development of the international monetary system, the Fund, by an eighty-five percent majority of the total voting power, may make provision for general exchange arrangements without limiting the right of members to have exchange arrangements of their choice consistent with the purposes of the Fund and the obligations under Section 1 of this Article.”

32.

Droit et Pratique du Commerce International, Vol. 2, No. 1 (March 1976), pp. 62–69.

33.

Cf. Article IV, Section 1 of the proposed second amendment of the Articles: “… In particular, each member shall:… (iii) avoid manipulating exchange rates or the international monetary system in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage over other members;…”

34.

“Hardship Clauses,” Droit et Pratique du Commerce International, Vol. 2, No. 1 (March 1976), p. 66.

35.

1973 A.M.C. 1489.

36.

Ibid., p. 1490.

37.

Article IV, Section 1, second.

38.

Article IV, Section 3(b), second.

39.

“Hardship Clauses, “Droit et Pratique du Commerce International, Vol. 2, No. 1 (March 1976), pp. 81–82.

40.

Oppetit, “L’adaptation des contrats internationaux aux changements de circonstances: la clause de ‘hardship’ “(cited n. 29), pp. 798–99.

41.

See Joseph Gold, The Stand-By Arrangements of the International Monetary Fund: A Commentary on Their Formal, Legal, and Financial Aspects (Washington, 1970), pp. 46–47. (Hereinafter referred to as Gold, Stand-By Arrangements.)

42.

Ibid., pp. 140–41, 145, and 198.

43.

Ibid., pp. 152–53.

44.

Decision No. 4377-(74/114), September 13, 1974, Selected Decisions, 8th, p. 52.

45.

Press Release No. 77/1, January 3,1977: IMF Survey, Vol. 6 (1977), pp. 1 and 5.

46.

Gold, Stand-By Arrangements, pp. 73–75.

47.

[1976] A.C. 443.

48.

Barclays Bank International Ltd. v. Levin Brothers (Bradford) Ltd. [1976] 3 All E.R. 900, at 911; [1976] 3 W.L.R. 852, at 863.

49.

It seems, however, that the substantive right of the plaintiff is to foreign currency. The question whether the substantive right is to foreign currency or to the sterling equivalent at the time of payment arose in Re Dynamics Corporation of America and Another [1972] 3 All E.R. 1046. The issue was the valuation of the claims of creditors for whom the U.S. dollar was the currency of account in the compulsory winding up of a company in which there were other creditors for whom the currency of account was sterling. The question at issue was whether the claims of the dollar creditors were to be valued in terms of sterling as of the date of the winding up order, the date as of which all liabilities could be ascertained and as of which available assets could be distributed pro rata, or as of some subsequent date such as the date when proof of the claims was established or the date of distribution. In view of the progressive depreciation of sterling, the share of the dollar creditors would become larger as the date chosen became later. The court held that the dollar creditors’ substantive claims were to dollars and not, as was argued on their behalf on the basis of dicta in the Miliangos case, to dollars or an amount of sterling to be ascertained at a date later than the date of the winding up order. The court relied on reasoning in the Miliangos case to support the thesis that the substantive claims were to U.S. dollars. Sterling was included in the judgment in that case because the foreign currency might not be paid, and it was necessary therefore to state the judgment in a form in which it could be executed in England. See Daniel A. Lapres, “Comments,” Canadian Bar Review, Vol.55 (1977), pp. 132–48.

50.

“The development has, of course, reflected the increased importance of currency values, and came about because the courts found that they could no longer do justice by confining their awards to the local currency. For hundreds of years, sterling had been an adequate method of denomination—even in international legal disputes. Judgements denominated in sterling did not do substantial injustice when sterling was a relatively strong currency; and in the more immediate past (between the end of the Second World War and 1973), the fixed exchange rate system meant that currency values remained stable over long periods. Moreover these periods were sufficiently extended for most claims to be adjudicated justly in sterling—since any substantial injustice arising from this practice could only occur as a consequence of a devaluation or of a foreign currency revaluation. Such events were rare enough for sterling to have survived as the universal currency of denomination used by the English courts.

“Since 1973, however, international conditions have been so uncertain and confused that this practice has generally become quite inappropriate. Currency values continue to fluctuate so extensively (and sterling has been so steeply devalued), that no one denomination (let alone sterling), can possibly be of universal application in international disputes. Under these circumstances, it is now clear that if the old sterling judgement rule had survived much longer, London would have rapidly lost importance as the prime international legal centre. This is a point of significance, since it is a legal principle that the English courts are open to the whole world. Under these circumstances, the English courts have become vitally important forums for the adjudication of disputes—having combined this renowned accessibility with an approach to problems (particularly contractual problems) that accords with business commonsense and practice. Obviously, had the old sterling judgements rule persisted for long into the period of floating exchange rates, London would have become a place where international justice could not be properly done.”—“Financial law report: 1” in International Currency Review, Vol. 9, No. 2 (1977), pp. 60–62, at p. 60.

51.

See D. F. Libling, “Questions and Answers (?); Miliangos v. Frank (Textiles) Limited,” Law Quarterly Review, Vol. 93 (April 1977), pp. 212–31.

52.

[1976] A.C. 443, at 467–68.

53.

