The Fund Agreement in the Courts-VIII

International Monetary Fund. Research Dept.
Published Date:
January 1964
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THIS ARTICLE discusses six cases, in most of which basic questions of law under the Articles of Agreement of the International Monetary Fund were raised. Two cases decided by German courts dealt with the unenforceability of certain exchange contracts; a case in New York and another in the Philippines involved exchange surrender requirements; a fifth case, decided in Brazil, considered multiple rates of exchange; and the last case, decided by the courts of the District of Columbia, dealt with the privileges and immunities of the Fund.

Unenforceability of Certain Exchange Contracts

Hamburg Court of Appeals

On July 7, 1959, the Court of Appeals (Oberlandesgericht) of Hamburg delivered a judgment that involved a discussion of Article VIII, Section 2(b).1 The plaintiff company, a resident of the Federal Republic of Germany, agreed in June and July 1957 to sell a number of pinball gambling machines to the defendant, a resident of the Saar Territory, under invoices expressed in deutsche mark, and brought this action for the unpaid price. The plaintiff claimed that the defendant had agreed to take delivery of the machines at a railroad depot in German territory, but had failed to do this. The defendant replied that the contract was void because a regulation of June 4, 1958 of the Ministry of Commerce, Traffic and Agriculture of the Saar Territory prohibited the importation of the gambling machines into the Saar Territory. In addition, a license was required under foreign exchange legislation, but had not been obtained.

The Court gave judgment for the plaintiff on the ground that the contract was for the delivery of the machines within German territory, and importation into the Saar Territory was solely at the risk of the defendant. For this reason, the regulations of the Saar Territory did not affect the validity of the contract. Although this reasoning was sufficient to dispose of the case, the Court went on to give other reasons for its opinion. Even if the contract did provide for importation of the machines into the Saar Territory, the regulation of June 4, 1958 provided only that a license was necessary for the movement of goods across the border, and an importation without license was a customs violation. The regulation did not apply to the underlying contract, and, therefore, the contract was not rendered invalid by the absence of a license.

Passing to the argument based on exchange control, the Court held that the regulations in force in the Saar Territory were foreign law. Under the Agreement of October 27, 1956 between the Federal Republic and France, the economic reintegration of the Saar Territory into the former had been postponed, and in the interval French foreign trade and exchange control was to continue to apply to the Saar Territory as French and not as German law. The Court then continued as follows:

Since foreign law is involved, it is irrelevant whether the defendant’s payments obligation is contrary to a prohibition of French exchange control. For the latter is not to be taken into consideration by a German judge, since it involves foreign public law (cf. RGZ 156, 158 [160], also RGZ 108, 241 [243]). Nor can any other result be derived for this case from the Bretton Woods Agreement, to which the Federal Republic of Germany has acceded (Articles of Agreement of the International Monetary Fund of July 1944, BGB1. 1952 II 728). Article VIII, Paragraph 2b of the Agreement contains the following provision:

“Exchange contracts which involve the currency of any member and which are contrary to the exchange control regulations of that member maintained or imposed consistently with this Agreement shall be unenforceable in the territories of any member.”

The interpretation of this provision, especially of the concept “exchange contract” is very controversial. If it is held to mean that in the case of “exchange contracts” the German judge must abide by prohibitions of foreign exchange control regulations, which is also controversial (cf. Hjerner, Frâmmande Valutalag och International Privatrâtt 42; Bûlck, Jahrbuch für internat. Recht V, 119), there still does not exist any reason to abide by French payment prohibitions that may exist; for no “exchange contract” is involved in this case. If one gives this concept a narrow interpretation and limits it to transactions involving exclusively foreign exchange, i.e., international means of payment, (for the controversy regarding interpretation refer to Mann, JZ 1953, 444; Nussbaum, Money in the Law 542 f.; Bûlck, idem 116; Hjerner, idem 43–46), then no reasoning is required. But even if one accepts a broader interpretation and includes under “exchange contracts” all transactions that in any manner affect the exchange holdings of a member country, this concept does not cover per se the sale of goods for money. If as in the case in question the contractual commitment of the nonresident is solely a money debt without the debt or being required to make payment in a particular manner that would affect the exchange holdings of the country, there can even under the broadest interpretation of the term be no question that an international purchase of goods is not an “exchange contract” pursuant to Article VIII.

Accordingly, in this case only German exchange control legislation is applicable, which, in accordance with the opinion under 2(a), does not obstruct the payment obligation of the defendant.2

There are three comments that must be made on this passage from the Court’s opinion. The first is that the “narrow interpretation” of “exchange contracts” as involving only means of payment rests on a reading of the provision which is neither exclusive nor necessary. After the learned international discussions of the last decade or more, this reading can be taken seriously only if the normal scope of exchange control and the purpose of Article VIII, Section 2(b), in the Fund Agreement are ignored. Secondly, the Court qualified the assumption that the “broader interpretation” covered contracts for the sale of goods with the proviso that a contract of this kind must affect the exchange resources of the member whose exchange control regulations are involved. However, the further elaboration of this point is not clear. Apparently, the Court did not consider that a member’s currency was involved if the contract between a resident and a nonresident merely called for payment without requiring payment in “a particular manner that would affect the exchange holdings” of the member. This is obscure because it is indicated in the report that the invoices for the machines were in deutsche mark. If this meant that payment had to be made in that currency, the exchange resources of the Saar Territory were affected because discharge of the defendant’s obligation would directly reduce those exchange resources. However, the exchange resources of the Saar Territory were affected by any obligation of the resident defendant to make payment to the nonresident plaintiff, whether or not a currency of payment was specified by the contract. If any foreign currency was specified, the effect was obvious, as already explained. If the domestic currency of the Saar Territory was specified, the exchange resources of the Saar Territory were affected because the nonresident’s holding of the currency would represent a charge against the economy of the Saar Territory that could be realized either by the conversion of the currency or by its use to acquire goods or services there for which foreign exchange might have been earned. If payment were made in either foreign or domestic currency under a contract that did not specify the currency of payment, the effect would be exactly the same as payment pursuant to a term specifying payment in the currency in which it was in fact made. Obviously, payment would have to be made in some currency, and a conclusion that payment in one currency affected exchange resources but payment in another did not could be accepted only by ignoring the economics to which the Fund Agreement gives a legal formulation. It will be seen that the views of the majority of the New York Court of Appeals in the Banco do Brasil case, discussed below, are open to the same criticism. However, it is a strange fact that whereas the majority of the New York Court doubted whether there was an exchange contract where a foreign currency was the currency of payment, the opinion of the Hamburg Court is open to the interpretation that this same doubt was expressed because the contract did not unequivocally call for payment in a foreign currency.

It is also possible that the Hamburg Court had another theory in mind in holding that there was no adequate demonstration of the fact that the exchange resources of the Saar Territory were affected. This is suggested by the fact that, as noted, the invoices were in deutsche mark. Perhaps the Court felt that if the defendant had deutsche mark balances in Germany, his disposition of them would not affect the exchange resources of the Saar Territory. This would not be correct. Whether or not there is exchange control, but clearly if there is control, the foreign exchange resources of residents are resources of the country in which they reside. These are resources that can be mobilized, and their character as resources of the country is not changed if they are not centralized but allowed to remain in private hands for use in accordance with exchange control regulations.

The third comment is that the Court concluded that the issue in connection with Article VIII, Section 2(b), was whether the contract between the parties was an “exchange contract.” It is submitted that this was not the substantive issue because, as explained above, the contract was clearly an “exchange contract.” The substantive issue was whether the regulation of June 4, 1958 of the Saar Territory was an “exchange control regulation” within the meaning of Article VIII, Section 2(b). This concept has not been defined with legal precision in the Fund Agreement or in any decision of the Executive Directors of the Fund. However, part of the reasoning that led to a decision of the Executive Directors on the meaning of “restrictions on the making of payments and transfers for current international transactions” in Article VIII, Section 2(a), can throw some light on “exchange control regulations.”

