An important feature of the Articles of Agreement of the International Monetary Fund is the power which is conferred upon the Fund to adopt final interpretations of its charter. This power is to be found in Article XVIII:
The Articles of Agreement (Articles) of the International Monetary Fund (IMF) and the practices of the IMF under that treaty are the principal sources of public international law on the exchange rates of the currencies of member states (members) of the IMF. By the end of September 1990, there were 154 members, among which a great variety of political and economic systems were represented. The most notable nonmembers were the Union of Soviet Socialist Republics and Switzerland, but the latter country and a number of other countries have applied for membership.
The fluctuation of exchange rates has given rise to problems of allocating the advantage or disadvantage resulting from changes in exchange rates. In one situation, the problem is bilateral, arising between the parties to a transaction or series of transactions. In the case of disagreement between them on the appropriate exchange rate for settlement when there are two or more possible rates, the advantage that one party enjoys because of the rate that is chosen is matched by the correlative disadvantage suffered by the other party. This kind of problem arises in many forms between the parties to a contract. Sometimes, the judicial solution of a problem may depend on interpretation of the contract.1 In other cases, the outcome may depend on the interpretation of an international convention,2 or the way in which a particular legal concept, such as restitutio in integrum, is applied.3 In some cases, courts have relied on the proposition that a party should have taken steps to protect itself against exchange risk in accordance with the normal practice of the trade in which the transaction or transactions occur.4 It may even be possible to imply a term that a party is to behave in this way.
It has been suggested on occasion that the Fund should take an initiative in issuing formal interpretations more frequently. This suggestion has been made in connection with Article VIII, Section 2(b), on the ground that this provision has an impact on the rights and obligations of private parties and the courts have not been expert in their understanding of it. The interpretations that are referred to in this connection are not confined to the text of Article VIII, Section 2(b), but include interpretations of other provisions that may be necessary in order to enable the courts to apply Article VIII, Section 2(b). The point has been made most recently in connection with the litigation involving a vast number of life insurance policies issued to Cuban residents by U.S. and Canadian companies that had been doing business in Cuba.72 The policyholders became refugees after the present regime came to power in Cuba, and then sued on the policies in courts in the United States and Canada. One of the defenses advanced by the insurance companies was the argument that the new regime had adopted exchange control regulations which prevented payment to the policyholders outside Cuba. The companies argued that the courts were bound by Article VIII, Section 2(b), to recognize these regulations. The cases undoubtedly raised many difficult issues of the interpretation of Article VIII, Section 2(b), and other provisions of the Articles. No one of the three members that had some connection with the litigation, Canada, Cuba, and the United States, requested an interpretation, and the Fund volunteered none. In response to requests by counsel for a number of litigants, the Fund did provide a statement which dealt in general terms with the sole question of the consistency of Cuban exchange control regulations with the Articles.73