Barclays Bank International Ltd. v. Levin Brothers (Bradford) Ltd., [1976] 3 All E.R. 900. Section 72(4) of the Bills of Exchange Act 1882 provides that: “If a sum of money expressed in a foreign currency is payable in England, it may be paid either in units of the money of account or in sterling at the rate of exchange at which units of the foreign legal tender can, on the day when the money is payable, be bought in London in a recognised and accessible market, irrespective of any official rate of exchange between that currency and sterling.”—ibid., at p. 907. The court held that this provision referred to payment of a debt under a bill of exchange on the due date and did not prevent application of the Miliangos principle if the debt was not paid on that date, so that judgment could be given in a foreign currency which would be converted into sterling, if paid in sterling, at the rate of exchange on the date of payment of the judgment or of its enforcement. The claim in this case was on bills of exchange, which had been dishonored, that were expressed in U.S. dollars.

54.

See also Lord Denning M. R. in Federal Commerce and Navigation Co. Ltd. v. Tradax Export SA [1977] 2 All E. R. 41, at 51:

“Once it is recognised that judgement can be given in a foreign currency, justice requires that it should be given in every case where the currency of the contract is a foreign currency; otherwise one side or the other will suffer unfairly by the fluctuation of the exchange. In saying this, I rely greatly on the practice of commercial arbitrators in the City of London. When shipping men or merchants abroad, or their brokers, contract on one of the standard forms, the currency of the contract is often in US dollars or some other foreign currency, but the proper law of the contract is English law. Sometimes there is an express provision that it is to be governed by English law. At other times there is a provision for arbitration in the City of London which carries with it an inference that the contract is governed by English law. In all those cases the arbitrators give their awards in the foreign currency, just as they did in Jugoslavenska Oceanska Plovidba v. Castle Investment Co. Inc. And they do so both for debts due and also for damages for breach of contract. If this practice is legitimate, as I am sure that it is, then it must be legitimate for the courts in like cases to give judgment in the foreign currency. Just as the House of Lords were much influenced in Miliangos v. George Frank (Textiles) Ltd. by the practice of arbitrators, so should we also be influenced. So I would hold that in contracts where the currency of the contract is a foreign currency, but the proper law of the contract is English law, the court can and should give judgment in the foreign currency: and this both when it is for a debt due under the contract (as demurrage) or damages for breach of contract (as of the implied term).”

55.

Jean Kraut A.G. v. Albany Fabrics Ltd. [1977] 2 All E.R. 116. In The Folias (The Times, July 16, 1976, p. 11), the French charterers of a vessel owned by a Swedish corporation paid damages to the Brazilian receivers of cargo damaged as a result of failure of the ship’s refrigeration machinery. The charterers spent French francs to obtain Brazilian cruzeiros for this purpose. The charterers claimed damages against the owners under the charter. The question was whether the charterers were entitled to an award in francs or in cruzeiros. The court held that as the charter was governed by English law, the principle of English law must apply that damages for breach of contract must be calculated in the currency in which the loss was incurred unless a contrary intention emerges from the contract. The loss in respect of which the charterers’ claim arose had been incurred in cruzeiros. The terms of the charter, under which the currency of account and payment of hire and other obligations was the U.S. dollar, did not constitute evidence of an intention to displace the principle that damages for breach of contract were to be calculated in the currency in which loss is incurred.

56.

See Margaret Reid, “Industrial Management and the Sterling Crisis: Exports Priced in Foreign Currencies,” Financial Times, June 18,1976, p. 21. Cf. U.S. Congress, Joint Economic Committee, Subcommittee on International Economics, Hearings, How Well Are Fluctuating Exchange Rates Working?, 93rd Cong., 1st Sess., June 20–21, 26–27, 1973 (Washington, 1973), pp. 21, 83, and 88.

57.

Reid, “Industrial Management and the Sterling Crisis” (cited n. 56), p. 21.

58.

After the devaluations and floating of the U.S. dollar, shipowners shied away from long-term charters and tried in some instances to denominate charter payments in currencies other than dollars, notably the currencies of Japan, the Federal Republic of Germany, and Norway. Charterers resisted these tendencies, with the result that charters were for shorter periods and involved higher costs.—U.S. Congress, Joint Economic Committee, Subcommittee on International Economics, Hearings (cited n. 56), p. 7.

59.

Reid, “Industrial Management and the Sterling Crisis” (cited n. 56), p. 21.

60.

See “Insurers and the Currency Question” by the financial editor, The Times (London), June 14,1976, p. 17. For another example of the alleged inability of British industry to protect itself fully against fluctuations in exchange rates, see Janet Porter, “UK Firms Vulnerable to Currency Swings: ICI Official Says Rules Bar Complete Protection,’’ Journal of Commerce, February 17,1977, pp. 1 and 21.

61.

See Reid, “Industrial Management and the Sterling Crisis” (cited n. 56), p. 21.

62.

“In my Budget Speech last year, I referred to the question of tax relief for the extra cost to companies of repaying foreign currency loans where sterling has fallen in value. I have now considered this question fully in the light of the report I have received of the extensive discussions the Inland Revenue subsequently had with those affected.

“As I made clear last year, the arguments for general relief for exchange losses are finely balanced.

“There are major areas where the balance of arguments would be against relief; in these areas there are real problems in distinguishing between different cases and in drawing lines between them.

“Moreover, although the recovery of sterling has reduced potential losses, the sums of tax at stake are considerable. I have had to conclude that since this year there is an urgent need to concentrate on income-tax reliefs, I cannot at the same time propose relief for exchange losses.”—Financial Times, March 30,1977, p. 21. See also “Inland Revenue: Borrowings in Foreign Currency,” New Law Journal, Vol. 126 (October 28, 1976), pp. 1064–65.

63.