It must be clearly understood that the two concepts are not the same. “Exchange control regulations” is a wider concept than the “restrictions” of Article VIII, Section 2 (a), because there are controls that can merely require the observance of certain procedures before payments may be made but without hindering any payments or without hindering payments for current international transactions. A control will be a restriction on payments if certain payments are prohibited, limited, or unduly delayed. Another type of measure that is an exchange control but not a restriction is an exchange surrender requirement. This does not in itself restrict the “making” of payments and transfers, and may not even be part of a restrictive System if the monetary authorities provide all the exchange that is required for making payments and transfers. Again, the concept of “restrictions on payments and transfers” in Article VIII, Section 2(a), on which the Executive Directors have taken a decision relates to “current international transactions,” whereas “exchange control regulations” in Article VIII, Section 2(b), embraces both current international transactions and capital movements.

In elucidating the meaning of “restrictions on the making of payments and transfers, etc.,” three views were considered. One view was that any governmental interference or impediment which reduced the freedom of private parties to make payments was a restriction. A second view was that a practice was a restriction if the purpose of the member in imposing it was to protect its balance of payments. Neither of these views was accepted, for reasons that need not be gone into here except to say that under either of these views the jurisdiction of the Fund to approve or disapprove certain practices would have covered, under the first view all, and under the second view many, of the practices that are normally regarded as trade controls. This could not have been reconciled with the international negotiations that preceded and succeeded the Bretton Woods Conference on the establishment of an international trade organization or with Resolution VII of the Conference itself.3 these negotiations have resulted in the General Agreement on Tariffs and Trade (GATT) and not the international organization that was envisaged, but there is no evidence in the legislative history of the Fund Agreement that the drafters contemplated a wider interpretation of the jurisdiction of the Fund if the plans for a trade organization did not succeed.

It followed from the unacceptability of the two views that have been mentioned that a third view had to be adopted. This was that the “restrictions” that were subject to the jurisdiction of the Fund must be on the financial aspect of transactions, and that the test of this must be objective and technical. In short, does the restrictive measure address itself to the transaction which gives rise to a payment or to that payment? This has been expressed in a sentence in a decision of the Executive Directors on the convertibility of currencies under the Fund Agreement, which reads: “The guiding principle in ascertaining whether a measure is a restriction on payments and transfers for current transactions under Article VIII, Section 2, is whether it involves a direct governmental limitation on the availability or use of exchange as such.” 4

It must be repeated, in order to avoid any misunderstanding, that the concept of “exchange control regulations” is not the same as the concept of “restrictions on the making of payments and transfers, etc.” and that there are many measures that would undoubtedly fall within the former category but not the latter. There has been no formal decision of the Executive Directors with respect to the meaning of “exchange control regulations,” but the factor of the proposed trade organization that influenced the decision with respect to the meaning of restrictions could justify the conclusion that “exchange control regulations” do not include regulations that are formulated and applied solely as controls of trade transactions.

It must also be said that the question of the meaning of “exchange control regulations” in Article VIII, Section 2(b), depends on the proper construction of that provision and the Articles as a whole, and the solution of this question is not much helped by judicial or other pronouncements that are not related to that provision.5 For example, it is necessary to take into account the fact that the concept to be elucidated is “exchange control regulations … maintained or imposed consistently with this Agreement.” In a certain sense it could be argued that pure trade controls are consistent with the Fund Agreement because there is nothing in the Agreement that prohibits them. On the other hand, there is no express or implied authority to adopt them, and it is thus difficult to hold that they are “maintained or imposed” consistently with the Fund Agreement. In other respects, these words are taken to mean that there is express or implied authority in the Agreement for certain practices and not merely that there is a neutral silence on them.

There are certain indications in the Court’s opinion that the regulation of June 4, 1958 was a control of importation into the Saar Territory and not a control of payments for imports, but these dicta must be read with caution because the Court did not concentrate on the classification of the regulation. If the license that was required did relate only to the ability of the defendant to make the import, and did not prescribe that he must get a license in order to obtain or use foreign exchange or pay in domestic currency for the import, it was probably not an “exchange control regulation.” It would be necessary to study the precise text and operation of the regulation before arriving at a firmer view. However, it must not be assumed that exchange controls and trade controls are necessarily exclusive categories. Frequently, the same measure can fall into both categories,6 and it is quite possible that this was true in the present case.

To sum up, to the extent that the case before the Hamburg Court of Appeals turned on the application of Article VIII, Section 2(b), the substantive issue was not whether there was an “exchange contract” but whether the regulation of June 4, 1958 was an “exchange control regulation.” This depended on the technical character of the regulation, and it will have become apparent that the effect of the regulation was not decisive. If the regulation was an exchange control regulation, it was a direct control of payment by the defendant. If it was a trade control regulation, it was an indirect control of payment, but this would not convert it into an exchange control regulation. However, it could have been a direct control of both trade and exchange.

There are two further aspects of the case that are worth noting. The first is that the agreements between the parties seem to have been made in June and July 1957, whereas the regulation that was involved was adopted on June 4, 1958. The Court made no reference to the retroactive application of the regulation and presumably, therefore, did not consider this as relevant under Article VIII, Section 2(b). Nor did the Court take into account the fact that on July 5, 1959, two days before the Court delivered its opinion, the special economic regime of the Saar Territory was terminated and integration with Germany became complete. These facts have a bearing on the question of the date as of which it must be determined whether an exchange contract is contrary to the relevant exchange control regulations and thus enforceable or unenforceable. Other cases have raised the issue whether this date is necessarily the date at which the contract is made, if there are changes in the regulations or in such other facts as membership in the Fund before a court decides whether there should be a remedy for nonperformance of the contract.7

The other aspect of the case involves the special status of the Saar Territory. Article VIII, Section 2(b), imposes on one member the duty to treat as unenforceable certain exchange contracts that are contrary to the exchange control regulations of another member. For these purposes, a member must be taken to include, in both instances, “all their colonies, overseas territories, all territories under their protection, suzerainty, or authority and all territories in respect of which they exercise a mandate.” 8 Under the Treaty for the Settlement of the Saar Question entered into by France and Germany on October 27, 1956, the Saar Territory was to be integrated politically into Germany by the application of German constitutional and other law as from January 1, 1957, except to the extent specified, but for a transitional period, to end not later than December 31, 1959, the Saar Territory was to remain part of the customs and currency area of France. The French franc was to remain legal tender, and French exchange control and other legal regulations relating to the franc were to continue to apply during the transition. The Court had no difficulty in regarding the customs and exchange regulations of the Saar Territory as foreign law. By implication, therefore, the Court treated the Saar Territory as under the authority of France for the purposes of Article VIII, Section 2(b).9

Supreme Court of Germany

On April 9, 1962, the Supreme Court of the Federal Republic of Germany delivered a judgment marked by a confident application of Article VIII, Section 2(b).10 The contrasts between this case and the opinion of the Hamburg Court are discussed below. The defendant was an Austrian resident that processed maize for foreign account to produce dextrose and waste dextrose sugar at its factory in Austria. In 1948, the defendant entered into agreements by which the plaintiff was to receive “commission or goods” in respect of all maize processed for all German firms except those named. The “commission quantity” was to be a defined number of kilograms of dextrose for defined amounts of maize. In 1948 and 1949 the defendant processed certain large amounts of maize for two German firms, and in these proceedings the plaintiff sought “monetary compensation” in deutsche mark in respect of the “commission quantity” which he claimed to be entitled to under the agency agreements.

The Supreme Court found that the parties had agreed to be governed by German law and noted that for this reason the lower court had found it unnecessary to consider the applicability of Austrian exchange control regulations. The Supreme Court disagreed with this. It said that normally the foreign exchange legislation of a country was regarded as effective only within the country’s territory. Since the defendant’s main office was in Austria, the claim against it was situate there and consequently was subject to Austrian foreign exchange control regulations, presumably in accordance with the principle of territoriality. However, the plaintiff alleged that the defendant had assets in Germany. To this argument, the Court reacted as follows:

The assets of a defendant outside a country are not in themselves, according to the principle of territoriality, subject to the restrictions of the foreign exchange legislation of that country (cf. Drobnig, loc. cit., page 1091, BGHZ 7, 397).

