The breakdown of the par value system of the original Articles of the Fund and the failure of the Fund’s efforts to substitute a comparable system based on central rates are producing widespread effects in international and domestic law. Some of the consequences have been discussed in this pamphlet. The drafters of new legislation must take account of the existing situation, even if the legislation is not related to the Fund. The courts are called upon to interpret contracts that refer to par values in circumstances in which they will continue to exist according to the law of the Fund until the second amendment of the Articles becomes effective but in which they are irrelevant to actual exchange rates. Unsettled monetary conditions have contributed to the spread of “hardship clauses” in contracts. This phenomenon is seen as one that blurs the distinction between the formation and the execution of a contract and that modifies the principle that a contract establishes immutable rights and obligations between the parties. The contract establishes a relationship that produces adaptations of the contractual terms.
The proposed second amendment of the Articles of Agreement is responsible for three classes of legislation that members of the Fund have adopted or are in the process of adopting. The first and most obvious class is legislation that amends the member’s Bretton Woods legislation in order to authorize the member to accept the proposed second amendment of the Articles and to enable it to perform its obligations under the Articles when amended. The second class also is legislation that was to be expected. It consists of measures to modify or abrogate the domestic law by or under which a par value for the member’s currency is established. The third class consists of a variety of measures that are considered necessary or desirable because of the changes introduced by the other two kinds of legislation. For example, the amendment of the Bretton Woods Agreements Act of the United States,10 which is to take effect on the occasion of the proposed second amendment of the Articles, has modified the Gold Reserve Act of 1934 (31 U.S.C. 405b).11
This paper examines legal developments in area of floating currencies, special drawing rights, and gold in the IMF. It highlights that the breakdown of the par value system of the original Articles of the IMF and the failure of the IMF’s efforts to substitute a comparable system based on central rates are producing widespread effects in international and domestic law. The floating of sterling has been an impetus to the reversal of the ancient rule that English courts can give monetary judgments only in sterling. It has also influenced the choice of the exchange rate on the day when payment is actually made.
The section above, entitled Special Drawing Rights, deals to a large extent with efforts to find a suitable unit of account in lieu of gold or a unit of account based on gold for the purposes of a growing number of treaties. This section deals with certain problems connected with gold-value and other value clauses. Some of these problems arise under domestic legislation that gives effect to treaties that are going to be amended or supplanted but were still in force without change on the date relevant to the problem under consideration. The domestic legislation continued, therefore, to refer to gold value.
The changes that have occurred in international monetary arrangements in the period since August 15, 1971 have provoked novel problems of international and domestic monetary law. It is useful to recall briefly some of the main events:
A number of units of account defined in terms of gold can be found in treaty law, among them the Poincaré franc,86 the Germinal franc,87 the U.S. dollar of a certain date, or a unit of account so defined as to be equivalent to the gold value of the U.S. dollar from time to time.88 Changes in the international monetary system have provoked a ferment of activity in the search for a unit of account in substitution for units based on gold. This activity is occurring among states in connection with treaties that give expression to existing or new agreements, among national technical departments and entities which, though official, do not engage the responsibility of states as such, and among nonofficial entities that participate in transnational activities.