The Despina R, The Times (London), February 2, 1977, p. 9. With respect to the currency in which loss is incurred, see The Folias (n. 55). For a decision in which a French Court (Paris Appeal Court, 19th Chamber, March 24, 1973) considered a claim to payment of damages in tort in a foreign currency, see Compagnie des Assurances Maritimes, Aériennes et Terrestres (C.A.M.A.T.) v. Garcia et Soc. Dabi, Revue Critique de Droit International Privé, Vol. 65 (1976), pp. 73–79. All the facts in the case were connected with Algeria, except that the defendant insurance company was French. The court refused to award damages in Algerian currency on the ground that the debtor was domiciled in France. According to a note on the case by Philippe Malaurie, there have been decisions on all sides of the question of the currency to be awarded. Most of them have been connected with contract. These cases lend themselves more easily to the award of foreign currency. The court did not accept the argument that Algerian exchange control regulations prevented payment in French francs under an insurance policy governed by Algerian law and calling for payment in Algeria. The court treated the exchange control regulations as affecting only the modalities of payment and not the substantive claim. Mr. Malaurie notes that “to permit a resident in Algeria to set up an asset in France in this way is not only to throw the insurer’s assets and liabilities out of balance; it also means causing a capital flight to the detriment of Algeria, contrary to Algerian exchange regulations and contrary to what international monetary cooperation should be today.”—Ibid., at p. 78.

64.

Joseph D. Becker, “The Currency of Judgment,” American Journal of Comparative Law, Vol. 25 (Winter 1977), pp. 152–59.

65.

Ibid., pp. 157–58.

66.

F.A. Mann, The Legal Aspect of Money: With Special Reference to Comparative Private and Public International Law, 3rd ed. (Oxford, 1971), pp. 351–52. See also Arthur Nussbaum, Money in the Law: National and International (Brooklyn, 1950), pp. 374–75.

67.

Article 403 of the Civil Code of Japan states: “If the amount of a debt is designated in foreign currency, the debtor may effect payment in Japanese currency at the rate of exchange current at the place of performance.” A Japanese court decided on July 15, 1975 that if the contract gives the obligee the option to demand payment in either yen or a foreign currency, and he chooses the latter, the obligor can pay in yen. If, however, the obligee demands yen, the obligor cannot pay in foreign currency. The court also decided that, if the obligee demands yen in discharge of an obligation payable in U.S. dollars, the rate of exchange at the time of actual payment must be applied. If the obligee does not demand yen but the court awards that currency, the rate of exchange at the end of the oral proceedings is to be applied.—Bank of Okinawa v. Tokai Electric Construction K.K., Hanrei Jiho (No. 782), 19 (Sup. Ct., 3rd P.B., July 15, 1975), Law in Japan: An Annual, Vol. 9 (1976), pp. 158–59.

68.

See The Role of Exchange Rates in the Adjustment of International Payments: A Report by the Executive Directors (Washington, 1970), pp. 40–63.

69.

International Monetary Reform: Documents of the Committee of Twenty (Washington, 1974), p. 11. (Hereinafter referred to as Documents of Committee of Twenty.)

70.

Ibid., p. 12.

71.

Report on Second Amendment, Part II, Chap. C, sec. 13.

72.

See Gold, “Par Value System,” pp. 155–214.

73.

Article IV, Section 1, second.

74.

Article IV, Section 3(a), second.

75.

Article IV, Section 3(b), second.

76.

Decision No. 4232-(74/67), June 13, 1974, Selected Decisions, 8th, pp. 21–30.

77.

Article IV, Section 4(a), original; Article IV, Section 4(a), first.

78.

Decision No. 4232-(74/67), June 13, 1974, Selected Decisions, 8th, pp. 22–23.

79.

Par. 11 of the Joint Declaration issued at Rambouillet on November 17, 1975 at the close of the six-nation economic summit, IMF Survey, Vol. 4 (1975), p. 350.

80.

Executive Board Decision No. 5392 (77/ 63), April 29,1977 (reproduced in Appendix D of this pamphlet).

81.

Article IV, Section 1(ii), second.

82.

Schedule C, paragraph 3, second.

83.

Schedule C, paragraph 8, second.

84.

Schedule C, paragraph 5, second.

85.

Article IV, Section 3, original; Article IV, Section 3, first.

Special Drawing Rights

86.

The Poincaré franc was established by the law of June 25, 1928 under the Poincaré Government of France with a gold content of 65.5 milligrams of gold nine-tenths fine. A gold franc must not be confused with any national franc. See “Air Madagascar,” the Malagasy National Air Transport Company and United Experts, Inc. (S.A. des Experts Réunis) v. Musset (Appeals Court of Madagascar, January 11, 1973), Revue de Droit Uniforme, I (1976), pp. 236–39.

87.

The Germinal franc was established after the French Revolution by the law of March 28,1803 (7 Germinal of year XI of the revolutionary calendar) with a gold content of 10/31 gram, nine-tenths fine.

88.

See Tullio Treves, “Les clauses or dans les conventions internationales sur la responsabilité,” Droit et Pratique du Commerce International, Vol. 2 (1976), pp. 421–48.

89.

A distinction must be observed between regulation of the exchange rate for a currency by reference to a basket of currencies and settlements in a currency on the basis of a unit of account composed of a basket of currencies. See Gold, Floating Currencies, Gold, and SDRs, p. 8, fn. 12. Burma, Guinea, Iran, Jordan, Kenya, Malawi, Mauritius, Qatar, Saudi Arabia, Tanzania, Uganda, Viet Nam, Zaïre, and Zambia have also pegged their currencies to the SDR. See also R. R. Troeller, “Brave New Ways to Stabilise Currencies,” Journal of World Trade Law, Vol. 11 (1977), pp. 213–27.