However, the plaintiff in this case cannot obtain any judgment against the defendant in German courts, even if the defendant possesses assets in the Federal Republic of Germany, if the Austrian exchange regulations are opposed to the satisfaction of his claim. For in the present case it must be borne in mind that both the Federal Republic of Germany and Austria have acceded to the Articles of Agreement of the International Monetary Fund (the so-called Bretton Woods Agreement) (cf. German BGB1 1952 II 637; Austrian BGB1 No. 105/1949). Thereby, inter alia, Art. VIII, Section 2b, of these Articles of Agreement has been raised by both countries to the status of internal law. This provision states that exchange contracts which are contrary to the exchange control regulations maintained or imposed by a member consistently with that agreement are unenforceable in the territories of any member. It can be concluded from this that the member countries have contractually agreed, within the field covered by the agreement, mutually to observe each other’s foreign exchange regulations (cf. BGHZ 31, 367, 373 WM 1960, 370; Staudinger BGB 11th edition, Art. 134, Note 20; OLG Schleswig, in Jahrbuch fuer intern. ausl. oeff. Recht 1955, 113, with note by Buelck; Mann JZ 1953, 442).

In these circumstances the judgment appealed against cannot stand. On the contrary, the Appeal Court will have to examine whether Austrian foreign exchange regulations which, under the aforementioned Articles of Agreement, are to be observed, are opposed to the legal action taken by the plaintiff, and whether an Austrian foreign exchange permit, if required, has been issued. This means both a permit for the agreements of March 1 and November 7, 1948 and a permit for the payment now claimed in this action.

It is not clear precisely what followed from the Court’s finding that the parties intended German law to govern their agreements. The Court might have meant that German law, including its private international law, applied, because it seems to have been willing to recognize the application of Austrian exchange control regulations to the extent that the claim against an Austrian resident was to be satisfied from assets in Austria. This was based, not on Article VIII, Section 2(b), but apparently on a principle of the territoriality of exchange control regulations, although often this principle has been taken in private international law apart from Article VIII, Section 2(b), to exclude any recognition of the exchange control regulations of another country. This aspect of the case will not be pursued further except to say that to the extent that the Court found that German law governed the contract but was nevertheless willing to recognize Austrian exchange control regulations—and this was certainly the position insofar as assets in Germany were concerned—the case is one in which Article VIII, Section 2(b), led to a result that would not have followed from the traditional private international law of the forum. In a number of cases,11 courts have reinforced the application of Article VIII, Section 2(b), by concluding that the result of applying the provision was the same as the result of applying their traditional private international law.

Perhaps the most notable feature of the case is that the Supreme Court, in deciding that Article VIII, Section 2(b), required the recognition of Austrian exchange control regulations, showed no hesitation on the question whether the agreements were “exchange contracts.” In the Hamburg case, the Court found that there was no “exchange contract” before it because, even if it was conceded that a contract for the sale of goods for money could be included in this category, it would be classified in this way only if it could be shown that the contract established something more than a bare pecuniary obligation. It was necessary to show that the payment would affect the exchange resources of the Saar Territory. The Hamburg Court was not satisfied that this was demonstrated, perhaps because the defendant could have paid in the domestic currency of the Saar Territory or from assets outside the Saar Territory.

In the Supreme Court case, the whole of the discussion of Article VIII, Section 2(b), and the conclusion that it required the recognition of Austrian exchange control regulations was postulated on the assumption that there were assets in Germany. The fact that these were outside the territory of Austria did not lead the Supreme Court to doubt that the disposition of them by a resident of Austria would affect the exchange resources of Austria.

The contrast between the two cases is even more striking. To begin with, the agreements provided for “commission or goods.” Therefore, if this was treated as a term entitling the plaintiff to call for money at his discretion, the currency of payment was not prescribed. There would have been no more than the “money debt” which the Hamburg Court found an inadequate basis for classifying a contract as an “exchange contract.” However, there is room for doubt whether the contract called for a pecuniary consideration at ail. On the one hand, the plaintiff was to receive “commission or goods,” but on the other hand this reward was expressed solely in terms of weights of dextrose. It is possible, of course, that the parties expected that the plaintiff would be entitled to and would call for the pecuniary equivalent of the dextrose, and that the reference to the dextrose was a formula for determining a fluctuating pecuniary reward.

The nature of the plaintiff’s rights is not clarified by the following passage in the judgment:

The Appeal Court states that there is no offense against Art. II of Military Government Law No. 51 and against Art. 3 of the Currency Law. The appeal wrongly challenges this.

(a) Both of these legal provisions relate to debts in money. In the present case, on the other hand, the debt was originally a debt in goods (dextrose). The plaintiff in this case is demanding money only as compensation for the dextrose which he alleges was owed under the agreement (Art. 326 BGB).

(b) The fact that under the agreement of March 1, 1948 the plaintiff was to receive “commission or goods” in no way alters the fact that a debt of the defendant to the plaintiff in respect of the delivery of a commission quantity of dextrose was not a monetary debt. This is so even if this clause could be regarded as giving the plaintiff an option (cf. BGH WM 1961, 451; Senate Decision VII ZR 64/60 of April 24, 1961).

(c) It is immaterial whether at the most 200 kg of pure dextrose can be produced from 1,000 kg of maize. Even if that were so, so that the defendant could not have taken the commission quantity for the plaintiff from the returnable yield of the maize, this would not in any way have altered the nature of the dextrose debt as a debt in goods.

In this passage, the Supreme Court concluded that the debt was not a monetary debt, presumably because it was expressed in goods. This was a finding for the purpose of Article II of Military Government Law No. 5112 and Article 3 of the Currency Law of June 18, 1948.13

It is not intended to discuss the finding in relation to these two monetary laws of the occupation authorities in Germany. If, however, the finding that there was no monetary debt under these laws is taken to apply more generally to the issues in the case, the judgment of the Supreme Court would have to be understood to be that a contract for the payment of a commission in goods is an “exchange contract.” Moreover, the statement that it would have to be ascertained whether there had been the grant of “both a permit for the agreements … and a permit for the payment now claimed in this action” could be interpreted to mean that a contract, even though not an exchange contract in its inception, could be converted into one by a claim for damages. However, both of the propositions advanced in this paragraph as interpretations of the decision must be regarded as tentative, in view of the fact that the Court seems to have been willing, in the second passage quoted above, to consider the possibility that the agreements gave the plaintiff an option to demand money in lieu of goods.

Exchange Surrender Requirements

New York Court of Appeals

On April 4, 1963, the New York Court of Appeals delivered its opinion in Banco do Brasil, S.A. v. A.C. Israel Commodity Co., Inc., et al.14 The defendant, a Delaware corporation with its principal place of business in New York, was an importer of Brazilian coffee. The plaintiff was a Brazilian banking corporation and quasi-governmental agency with functions that included the supervision of all matters relating to foreign exchange and with powers to act for the enforcement of Brazilian foreign exchange laws and the recovery of moneys due to Brazil under them. The gist of the plaintiff’s complaint was that the defendant conspired with a Brazilian exporter of coffee to pay the exporter dollars which the exporter could sell in the Brazilian free market for 220 cruzeiros per dollar instead of surrendering the dollars to the plaintiff, in accordance with Brazilian exchange control regulations, at the rate of 90 cruzeiros per dollar. The defendant profited by paying a lower price for the coffee than the minimum price established by Brazilian law. The plaintiff alleged that the evasion of Brazilian exchange control regulations had been accomplished by the exporter’s forgery of documents evidencing receipt of the dollars by the plaintiff, without which the coffee could not have left Brazil. The plaintiff claimed damages of more than $1.3 million against the defendant. The arguments addressed to the Court of Appeals, in the course of which the plaintiff relied heavily on Article VIII, Section 2(b), were summarized in an earlier article.15

The Court of Appeals, by the narrow margin of four judges to three, denied the plaintiff’s claim. Burke, J., delivering the opinion of the majority, first dealt with the question whether there was an exchange contract that involved Brazilian currency:

It is far from clear whether this sale of coffee is covered by subdivision (b) of section 2. The section deals with “exchange contracts” which “involve” the “currency” of any member of the International Monetary Fund, “and *** are contrary to the exchange control regulations of that member maintained or imposed consistently with” the agreement. Subdivision (b) of section 2 has been construed as reaching only “transactions which have as their immediate object ‘exchange’ that is, international media of payment” (Nussbaum, Exchange Control and the International Monetary Fund, 59 Yale L.J. 421, 426), or a contract where the consideration is payable in the currency of the country whose exchange controls are violated (Mann, The Exchange Control Act, 1947, 10 Mod. L. Rev. 411, 418). More recently, however, it has been suggested that it applies to “contracts which in any way affect a country’s exchange resources” (Mann, The Private International Law of Exchange Control Under the International Monetary Fund Agreement, 2 International and Comp. L.Q. 97, 102; Gold and Lachman, The Articles of Agreement of the International Monetary Fund and the Exchange Control Regulations of Member States, Journal du Droit International, Paris (July-Sept. 1962)). A similar view has been advanced to explain the further textual difficulty existing with respect to whether a sale of coffee in New York for American dollars “involves the currency” of Brazil, the member whose exchange controls were allegedly violated. Again it is suggested that adverse effect on the exchange resources of a member ipso facto “involves” the “currency” of that member (Gold and Lachman, op. cit.). We are inclined to view an interpretation of subdivision (b) of section 2 that sweeps in all contracts affecting any members’ exchange resources as doing considerable violence to the text of the section. It says “involve the currency” of the country whose exchange controls are violated; not “involve the exchange resources.” While noting these doubts, we nevertheless prefer to rest this decision on other and clearer grounds.

The first of the grounds on which the majority based its decision was that the sanction of unenforceability in Article VIII, Section 2(b), required New York courts in certain circumstances to withhold judicial remedies to enforce a contract but did not require them to grant damages for a tort if the contract was performed:

The sanction provided in subdivision (b) of section 2 is that contracts covered thereby are to be “unenforceable” in the territory of any member. The clear import of this provision is to insure the avoidance of the affront inherent in any attempt by the courts of one member to render a judgment that would put the losing party in the position of either complying with the judgment and violating the exchange controls of another member or complying with such controls and refusing obedience to the judgment. A further reasonable inference to be drawn from the provision is that the courts of no member should award any recovery for breach of an agreement in violation of the exchange controls of another member. Indeed, the International Monetary Fund itself, in an official interpretation of subdivision (b) of section 2 issued by the Fund’s Executive Directors, construes the section as meaning that “the obligations of such contracts will not be implemented by the judicial or administrative authorities of member countries, for example, by decreeing performance of the contracts or by awarding damages for their non-performance.” (International Monetary Fund Ann. Rep. 82–83 [1949], 14 Fed. Reg. 5208, 5209 [1949].) An obligation to withhold judicial assistance to secure the benefits of such contracts does not imply an obligation to impose tort penalties on those who have fully executed them.

From the viewpoint of the individuals involved, it must be remembered that the Bretton Woods Agreement relates to international law. It imposes obligations among and between states, not individuals. The fact that by virtue of the agreement New York must not “enforce” a contract between individuals which is contrary to the exchange controls of any member, imposes no obligation (under the law of the transaction—New York law*) on such individuals not to enter into such contracts. While it does mean that they so agree at their peril inasmuch as they may not look to our courts for enforcement, this again is far from implying that one who so agrees commits a tort in New York for which he must respond in damages. It is significant that a proposal to make such an agreement an “offense” was defeated at Bretton Woods. (1 Proceedings and Documents of the United Nations Monetary and Financial Conference 334, 341, 502, 543, 546—referred to in Nussbaum, Exchange Control and the International Monetary Fund, 59 Yale L. J. 421, 426, 429, supra.)

The second ground was the principle of law that the courts of one country will not enforce the revenue laws of another country:

Lastly, and inseparable from the foregoing, there is a remedial consideration which bars recovery in this case. Plaintiff is an instrumentality of the Government of Brazil and is seeking, by use of an action for conspiracy to defraud, to enforce what is clearly a revenue law. Whatever may be the effect of the Bretton Woods Agreement in an action on “A contract made in a foreign country between citizens thereof and intended by them to be there performed” (See Perutz v. Bohemian Discount Bank in Liquidation, 304 N.Y. 533, 537, 110 N.E. 2d 6, 7), it is well established since the day of Lord Mansfield (Holman v. Johnson, 1 Cowp. 341, 98 E.R. 1120 [1775]) that one State does not enforce the revenue laws of another. (Government of India v. Taylor, 1 All E.R. 292 [1955]; City of Philadelphia v. Cohen, 11 N.Y. 2d 401, 230 N.Y.S. 2d 188, 184 N.E. 2d 167; 1 Oppenheim, International Law, § 144b [Lauterpacht ed., 1947].) Nothing in the Bretton Woods Agreement is to the contrary. In fact its use of the unenforcibility device for effectuation of its purposes impliedly concedes the unavailability of the more direct method of enforcement at the suit of the aggrieved government. By the second sentence of subdivision (b) of section 2, further measures to make exchange controls more effective may be agreed upon by the member States. This is a matter for the Federal Government which not only has not entered into such further accords but has not even enacted the enabling provision into law (U.S. Code, tit. 22, § 286 h).

The minority, in an opinion delivered by Chief Judge Desmond, held that if this was a suit to enforce a foreign revenue law, the adherence of the United States to the Fund Agreement made it impossible to object on the basis of New York public policy:

If there had never been a Bretton Woods Agreement and if this were a suit to enforce in this State the revenue laws of Brazil it would have to be dismissed under the ancient rule most recently restated in City of Philadelphia v. Cohen, 11 NY. 2d 401, 230 N.Y.S. 2d 188, 184 N.E. 2d 167. But Cohen and its predecessor cases express a public policy which lacks applicability here because of the adherence of the United States to the Bretton Woods Agreement. As we noted in Perutz v. Bohemian Discount Bank in Liquidation, 304 NY. 533, 537, 110 N.E. 2d 6, 7, the membership of our Federal Government in the International Monetary Fund and other Bretton Woods enterprises makes it impossible to say that the currency control laws of other member States are offensive to our public policy.

However, the minority concluded that this was not a suit to collect taxes levied by the Brazilian Government and was therefore not a suit to enforce a foreign revenue law. It was not even an effort to enforce Brazil’s currency regulations. It was an action to recover damages in tort for fraud and conspiracy to deprive the plaintiff of the dollar proceeds to which it was entitled. The defendant not only knew of and intended to benefit by the fraud but also participated in it in New York “by making its purchase agreements here and by here receiving the shipping documents and making payments.” The minority concluded that “refusal to entertain this suit does violence to our national policy of co-operation with other Bretton Woods signatories and is not required by anything in our own State policy.”

The opinions in the New York Court of Appeals have been quoted at some length because of the obvious importance of the case, but at this stage of the discussion of the case only one comment will be made. This is on the views expressed by the majority on the meaning of the words “involve the currency” in Article VIII, Section 2(b). The majority was inclined to hold that these words could not be understood to mean that the contract affected the exchange resources of the member whose exchange controls were violated. It is submitted with all due respect that this is an unfortunate dictum. Its seriousness is enhanced by the fact that it was delivered by the senior court of a state that has a leading role in international trade and finance.

The majority dictum on this issue cannot be accepted once the objectives of the Fund Agreement and the particular purpose of Article VIII, Section 2(b), are grasped.16 The Fund Agreement seeks the elimination of exchange restrictions and controls but authorizes them in special circumstances, usually related to the economic difficulties of a member. In the Fund Agreement, members have agreed to cooperate with the Fund and among themselves in various ways, one of which is that they will not enforce exchange contracts that violate the exchange control regulations of a member. In this way, they avoid intensifying any economic difficulties of that member. This cooperation would be reduced drastically in scope if an exchange contract were deemed to “involve” the currency of a member only if, as implied by the majority, it called for payment in the member’s currency. Exchange control regulations make no distinction between payments in domestic and foreign currency for the reasons explained above in the discussion of the Hamburg case, and it would have been quixotic on the part of the drafters to make this distinction for the purposes of Article VIII, Section 2(b). Probably, many people who are un-familiar with exchange control would more readily expect that if the protection given by such a provision was to be more limited than the normal scope of exchange control regulations, the contracts that it would apply to would be those requiring payment in foreign exchange and not domestic currency. Indeed, it has already been noted that this is one possible interpretation of the opinion in the Hamburg case.