90.

See Gold, Floating Currencies, Gold, and SDRs, pp. 9–15.

91.

Article XV, Section 2, second.

92.

See Appendix B of this pamphlet; Selected Decisions, 8th, pp. 32–33 (cited n. 6).

93.

Article V, Section 10(a), second.

94.

Article V, Section 11(a), second.

95.

Documents of Committee of Twenty, pp. 18–19.

96.

Article VIII, Section 7, second; Article XXII, second.

97.

Article IV, Section 2(b), second; Schedule C, paragraph 1, second; Report on Second Amendment, Part II, Chap. I, sec. 2.

98.

See paragraph 4 of the Communiqué of the Committee of Twenty, January 18, 1974, Documents of Committee of Twenty, p. 218; Outline of Reform, paragraph 38, Documents of Committee of Twenty, p. 21.

99.

J.J. Polak, Valuation and Rate of Interest of the SDR, IMF Pamphlet Series, No. 18 (Washington, 1974), p. 18.

100.

Cf. U.S. National Advisory Council on International Monetary and Financial Policies, Annual Report to the President and to the Congress, July 1, 1975 - June 30, 1976 (Washington, 1977): “…in its January 1976 meeting in Jamaica the Interim Committee reached a comprehensive agreement combining long-term structural reforms of the international monetary system with measures to meet current financing needs” (p. 25).

101.

Andreas S. Gerakis, “Pegging to the SDR: The Experience of Iran, Jordan, Qatar, and Saudi Arabia,” Finance and Development, Vol. 13 (1976), pp. 35–38.

102.

Note that although the United States, like all other members, must maintain the value of the Fund’s holdings of dollars on the basis of the SDR, under U.S. law appropriations are not necessary for subscriptions or for payments to the Fund in performance of the obligation to maintain the value of the Fund’s holdings of U.S. dollars. The theory on which this conclusion rests is that payments to the Fund involve an exchange of assets. Dollars paid to maintain the SDR value of the Fund’s holdings of dollars maintain the value of the United States’ rights in the Fund. The analogy that is employed is that of a deposit with a bank. Although the concept of the “exchange of assets” had existed since 1968, it began to be employed only when the Fund adopted the basket technique of valuing the SDR and applied this mode of valuation in the General Account with effect from July 1,1974. The daily fluctuation in the values of currencies was a reason for the change.—Hearings on H.R. 13955 (cited n. 14), pp. 31–32. The concept of the “exchange of assets” is applicable to the Fund because of the character of its transactions under its Articles. The concept would not be applicable to all international organizations in which the United States has obligations to maintain the value of the dollars held by the organizations.

103.

See Report on Second Amendment, Part II, Chap. H, sec. 4.

104.

Gold, Floating Currencies, Gold, and SDRs, pp. 45–48.

105.

See, for example, Article VII of Montreal Protocol No. 4 to Amend the Convention for the Unification of Certain Rules Relating to International Carriage by Air, signed at Warsaw on October 12, 1929:

“In Article 22 of the Convention—

…d. after paragraph 5 the following paragraph shall be inserted: ‘6. The sums mentioned in terms of the Special Drawing Right in this Article shall be deemed to refer to the Special Drawing Right as defined by the International Monetary Fund. Conversion of the sums into national currencies shall, in case of judicial proceedings, be made according to the value of such currencies in terms of the Special Drawing Right at the date of the judgment. The value of a national currency, in terms of the Special Drawing Right, of a High Contracting Party which is a Member of the International Monetary Fund, shall be calculated in accordance with the method of valuation applied by the International Monetary Fund, in effect at the date of the judgment, for its operations and transactions. The value of a national currency, in terms of the Special Drawing Right, of a High Contracting Party which is not a Member of the International Monetary Fund, shall be calculated in a manner determined by that High Contracting Party.

“‘Nevertheless, those States which are not Members of the International Monetary Fund and whose law does not permit the application of the provisions of paragraph 2(b) of Article 22 may, at the time of ratification or accession or at any time thereafter, declare that the limit of liability of the carrier in judicial proceedings in their territories is fixed at a sum of two hundred and fifty monetary units per kilogramme. This monetary unit corresponds to sixty-five and a half milligrammes of gold of millesimal fineness nine hundred. This sum may be converted into the national currency concerned in round figures. The conversion of this sum into the national currency shall be made according to the law of the State concerned.’”

106.

A.H.E. Popp, “Air Law - Warsaw Convention - International Conference -Recent Developments,” Canadian Bar Review, Vol. 54 (1976), pp. 438–49.

107.

The daily tabulation by the Fund of the valuation of the SDR in terms of currencies includes the Swiss franc. A footnote to the tabulation reads as follows: “Based on representative rates received in the Fund prior to 1:30 p.m. each day, except for the Swiss franc rate which is based on rate for U.S. dollar in Zurich as supplied by the Swiss National Bank and the United States dollar which is derived directly from the ‘basket’.”

108.

Cf. n. 107.

109.

See Paul P. Heller, “The Warsaw Convention and the Two-Tier’ Gold Market,” Journal of World Trade Law, Vol. 7 (1973), pp. 126–29. Mr. Heller has elaborated his views in “The Value of the Gold Franc —A Different Point of View,” Journal of Maritime Law and Commerce, Vol. 6 (1974), pp. 73–103.

110.

Resolution 013, adopted effective September 1, 1975. See Gold, Floating Currencies, Gold, and SDRs, pp. 49–51.

111.

International Air Transport Association, News, released on February 16, 1977, in Geneva, Switzerland.