The majority based its dictum solely on the language of Article VIII, Section 2(b). Even then, the argument was oversimplified. The negotiators and drafters of the Articles were men highly expert in finance and economics, including exchange control, who had no difficulty with the concept that a currency was “involved” if the resources that supported it could be drained away. They understood that this would involve a currency in the sense that its stability could be impaired and disorderly exchange arrangements or competitive exchange depreciation provoked.17 What they would have found difficult to understand was why a currency was involved only to the extent of a drain resulting from payments in domestic currency or, to take the other limited view, only to the extent that the drain resulted from payments in foreign exchange. Finally, even the commentator who is intent only on the language of the provision cannot really maintain that “involve the currency” can mean nothing but “expressed in the currency” or “requiring payment in the currency.” There is some comfort in the reflection that the view of the majority was only an obiter dictum.

United States Supreme Court

The Banco do Brasil petitioned the U.S. Supreme Court for a writ of certiorari to review the judgment of the New York Court of Appeals. It asserted that the question justifying review was whether the national policy of the United States, as evidenced by its adherence to the Fund Agreement, prevented a state court from refusing on grounds of state policy to consider the civil claim of an instrumentality of the Government of Brazil for the dollars that would have accrued to it but for a fraudulent conspiracy to evade Brazil’s exchange control law.

In their brief in support of the petition, counsel for the Banco do Brasil vigorously attacked the application to this case of the rule that the revenue laws of one country are not enforced by the courts of another country. In this, they relied on the general effect of the Fund Agreement on U.S. public policy and moved away from the argument based on Article VIII, Section 2(b), to which so much emphasis had been given by the Banco do Brasil in the New York courts. The brief argued that, in concentrating on Article VIII, Section 2(b), the majority in the Court of Appeals had ignored the decision of the U.S. Supreme Court in the Kolovrat case,18 in which the Court held that, because of the United States’ membership in the Fund, Oregon could not validly cut off the right of Yugoslav nationals to inherit American property because of Oregon’s public policy objections to exchange controls maintained by Yugoslavia as a member of the Fund. Similarly, New York should not be able, by relying on its rule of public policy with respect to “revenue” laws, to cut off the right to sue for damages for conspiracy to violate exchange controls maintained by Brazil as a member of the Fund.

The brief pointed out that the Fund had helped Brazil with financial resources and technical advice, but Brazil still found it necessary to have broad exchange controls as permitted by the Fund Agreement. As a member of the Fund, the United States was bound to cooperate with the Fund and Brazil to make Brazil’s controls effective. The action of the New York Court ignored this national policy by encouraging frauds on Brazilian exchange controls. The resulting losses that might be suffered by Brazil and other members of the Fund that had exchange surrender requirements could fall ultimately on the U.S. taxpayer because of an increase in U.S. foreign economic aid that might become necessary. U.S. aid to Brazil since the war had been vast, and had continued, both under independent programs and through the Fund, since the alleged conspiracy.

The Supreme Court invited the Solicitor General to express the views of the United States, and, after consultation with the Department of State and the Department of the Treasury, he submitted a memorandum in which he stated the view of all three that the case did not present a problem requiring resolution by the Supreme Court. The memorandum regarded Article VIII, Section 2(b), as the relevant provision, and argued that this did not require state courts to go beyond its terms and give a remedy in tort based on alleged violations of exchange control regulations. As for the argument of petitioner “that notwithstanding the limited scope of Article VIII, Section 2(b), the United States’ adherence to the Bretton Woods Agreement per se manifests an overriding national policy favoring the enforcement of foreign exchange control regulations, so that the New York courts were compelled to entertain petitioner’s tort action,” the two Departments consulted and the Solicitor General agreed that “the bare acceptance of the Bretton Woods Agreement did not establish a national policy requiring the courts of the State of New York to entertain this suit.” He pointed out that the views of the two Departments particularly charged with the negotiation and performance of the Fund Agreement must be given great weight.

The Solicitor General distinguished the Kolovrat case in a passage that is not easy to understand:

All that was held in Kolovrat was that the Bretton Woods Agreement constituted an expression of national policy on the subject of foreign exchange, which the State of Oregon was not at liberty to disregard. The claim rejected in Kolovrat as inconsistent with this established national policy was based on the assumption that a Bretton Woods member might fail to meet obligations which were expressly set out in the agreement. No question as to the scope of an obligation imposed by the agreement was involved. The present case, unlike Kolovrat, concerns the meaning to be given to a particular provision in light of the United States’ adherence to the agreement.

Since the language and history of the provision is explicit, and since the governmental agencies primarily concerned are not of the opinion that adherence to the agreement ipso facto establishes the overriding policy urged by petitioner, we suggest that, from the standpoint of the United States, there is no impelling need for review by this Court.

The Banco do Brasil replied to the Solicitor General’s memorandum by stating that it did not contend that Article VIII, Section 2(b), imposed an obligation to entertain the suit. Nor did it argue that this provision or the Fund Agreement as a whole was the source of its cause of action. Its cause of action was in tort for damages for conspiracy, and the contention was that the national policy resulting from the United States’ acceptance of the Fund Agreement prevented New York courts from refusing to entertain the claim because the alleged fraud involved Brazil’s foreign exchange regulations. On the Solicitor General’s treatment of the Kolovrat case, the reply contended that if the Solicitor General was arguing that the basis of the Kolovrat decision was that Oregon was not entitled to assume that Yugoslavia might fail to meet an express obligation in the Fund Agreement to refrain from controlling the transfer of inheritances to residents in the United States, the argument failed because there was no such express obligation in the Fund Agreement.

The Supreme Court denied the petition for a writ of certiorari.19 No reasons were given, and it must not be assumed that they are necessarily those set out in the Solicitor General’s brief, although they probably weighed heavily against the argument of an implied treaty obligation. The case is of considerable importance as one of three decided by U.S. courts in which the central issue seems to have been the impact of the Fund Agreement as a whole, in contrast to the effect of Article VIII, Section 2(b), in isolation, on the public policy of the United States. The other two cases are the Kolovrat case and Perutz v. Bohemian Discount Bank in Liquidation.20 Later cases will have to decide to what extent these cases establish a pattern and what that pattern is. In this connection, it seems impossible to argue that the Kolovrat case turned on some specific provision of the Fund Agreement and not the Fund Agreement as a whole. There is no provision in the Articles that would require Yugoslavia to permit the transfer of inheritances.21 However, the precise ratio decidendi of the Kolovrat case is even more obscure than that of the Perutz case.

The issue that faced the courts in the Banco do Brasil case was a difficult one. It would not have been surprising if it had been held that the public policy of the United States now required that the suit for damages should be entertained. The arguments of counsel for the Banco do Brasil in which the financial and economic aid of the Government of the United States to Brazil is contrasted with the action of the New York Court are powerful. On the other hand, the rule refusing the enforcement of revenue laws is an old one and it is not easy to shake its authority. Moreover, it might have been feared that if the Banco do Brasil had succeeded, the burdens on New York bankers and merchants doing business with countries having exchange control regulations could be considerably increased, and the New York courts could find themselves forced to deal with a mass of litigation involving the implementation of these regulations. It is interesting to note that it was not asserted that the Brazilian participants in the alleged conspiracy had been punished in Brazil, or that steps had been taken in Brazil to tighten procedures and avoid similar evasions in future. It might also have been felt that the Brazilian exchange System was an unduly complicated one, whether it was consistent with the Fund Agreement or not.22

Even after all of this is said, there remains an uncomfortable feeling in the minds of some commentators that perhaps the most desirable balance was not struck on the issue of public policy.23

Supreme Court of the Philippines

In Bacolod Murcia Milling Co., Inc. v. Centrai Bank of the Philippines,24 the Supreme Court of the Philippines on October 25, 1963 denied an appeal from a decision of the Court of First Instance of Manila dismissing a petition praying that Circular No. 20 promulgated by the Central Bank on December 9, 1949, and in particular section 4(a) thereof, be declared null and void on the ground that it was ultra vires and also because it constituted a confiscation of private property without the justification of public use and fair compensation. Section 4(a) provided, inter alia, that all receipts of foreign exchange should be sold by the recipient to an authorized agent of the Central Bank within one business day following receipt, and authorized agents were required to sell the exchange to the Central Bank daily. The petitioner received U.S. currency for an export of sugar to the United States in December 1956, but objected to the sale of this exchange to the Central Bank at the rate of two pesos per dollar paid by the Central Bank. This was the par value for the peso established by the Philippines under the Fund Agreement, and also the rate at which the Bank sold dollars to importers, but the petitioner objected to payment based on anything less than the prevailing rate for the peso in foreign markets, principally in the United States, which rate the petitioner alleged was at least three pesos per dollar. Of the issues that were raised, the Supreme Court considered the most important to be whether the exchange control provision in section 4 (a) of the circular was authorized by Section 74 of the charter of the Central Bank (Republic Act No. 265), pursuant to which the circular purported to have been promulgated:

Emergency restriction on exchange operations.—… in order to protect the international reserve of the Central Bank during an exchange crisis and to give the Monetary Board and the Government time in which to take constructive measures to combat such a crisis, the Monetary Board [of the Central Bank], with the concurrence of at least five of its members, and with the approval of the President of the Philippines, may temporarily suspend or restrict sales of exchange by the Central Bank and may subject all transactions in gold and foreign exchange to license by the Central Bank. The adoption of the emergency measures authorized in this section shall be subject to any executive and international agreements to which the Republic of the Philippines is a party.

The court below had found that there was a monetary crisis, and the Central Bank argued that the express and implied provisions of the charter empowered the Bank to impose exchange control of the kind that had been imposed. The word “restrict” in Section 74 was synonymous with “control” and the compulsory surrender of foreign exchange to the monetary authorities and their sale of it to exporters constituted a recognized form of exchange control. Again, Section 2 charged the Bank with the duty “to administer the monetary and banking system of the Republic; to maintain monetary stability in the Philippines; to preserve the international value of the peso.” Another provision on which the Bank relied was Section 70:

Action when the international stability of the peso is threatened.—Whenever the international reserve of the Central Bank falls to an amount which the Monetary Board considers inadequate to meet the prospective net demands on the Central Bank for foreign currencies, or whenever the international reserve appears to be in imminent danger of falling to such a level, or whenever the international reserve is falling as a result of payments or remittances abroad which, in the opinion of the Monetary Board, are contrary to the national welfare, the Monetary Board shall:

(a) Take such remedial measures as are appropriate and within the powers granted to the Monetary Board and the Central Bank under the provisions of this Act; …

The writer of the opinion, and perhaps certain other members of the Court, concluded that the Central Bank had not made out a power to compel the surrender of foreign exchange to it. Under Section 70, the remedial measures that could be taken had to be within the statutory powers. Section 74 and other provisions merely authorized the Monetary Board of the Central Bank to restrict or regulate foreign exchange, but this did not include the power to commandeer that had been exercised. This was a confiscatory power which, if justified by a monetary crisis, could be adopted by the Legislature but not by the Bank. It was true that the measure had helped to ward off the monetary crisis, but it was not necessary for that purpose. The licensed recipients of foreign exchange could have been directed to sell it directly to licensed importers. The members of the Court holding these views concluded, therefore, that the disputed Section 4(a) of Circular No. 20 was not valid.

Although the writer and perhaps some other members of the Court held this view, the majority nevertheless concluded that the petitioner could not succeed on any claim to compel payment by the Bank at the rate of three pesos per dollar for exchange surrendered to it. The petitioner had applied for and obtained a license to export under the provisions of Circular No. 20, and it was, therefore, estopped from challenging the Bank’s power to enforce those provisions of the circular that required the surrender of the proceeds of licensed exports.

The defense of estoppel did not operate against that part of the petition which sought the prohibition of the enforcement of the circular prospectively, i.e., where licenses had not yet been applied for under the circular. However, the Court found that the petitioner could not succeed on this part of its case either:

One last defense raised by the Bank against the action is that under present laws and because of international agreements which the country has entered into, the Bank may not unilaterally change the present rate of exchange of P 2 to the dollar. The members of the Court agreed that this defense is valid and bars the present suit.

Sections 3 and 4 of Article IV of the International Monetary Fund Agreement of which the Philippines is a signatory, provides as follows:

“Sec. 3. Foreign Exchange dealings based on parity.—The maximum and the minimum rates for exchange transactions between the currencies of members taking place within their territories shall not differ from parity;

  • (i) in the case of spot exchange transactions, by more than one per cent; and

  • (ii) in the case of other exchange transactions, by a margin which exceeds the margin for spot exchange transactions by more than the Fund considers reasonable.”

“Sec. 4. Obligations regarding exchange stability—

(a) Each member undertakes to collaborate with the Fund to promote exchange stability, to maintain orderly exchange arrangements with other members, and to avoid competitive exchange alterations.

(b) Each member undertakes, through appropriate measures consistent with this Agreement, to permit within its territories exchange transactions between its currency and the currencies of other members only within the limits prescribed under section 3 of this article.” 25

The main purpose of the agreement is to promote exchange stability, to maintain orderly exchange arrangements among members, and to avoid competitive exchange depreciation. (Art. 1, par. iii, International Monetary Fund Agreement.)

To comply with its obligations under the agreement, especially as regards exchange stability, the Bank may not change the par value of the peso in relation to the dollar without previous consultation or approval by the other signatories to the agreement. Circular No. 20 must have been communicated to the other members of the agreement—and it is assumed that no contemplated change therein had been communicated to the other signatories at the time of the filing of this case.

The Central Bank, therefore, may not be compelled to ignore Circular No. 20, which was adopted with the advice and acquiescence of the other members of the International Monetary Fund, and it may not be compelled by mandamus to prohibit its enforcement.

Furthermore, under Article 49 of Republic Act No. 265, the Central Bank does not have the power to change the par value of the peso, a change which the present suit would require. This can be done only by the President upon proposal of the Monetary Board and with the approval of Congress. Were the petition of the petitioner for the payment of his dollar earnings at the rate of P 3 to the dollar granted, the Central Bank would be violating the above provision of Republic Act No. 265 because it would be consenting to an actual change in the par value of the peso in relation to the dollar without previous approval or authority of those empowered to make the change.

The petitioner moved for a rehearing on the ground, inter alia,26 that the Court had not properly understood the provisions of the Fund Agreement that it had cited. These dealt, not with the establishment or change of par values, but with the margins for exchange transactions. For spot exchange transactions the margins were 1 per cent from parity, but for other exchange transactions, “such as those involving bank notes, drafts or bills of exchange expressed in foreign currency, like the U.S. dollar currency involved in our case,” the margin could be wider by an amount which the Fund considered reasonable. No evidence had been presented of what the Fund regarded as reasonable, but it had been shown that a rate of at least three pesos per dollar prevailed in the United States and it could not be presumed that the United States was in violation of the Fund Agreement. Therefore, the case did not involve any inconsistency with the par value for the peso, but rested instead on the fact that the rate claimed as just compensation was within the permitted margins based on parity.

Moreover, the petitioner continued, the current practice of the Central Bank under the latest amendment of Circular No. 20 required the surrender of only 20 per cent of export receipts at the official rate and permitted the sale of the other 80 per cent by the authorized banks at the prevailing free market rate in the Philippines. It must be assumed that this practice was valid under the Fund Agreement, and it supported the petitioner’s contention that the Fund Agreement did not prevent a higher rate than the official rate in 1956.

In opposing the petitioner’s motion, the Central Bank replied that the petitioner’s claim was really to the difference between the official rate of exchange that it had received, which was also the par value, and the market rate abroad. This was a claim to recover damages for the depreciation of the Philippine currency. Such a claim was inconsistent with Philippine public policy and called on the Court to recognize a change in the par value of the peso that had not been adopted in accordance with the law. The Court has not yet passed upon these arguments and decided whether or not to permit a rehearing.