112.

Intergovernmental Maritime Consultative Organization, Press Release (IMCO/23/1976), October 26, 1976.

113.

Nederlandse Jurisprudentie, 1972, No. 269, pp. 728–38.

114.

European Transport Law, Vol. 9 (1974), pp. 701–10.

115.

Gold, Floating Currencies, Gold, and SDRs, pp. 17–33.

116.

Joseph Gold, The Fund Agreement in the Courts: Parts VIII-XI (Washington, 1976), p. 115. (Hereinafter referred to as Gold, Fund Agreement in Courts: Parts VIII-XI)

117.

Gold, Floating Currencies, Gold, and SDRs, p. 38.

118.

IMCO Press Release (IMCO/23/1976), October 26, 1976 (cited n. 112).

119.

UN General Assembly, DOC. A/CN. 9/9/C. 1/SR.10, April22, 1976.

120.

UN General Assembly Resolution 31/100, December 15, 1976.

121.

See Gold, Floating Currencies, Gold, and SDRs, pp. 39–40.

122.

International Telecommunication Convention, Art. 8.

123.

Ibid., Art. 5, Sec. 4(d) and Art. 11, Sec. 1(2).

124.

Z. Caha, “Decisions of the Universal Postal Union,” in The Effectiveness of International Decisions, edited by Stephen M. Schwebel (Leyden, 1971), pp. 290–303, at pp. 292–93.

125.

Ibid., p. 291.

126.

Constitution of the Universal Postal Union, Art. 7.

127.

Detailed Regulations of the Universal Postal Convention, done at Lausanne, July 5, 1974, Art. 103.

128.

Ibid., Art. 103 (12).

129.

Resolution C27 of the Universal Postal Union on Rules for Payment (Proposal 2500.2, Committee 2, 5th meeting, Congress —Doc. 138,20th Plenary Meeting).

130.

cept is a “Restricted Union” within the meaning of Article 8 of the Constitution of the upu, i.e., member countries or their postal administrations that make Special Agreements “concerning the international postal service, provided always that they do not introduce provisions less favourable to the public than those provided for by the Acts [of the upu] to which the member countries concerned are parties.” The members of cept are the postal and telecommunications administrations in 26 European countries that aim at establishing closer relations and harmonizing and improving their administrative and technical services within the spirit of the upu and itu Conventions. With respect to telecommunications, see Art. 31 (“Special Arrangements”) of the International Telecommunication Convention, 1973.

131.

Gold, Floating Currencies, Gold, and SDRs, pp. 58–62.

132.

Article XII, Section 6(f), second.

133.

Article V, Section 12(h), second.

134.

Article V, Section 12(h), second; Article XII, Section 6(f)(iii), second.

135.

Article V, Section 12(f), second.

136.

Article V, Section 2(b), second.

137.

Instrument to Establish the Trust Fund, sec. II, para. 4(c). (Decision No.5069-(76/72), May 5, 1976, Selected Decisions, 8th, p. 190); also sec. Ill, par. 1, pp. 191–92.

138.

Cf. General Arrangements to Borrow, which is an example of resources lent to the Fund not for a special purpose in the sense of Article V, Section 2(b) of the proposed second amendment, but for the ordinary transactions of the Fund.

139.

Dahomey (now Benin), The Gambia, Ghana, Guinea, Guinea-Bissau, Ivory Coast, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone, Togo, and Upper Volta (International Legal Materials, Vol. 14 (1975), pp. 1200–1209).

140.

See “ECOWAS Count-down,” West Africa, February 14, 1977, pp. 322–23.

141.

“Convertible currency” means currency declared as such by the Fund and shall include the currencies of the United States, the United Kingdom, the Federal Republic of Germany, France, Japan, Sweden, Switzerland, and the Netherlands and such other currencies as the Council of Ministers of the ECOWAS may designate from time to time after consultation with the Fund.

142.

Cf. Appendix to Resolution X of the Conference of Ministers for Foreign Affairs of Non-Aligned Countries, Lima, August 25–30, 1975 (NAC/FM/ CONF. 5/15, Annex I), Convention Establishing the Solidarity Fund for Economic and Social Development in Non-Aligned Countries, the broad purpose of which would be to further cooperation and mutual assistance among its member countries in order to accelerate their economic and social development. Under Article (7) the subscribed capital and shares would be expressed in SDRs or in “units of SDRs.” Payments for the shares would be payable “in freely convertible currencies on the basis of the exchange rate linking such currencies to SDRs units on the day of payment.”

143.

UN General Assembly, DOC. A/CONF. 73/15, August 4, 1976.

144.

Prospectus issued by the International Bank for Reconstruction and Development, June 29, 1976, pp. 4–5.

145.

Bank of Finland, Monthly Bulletin, Vol. 50, No. 12, pp. 1–2.

146.

Statutes of the Nordic Investment Bank, par. 4.

147.

Ibid., par. 9.

148.

Ibid., par. 7(e).

149.

Nordiska Rådet, Ministerråds förslag om upprättande av en nordisk investeringsbank, 1: a extra sessionen 1975, p. 5. [Nordic Council, Recommendation of the Ministerial Council to Establish a Nordic Investment Bank].

150.

Agreement on Short-Term Foreign-Exchange Assistance between the central banks in Denmark, Finland, Iceland, Norway, and Sweden, par. 7 and 10, Danmarks Nationalbank, Report and Accounts for the Year 1975 (Copenhagen), Annex 5, pp. 95–96.

151.

European Convention on Products Liability in Regard to Personal Injury and Death, Appendix, International Legal Materials, Vol. 16 (1977), pp. 7–12, at p. 12.

152.

Ursula Wassermann, “Council of Europe: Products Liability Convention,” Journal of World Trade Law, Vol. 11 (1977), pp. 192–96, at p. 195.

153.

Proposal for a Council Directive relating to the approximation of the laws, regulations, and administrative provisions of the Member States concerning liability for defective products, presented by the Commission to the Council on September 9, 1976 (Bulletin of the European Communities, Supp. 11/76).

154.

Decision No. 3289/75/ECSC of the Commission, December 18, 1975 on the definition and conversion of the unit of account to be used in decisions, recommendations, opinions, and communications for the purposes of the Treaty Establishing the European Coal and Steel Community (Official Journal of the European Communities, Vol. 18, No. L327, December 19, 1975, p. 4).

155.

Explanatory memorandum, par. 26 (Bulletin of the European Communities, Supp. 11/76):

“The new European unit of account used to determine the maximum limits of liability is an average variation in value of all currencies of the Member States. By using this unit of account it is possible to solve the monetary problems which arise as a result of the fact that the exchange rates of the various currencies involved change daily.

“This latter fact, in combination with the circumstances that the calculation of the equivalent in national currency is necessary only at the point of time when the amount of damages is fixed, either by agreement or by judicial decision, indicated that it was appropriate to adopt that point of time as the time when the European unit of account should be converted into the relevant national currency. A fixing generally of a specific date for conversion of the European unit of account into national currencies would involve the danger that the relative values of the currencies would change again between the date so specified and the day on which the damages were awarded.

“In an age where purchasing power of all currencies is steadily being eroded it is necessary to adjust from time to time the specified maximum limits of liability in order to maintain their value at the level laid down in the directive. A period of three years appeared to be appropriate. Therefore, a clause has been provided for paragraph 5 of Article 7 which takes these matters into consideration.”

Gold

156.

Article V, Section 10, second.

157.

Article XV, Section 2, second.

158.

Schedule B, paragraph 7(a), second.

159.

Schedule B, paragraph 7(b), second.

160.

Article V, Section 12(e), second.

161.

Article V, Section 12(c), second.

162.

Article V, Section 12(f)(i) and (ii), second. See also (iii) for a further use.

163.

Article V, Section 12(g), second.

164.

Schedule K, paragraph 2(a), second.

165.

Schedule B, paragraphs 2 and 3, second.

166.

Article V, Section 12(a), second.

167.

Article V, Section 12(c), second.

168.

Article V, Section 12(d), second.

169.

Article IV, Section 2(b), second. See Report on Second Amendment, Part II, Chap. I, sees. 1 and 2.

170.

Schedule C, paragraph 1, second.

171.

Communiqué of the Bank of France, January 16,1975 (Banque de France, Bulletin Trimestriel, No. 14, February 1975, pp. 42–43). This practice is not followed in the tabulation of the gold holdings of France in the Fund’s publication, International Financial Statistics (Vol. 30, No. 4, April 1977, p. 146, n.). Gold continues to have an official price of SDR 35 per fine ounce for the purposes of the Articles until they are amended. Members may sell gold in the market at a premium above the official price but not to another member under the present Articles. According to the Fund’s Annual Report of the Executive Directors for the Fiscal Year Ended April 30, 1975 (Washington, 1975), “it is not possible to put any precise numerical value on the contribution that members’ gold holdings make to their ability to meet payments deficits” (p. 40).

172.

Banca d’ltalia, Assemblea Generale Ordinaria dei Partecipanti, 1974, p. 203.

173.

The Invitation to Bid recognizes expressly that the Bank for International Settlements may bid, but this recognition does not derogate from the prohibition of bids by agents on behalf of members at prices inconsistent with the Articles.

174.

9 & 10 Eliz. 2 c. 27. See also the Carriage by Air Act (Supplementary Provisions), 1962 (10 & 11 Eliz. 2 c. 43), which gives the force of law to the Guadalajara Convention.

175.

Sec. 4 (4) of the Carriage by Air Act 1961; Art. 6 of the Carriage by Air Acts (Application of Provisions) Order 1967.

176.

Sec. 4(1) of the Carriage by Air Act 1961.

177.

The Carriage by Air (Sterling Equivalents) Order 1973 (S.I. 1973/1189).

178.

The Carriage by Air (Sterling Equivalents) Order 1974 (S.I. 1974/528).

179.

The Carriage by Air (Sterling Equivalents) Order 1975 (S.I. 1975/1613).

180.

On the same dates, the Fund’s holdings of sterling were computed on the basis of $2.2575, $2.2575, and $1.76711 per pound sterling.

181.

S.I. 1974/528. The earlier Order (S.I. 1973/1189) referred to $42,222. See precise numerical value on the contribution that members’ gold holdings make to their ability to meet payments deficits” (p. 40).

182.

Gold, “Par Value System,” pp. 191–98.

183.

See Report on Second Amendment, Part II, Chap. C, sec. 6.

184.

Canada, House of Commons, Thirtieth Parliament, 2nd Sess., 25 Elizabeth II, 1976, Bill C-5, An Act to amend the Currency and Exchange Act and to amend other Acts in consequence thereof, First reading, October 21, 1976.

185.

Article IV, Section 2(b), second.

186.

P. L. 94–564, 94th Cong., Bretton Woods Agreements Act, Amendments, Section 8, 90 Stat. 2660, at p. 2661.

187.