Multiple Rates of Exchange

First Taxpayers Council of Brazil

The case of Cobrazil, Cia. de Mineraçao de Metalurgia Brazil (Brazil Metallurgy Mining Co.), decided by the Second Chamber of the First Taxpayers Council of Brazil on March 29, 1963,27 involved the question of the meaning of an exchange rate. The issue arose under a provision of the Brazilian income tax regulations which declared that certain calculations for tax purposes involving foreign currency should be made by converting the currency at the rate of exchange effective on the date of payment, credit, remittance, receipt, or use, or at the rate of exchange at which the pertinent operations were actually carried out. More particularly, the issue involved certain remittances made in Belgian francs. Cobrazil objected to the conversion of these amounts at a rate of exchange which included the surcharge imposed by the Superintendencia da Moeda e do Credito (Sumoc) on the purchase of the foreign exchange.

Cobrazil argued that there were only two exchange rates in Brazil at the relevant date, the par value (official rate) as declared to the Fund and the free rate. The surcharges imposed by Sumoc were not part of the amount of Brazilian currency that was converted into Belgian francs but were in the nature of expenditures required in order to obtain conversion. These expenditures should not be taken into account in determining the rate of exchange under the income tax regulations.

The Council rejected Cobrazil’s contention. An exchange rate was the rate at which an exchange operation is carried out. It was the effective rate at which units of one currency are acquired in return for units of another currency. A surcharge paid on the acquisition of foreign currency or a bonus received on its disposition was part of the exchange operation and thus part of the exchange rate. There was no justification for adopting, as the basis for calculation, either the par value or the free market rate where the operation was performed at the par value and surcharge or bonus, because this would mean departing from the rate at which the operation was actually carried out. The Council concluded that the various premiums, surcharges, and bonuses associated with exchange operations in Brazil were integral parts of the Brazilian system of multiple rates of exchange.

The views of the Council as summarized above are consistent with the conclusions reached by the Fund in applying various provisions of the Fund Agreement that deal with rates of exchange. For example, Article IV, Section 3, prescribes the maximum and minimum rates, in terms of variations from parity, for exchange transactions in a member’s territories involving its own and another member’s currency. Under Article VIII, Section 3, members are required to avoid “multiple currency practices” (i.e., multiple rates of exchange), except as authorized by provisions of the Fund Agreement or approved by the Fund. In determining whether a member is observing the obligations of these provisions, the Fund has always applied the concept of the “effective” rate of exchange. This is the rate at which one currency is in fact exchanged for another. The cost of one currency in terms of another may be the result of a diversity of procedures or devices imposed by monetary authorities, but it is this cost which the Fund regards as relevant for arriving at the rate of exchange for the purposes of the Fund Agreement. A vast body of precedent has grown up around the concept of the effective rate. Sometimes it may take close inspection and fine reasoning to determine whether or not a particular expenditure or receipt relates to the purchase or sale of one currency in return for another. But in many cases the answer will be clear. For example, it has been held since the early days of the Fund that taxes on the purchase or sale of exchange are part of the exchange rate for that purchase or sale. “An effective buying or selling rate which, as the result of official action, e.g., the imposition of an exchange tax, differs from parity by more than one per cent, constitutes a multiple currency practice.” 28

Another feature of the Council’s opinion that accords with Fund practice is the fact that the motive with which the surcharge was imposed did not affect the result. Cobrazil appears to have argued, without success, that the surcharge was not part of the rate because it was a fiscal measure. The Fund in its practice regards an exchange surcharge as part of the exchange rate whatever might be the motive of the monetary authorities in imposing it. Their motive might be to raise revenue, protect domestic industry, or something else, but the Fund’s determinations are not based on these considerations but on such objective facts as the way in which the surcharge is levied.

Although there is a close correspondence between the conclusions of the Council and the practice of the Fund as described above, there are certain dicta involving the Fund Agreement that do not command support:

The official rate, as it is called, is simply the nominal value in accordance with the Bretton Woods Agreement of 1944, approved by Decree No. 21,177 of May 27, 1946, which was published in the Diario Oficial of June 27, 1946, page 9,559.

That Agreement does not and could not control the exchange system of any of the Parties.

And the par value there established is limited to the direct relations of Fund members with one another and with the institutions created at that time. If this were not the case there would be a restriction of national sovereignty which would be inadmissible under the Constitution.

This is evident, in refutation of the appellant’s reasoning, from the text of the Agreement, which was published in the Diario Oficial.

“A member may change the par value of its currency without the concurrence of the Fund if the change does not affect the international transactions of members of the Fund” (Article 4, Section 5(e)).

A reading of the full text will never bear out the appellant’s interpretation.

The Bretton Woods Agreement does not require the country to maintain an unalterable value of its currency for all purposes; much less does it institute an exchange system or System of foreign-trade control to be effective in Brazilian territory, preventing the country from issuing regulations and establishing the kind of system best consonant with national commercial interests.

There should be no doubt about the following legal propositions:

(1) A par value established under the Fund Agreement may be regarded as the “nominal value” of a currency because the Fund Agreement does not require that exchange transactions shall take place at that value. However, it is the value on which exchange transactions are to be based, and Article IV, Sections 3 and 4(6), establish the rules for the margins from par within which members may permit exchange transactions within their territories.

(2) The par value is not simply the basis for exchange transactions between the governmental or monetary authorities of member countries or between the Fund and those authorities. The provisions of the Fund Agreement with respect to par values and exchange rates apply to all exchange transactions taking place within a member’s territories, including all the exchange transactions to which private entities or persons are parties.

Article IV, Section 5(e), does not authorize a member to permit certain exchange transactions to take place within its territories beyond the permitted margins from the par value established in accordance with the Fund Agreement. In other words, the provision does not give a member freedom to decide to what extent it will or will not make its par value effective in exchange operations. The function of Article IV, Section 5(e), is to enable a member, not to ignore its existing par value but, to change it consistently with the Fund Agreement without getting the concurrence of the Fund which is normally necessary in order to ensure that a change of par value will be consistent with the Fund Agreement.

There is reason to believe that Article IV, Section 5(e), was inserted in the Fund Agreement as the result of the contention that if the central authorities of a member had a complete monopoly of the trade and payments of that country, and if the member’s currency was not employed in international payments, the par value of the currency was irrelevant internationally because it would affect no international payments. It was argued, therefore, that a member in such a position should be able to change its par value after consulting the Fund as required by Article IV, Section 5(b), but without the necessity for getting the Fund’s concurrence. There was some skepticism that a case of the kind postulated as the basis for the provision could ever be demonstrated, and none has in fact been proved to the satisfaction of the Fund. Nor is it clear that a case would come under the provision even in the unlikely event that no payments of any kind, whether for invisibles or trade, were made in the member’s currency. The exchange rate might still be a factor affecting the allocation of resources in the country and hence the volume of external transactions, and it might therefore be held that “the international transactions of members of the Fund” were affected. In any event, what should be clear is that in referring to “the international transactions of members of the Fund” which the change of par value does not affect, the provision is not referring solely to the transactions of governmental or monetary authorities, as is assumed in the dicta quoted from the Council’s opinion, but to the transactions of all of the member’s residents as well.

(3) It is true that rates of exchange not based on a par value established under the Fund Agreement may exist within a member’s territories. This will not be because the Fund Agreement is limited in its application to the exchange Systems of members. Once a member joins the Fund, it will be subject thenceforth to a code of international obligations in relation to its exchange System. If there are nonparity rates, they either will be permitted by this code or will be violations of it. In certain circumstances, multiple currency practices may be permitted by the Fund Agreement. They may be maintained, although not permanently, if they were engaged in when the member joined the Fund, but any adaptation of them or any introduction of new ones requires the prior approval of the Fund. Even though multiple currency practices may thus be consistent with the Fund Agreement, they are no more than temporary expedients because the objective of the Articles is a unitary rate system based on a par value established under the Fund Agreement. This means an exchange system in which all exchange transactions take place within the permitted margins from a parity that is itself consistent with the Fund Agreement.