See Maxwell on the Interpretation of Statutes, 12th ed., by P. St. J. Langan (London, 1969), p. 40:

“The mischief rule. In Hey don’s Case, in 1584, it was resolved by the Barons of the Exchequer (at p. 7b) ‘that for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered: (1st). What was the common law before the making of the Act. (2nd). What was the mischief and defect for which the common law did not provide. (3rd). What remedy the Parliament hath resolved and appointed to cure the disease of the commonwealth. And, (4th). The true reason of the remedy; and then the office of all the Judges is always to make such construction as shall suppress the mischief, and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief, and pro privato commodo, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publico.’ In 1898, Lindley M. R. said: ‘In order properly to interpret any statute it is as necessary now as it was when Lord Coke reported Hey don’s Case to consider how the law stood when the statute to be construed was passed, what the mischief was for which the old law did not provide, and the remedy provided by the statute to cure that mischief.’ Although judges are unlikely to propound formally in their judgments the four questions in Heydon’s Case, consideration of the ‘mischief or object of the enactment is common, and will often provide the solution to a problem of interpretation.”

188.

Re Motor Ship “Saga” (Lower Court, Göteborg, Sweden, October 2, 1973). See also Gold, Floating Currencies, Gold, and SDRs, pp. 30–31.

189.

Judgment No. 256/1974 (Court of Appeals, Athens, Greece, January 10, 1974). See also Gold, Floating Currencies, Gold, and SDRs, pp. 30–31.

190.

Nederlandse Jurisprudentie, 1972, No. 269, pp. 728–38. See also Gold, Fund Agreement in Courts: Parts VIII-XI, pp. 110–21; Gold, Floating Currencies, Gold, and SDRs, pp. 22, 30, and 31.

191.

European Transport Law, Vol.9 (1974), pp. 701–10. See also Gold, Floating Currencies, Gold, and SDRs, pp. 17–21, 24–25.

192.

Matter of the Khendrik Kuivas, Hamburg District Court, Div. 64, Ref. No. 64 SRV 6/76.

193.

See p. 33.

194.

Gold, Floating Currencies, Gold, and SDRs, pp. 17–21.

195.

Matter of the Khendrik Kuivas (cited n. 192).

196.

48 Stat. 112. See Appendix E of this pamphlet.

197.

P.L. 93–373, Sec. 2(b), 88 Stat. 445.

198.

U.S. Congress, Senate, Committee on Foreign Relations, U.S. Participation in ADB and IDA, Hearings on S. 2193, S. 2665, and S. 2666, 93rd Cong., 1st Sess., November 19, 1973 (Washington, 1974), p. 19. See also paragraph 2 of the letter dated April 12, 1977 from Anthony Solomon, Under Secretary of the Treasury for Monetary Affairs, to Congressman Henry Reuss:

“This Administration fully shares the view that the international monetary role of gold should be progressively diminished and eventually eliminated. The actions being taken pursuant to the Jamaica agreement—the sales of IMF gold and the amendments to the IMF Articles dealing with gold—are important steps toward this objective. I would point out also that there have been no efforts of which we are aware on the part of countries to ‘peg’ the price of gold or to utilize gold in settlements among monetary authorities, possibilities that had been of concern to some both before and following the Jamaica agreement.”

199.

Robert S. Getman, “The Right to Use Gold Clauses in Contracts,” Brooklyn Law Review, Vol. 42 (1976), pp. 479–526.

200.

Equitable Life Assur. Soc. of U.S. v. Grosvenor, 426 F. Supp. 67 (1976). The defendants argued that the words “or otherwise dealing with gold” authorized the use of gold clauses. The court held, however, that: “The Repealing Act is a statute which was intended to again allow citizens to buy, sell, hold and deal with gold as a commodity but not to use it as an index of value to measure obligations. The two statutes are not irreconcilable. Citizens may now deal with gold as a commodity—buying, selling and holding it, contracting on futures and generally dealing with it as they would cotton or other commodities. However, Congress did not repeal the prohibition against its use as an index of value to measure obligations unrelated to their dealings in it.”—Ibid., at p. 72.

201.

See U.S. Congress, House, Committee on Banking and Currency, Subcommittee on International Finance, To Delay Until July 1,1975, the Date for Removing Restrictions on Private Ownership of Gold, Hearings on H.R. 17475, 93rd Cong., 2d Sess., December 3 and 5, 1974 (Washington, 1974), p. 8. See also Deak-Perera Report, Vol. 2, No. 15 (First August 1976 Issue), p. 1, for a discussion of litigation (Wall Street Journal, July 16, 1976, p. 18) in which it is being argued that the Joint Resolution has been abrogated and that gold-value clauses in obligations issued in 1927 and 1931 can now be enforced. The Report notes the opinion that Congress would not repeal the Resolution if the effect were to restore the enforceability on the basis of the current market price of gold of gold-value clauses entered into in the past.

202.

U.S. Congress, Senate, Committee on Banking, Housing and Urban Affairs, Subcommittee on International Finance, Amendments of the Bretton Woods Agreements Act, Hearings on H.R. 13955,94th Cong., 2d Sess., August 27, 1976 (Washington, 1976), pp. 160–61. For the views of other witnesses, see pp. 124–25. See particularly the testimony of Mr. Jack Bennett, a former Under Secretary of the Treasury, whose views were consistent with those of Mr. Yeo, but who was even more explicit about his concern that “some of the company the proposal keeps” suggested that it was related to an effort to restore the gold standard (p. 124).

The view of Dr. Arthur Burns, Chairman of the Federal Reserve Board, is expressed in a letter to Senator Helms, dated June 2, 1976, which contains the following passage: “In December 1974,1 testified on behalf of the Board in favor of a bill that would have postponed the date when U.S. citizens would be permitted to deal in gold without a Treasury license. While the Board favored restoring to U.S. citizens the right to deal in gold, it was concerned that removal of restrictions on private trading in gold at that time might have an adverse impact on an already strained financial situation. Fortunately, this did not happen. In the past year and a half our financial institutions and markets have strengthened markedly, and economic recovery is well under way.

“In light of the changed circumstances, I personally would not object to legislative action that would permit private citizens to make contracts containing legally-enforceable gold clauses. However, the Board is split on the advisability of such action. Our discussions have suggested that opinions on this subject may vary widely, and that hearings could be helpful in fully exploring the advantages and disadvantages of permitting the use of gold clauses. The Federal Reserve would be pleased to assist the Congress in this deliberation.”—U.S. Congressional Record, Vol. 122, No. 91, June 14, 1976, pp. S 9127–28.

According to the Deak-Perera Report, Vol. 2, No. 15 (First August 1976 Issue), p. 2, “Even Secretary Simon has had a change of heart on this matter. On August 5 he told us that he agrees with Burns’ turnaround. ‘I couldn’t care less,’ he said, ‘whether the gold clause bill is passed or not?”

203.

U.S. Congressional Record, Vol. 122, No. 91, June 14,1976, p. S 9128. For another effort to repeal the Joint Resolution, see H.R. 6983 of May 6, 1977 (95th Cong., 1st Sess.):

“… nothing shall prohibit any contractual provision which gives the obligee the right to require payment by the obligor in gold, in gold coin, or in an amount of currency measured by the value of gold or gold coins.”

204.

See Gold, Floating Currencies, Gold, and SDRs, pp. 66–71; Deak-Perera Report, Vol. 2, No. 16 (Second August 1976 Issue), pp. 2–3.

205.

Canada, House of Commons, Thirtieth Parliament, 2nd Sess., 25 Elizabeth II, 1976, Bill C-5, An Act to amend the Currency and Exchange Act and to amend other Acts in consequence thereof, First reading, October 21, 1976. Gold clauses and gold-value clauses continue to be void. See Jean-R. Garon and Jean-Claude Royer, “Les effets de la dépréciation monétaire sur les rapports juridiques contractuels en droit commercial canadien et québecois,” Canadian Bar Review, Vol. 50 (1972), pp. 389–419.

See also the Resolution of the 57th Conference of the International Law Association adopted in Madrid, August 29-September 4, 1976:

“RESOLUTION

“The Conference of the International Law Association held at Madrid, on the proposal of the Committee on International Monetary Law and having regard to the Report of that Committee;

“Considering that the proposals for international monetary reform are not such as to eliminate monetary hazards, while international transactions in the fields of trade, services and capital movements, both non-governmental and in a public international law context, presuppose a minimum of legal certainty concerning their monetary aspect;

“Considering that coverage of exchange risks may be obtained by a number of traditional legal and factual devices, notably by recourse to the forward money market;

“Considering that the current international monetary situation increases the difficulties ensuing both in the interpretation of existing value and, in particular, gold clauses in private transactions as well as in international conventions, and the drafting of any such clause in the future, while some units of account have been developed (and, in particular, the I.M.F. Special Drawing Right definition effective July 1, 1974) that provide a considerable degree of value stability in terms of the most important currencies, and whose administration is entrusted to appropriate international organizations, and that they could prove useful, in particular, for long-term international operations.

“I. Recommends

“1. Governments should encourage the introduction of combination-of-currencies units of account devoid of a link to gold and, where such units have been introduced already for world-wide application, as for example in the International Monetary Fund by the definition of the Special Drawing Right effective July 1, 1974, or for use in a regional or economic grouping, as for example in the European Communities the E.C. unit of account, should maintain the validity of those units.

“2. States, are invited to uphold existing value clauses in private international contracts and should, in any event, abstain from retroactively encroaching on such clauses, while courts and arbitrators, as far as it is in their power, should abide by the same principle without prejudice to other value clauses.

“II. Suggests

“Parties are well advised to prefer for the time being the kind of value clause based on combination-of-currencies units of account now in use in the I.M.F. and the European Communities in lieu of the reference to gold in its several forms.

“III. Requests

“The Committee on International Monetary Law to continue its work on value clauses in international operations, including a study of model clauses, and to report again at the next General Conference of the International Law Association, taking into account the possible need for adjustment where a unit of account based on a combination of currencies and resorted to in an international operation should cease to exist or be modified.”

206.

Treseder-Griffin and Another v. Co-operative Insurance Society Ltd. [1956] 2 Q.B. 127.

207.

Ibid., at p. 144.

208.

Ibid., at p. 145.

209.

Multiservice Bookbinding Ltd. and Others v. Marden, The Times (London), May 12, 1977, p. 10.

210.

Section 6 of The Coinage Act, 1870 of the United Kingdom was similar to the Canadian Currency and Exchange Act, Sec. 12(1), which is to be amended as noted. Sec. 6, which reads as follows, was repealed by the Decimal Currency Act, 1969 (1969 c. 19):

“Every contract, sale, payment, bill, note, instrument, and security for money, and every transaction, dealing, matter, and thing whatever relating to money, or involving the payment of or the liability to pay any money, which is made, executed, or entered into, done or had, shall be made, executed, entered into, done and had according to the coins which are current and legal tender in pursuance of this Act, and not otherwise, unless the same be made, executed, entered into, done or had according to the currency of some British possession or some foreign state.”

211.

Article XIX, Section 2(c), second.

212.

Article XVII, Section 3, second.