Privileges and Immunities

U.S. Court of Appeals for the D.C. Circuit

On July 27, 1962 the United States Congress approved a Joint Resolution 29 which, after reciting, inter alia, that it was in the interest of the United States to promote international monetary cooperation through the Fund, and that the principal office of the Fund in Washington, D.C. had become inadequate, went on to authorize the Administrator of General Services, on the basis of full reimbursement by the Fund, to acquire by purchase, condemnation, or otherwise, certain defined land adjacent to the Fund’s principal office and to convey the property to the Fund for the expansion of its principal office. On December 28, 1962 the United States brought an action in the U.S. District Court for the District of Columbia for the taking of the property under power of eminent domain for conveyance to the Fund and for the ascertainment and award of just compensation to the owners. The defendant owners answered the complaint by alleging that the Joint Resolution was unconstitutional on the ground that the interest of the United States in the Fund, amounting to only 26 per cent of the total voting power, was not such that a taking by the United States could be considered as made for a public use of the United States. The owners also objected that the Fund, the real party in interest, had not been joined as a party to the action.30 The owners argued that the condemnation of property by the United States for the benefit of another international organization, the Pan American Health Organization, which had been upheld by the Court,31 was not a precedent because the United States was not to be reimbursed in that case. It was making a contribution to the work of that organization and was not simply acting as its purchasing agent.

The United States deposited with the Court an amount that it estimated as just compensation. On February 1 and 5, 1963, the Court, treating the owners’ answer as motions to dismiss the complaint and deny possession, dismissed the owners’ motions and ordered that possession be surrendered on or before May 1, 1963. The owners appealed from these orders to the U.S. Court of Appeals for the District of Columbia Circuit, whereupon the United States moved that this appeal be dismissed on the ground that the Court lacked the jurisdiction to review them. The United States argued, on the strength of Catlin v. United States,32 that there was jurisdiction to review orders in a condemnation suit only where they finally disposed of the whole case and adjudicated all aspects of it. The District Court’s dismissal of the owners’ motions was not a final action in this sense. The District Court’s dismissal was interlocutory, and judgment would not be final until just compensation was determined and judgment for it granted. In the determination of just compensation, the owners could present their contentions as to the invalidity of the transfer of title.

It was at this stage of the case that the legal argument began to revolve around the Fund Agreement. The owners argued that if their appeal resisting the transfer of possession were denied, they might suffer irreparable harm. That would be the situation if their building was demolished or if the United States conveyed title to the Fund. In the latter event, the owners could not recover their property if the final decision was in their favor because the immunities of the Fund under Article IX, Section 3, would shield it from judicial process.

The United States argued that the Fund’s immunities were not relevant. A condemnation suit was an in rem proceeding in which the Court acquired jurisdiction over the property and retained that jurisdiction until final settlement. It was true that, under the declaration of taking procedure that had been followed, the United States could acquire a title, but this would be set aside if final judgment were given for the owners. The United States could convey this defeasible title to another, but this would not terminate the Court’s jurisdiction over the property itself. The United States could not convey a greater title than it had, so that, if title were conveyed but the Court later found that the condemnation was unconstitutional, physical possession could be restored by the Court to the former owners. The owners replied quite simply that the Fund Agreement made no distinction between in rem and in personam proceedings in granting immunity to the Fund.

The Court of Appeals found for the owners on the question which involved the Fund’s privileges and immunities. Senior Circuit Judge Prettyman, speaking for the Court, said:

The International Monetary Fund was established by Articles of Agreement between the United States and other powers, known as the Bretton Woods Agreement, effective December 27, 1945, 60 Stat. 1401 et seq. The Agreement provides (Article IX, Section 3, Id. at 1413):

“The Fund, its property and its assets, wherever located and by whomsoever held, shall enjoy immunity from every form of judicial process except to the extent that it expressly waives its immunity for the purpose of any proceedings or by the terms of any contract.”

The Fund has not waived its immunity for the purpose of the present proceeding, nor has its immunity been removed by the terms of any contract.

The Government says that upon the effective date of the judgments of the District Court it will transfer the title to the property and its possession to the Monetary Fund. The statute under which it would acquire the property would require it to do so. Therefore immediately after transfer of the title to the United States that title will be transferred to an entity which is immune from all judicial process of the United States. We think this circumstance takes this case out of the doctrine of the Catlin case and makes these judgments of the District Court final judgments.

The Government argues that the proceeding, being a condemnation action, is in rem, and that the court, having acquired jurisdiction over the property, never loses that jurisdiction. But the statute in this particular case (Pub. L. No. 87–552) authorizes the Administrator to acquire and to convey this property to an entity which is not only itself immune from process but whose property is also immune. Unless either that statute or that paragraph in the Bretton Woods Agreement is invalid, this property, as well as its prospective owner, would pass beyond the jurisdiction of this court the instant it passed to the Fund.

The Court concluded that there should be a prompt resolution of the basic issue of the validity of the taking, and that until then the effect of the orders of the lower Court should be stayed. The issue was never finally resolved, because shortly after this judgment of the Court of Appeals the parties agreed on a price for the property.

The detached observer may view the predicament of the Fund as a bystander in this litigation with a certain amusement. The Fund’s building project would be accelerated by the success of the United States’ argument but at the cost of the contraction of the Fund’s privileges and immunities in the courts of the host member. On the other hand, if the United States’ argument failed, the building program would not prosper but the Fund’s privileges and immunities would remain intact. Time has disposed of the dilemma. Now that the extension of the headquarters building is well under way, the undetached observer can feel even greater satisfaction in the Court’s confirmation of the Fund’s privileges and immunities.

Les Statuts du Fonds devant les tribunaux—VIII


Deux tribunaux allemands ont eu à connaître des “contrats de change” visés à l’article VIII, section 2, paragraphe b) des Statuts du Fonds; dans un de ces cas, la Cour Suprême a donné à cette conception une interprétation extensive à certains égards. Dans l’autre, cependant, la question de fonds était sans doute celle de savoir s’il s’agissait de “réglementation de contrôle des changes”. Les deux cas posaient la question de savoir ce qu’il faut entendre par monnaie “impliquée” dans un “contrat de change”. Ceci doit done signifier que les ressources en devises d’un membre sont affectées, et que l’interprétation doit se fonder sur un critère économique.

Dans une affaire soumise à un tribunal de l’Etat de New York, la question qui se posait consistait à déterminer si, en raison même des Statuts, l’ordre public des Etats-Unis interdit aux tribunaux de New York de refuser de connaître d’une demande de dommages découlant d’une conspiration visant à éluder les mesures de contrôle des changes du Brésil parce que l’ordre public de l’Etat de New York interdit l’application des lois fiscales étrangères. Il a été décidé que les Statuts n’ont pas eu cet effet, et la Cour Suprême des Etats-Unis a refusé de considérer cette decision. La Cour d’Appel a interprété de façon restreinte les dispositions de l’article VIII, section 2, paragraphe b), mais c’était là une opinion incidente qui ne doit pas être considérée comme faisant jurisprudence.

La Cour Supreme des Philippines semble avoir décidé que le pouvoir de la Banque centrale d’imposer un contrôle des changes ne s’étend pas aux obligations de cession de devises; mais la Cour a décidé que si un exportateur présente une demande de licence, il est exclu de contester les règlements de la Banque, et que les Statuts s’opposent à un paiement pour devises cédées à un taux supérieur à la parité. Cette decision a fait l’objet d’un appel.

Un tribunal brésilien a décidé que le taux de change pour le calcul de l’impôt sur le revenu est le taux effectif (c’est-à-dire la parité plus la surtaxe) auquel les operations de change sont effectuées. C’est là le point de vue du Fonds sur les taux de change, mais certains points juridiques de la decision sont sujets à discussion.

Les tribunaux du District de Colombia ont décidé qu’une propriété transférée au Fonds avec un titre annulable en vertu d’une procédure d’expropriation est, selon les Statuts, à l’abri de toute procédure judiciaire.

El Convenio del Fondo ante los tribunales—VIII


Dos tribunales de Alemania se han pronunciado sobre los “contratos de cambio” a que se refiere el Artículo VIII, Sección 2(b), del Convenio del Fondo. En uno de los casos la Corte Suprema atribuyó amplia significación a estos contratos en ciertos aspectos; y en el otro, en cambio, es probable que la cuestión esencial consistiera en determinar si se trataba de “disposiciones sobre control de cambio.” En ambos casos se suscita el punto de lo que ha de entenderse por moneda “comprendida” en un “contrato de cambio.” Quiere esto decir, ha de aducirse, que los recursos cambiarios de un pais miembro resultan afectados, y que la interpretaciôn ajustada a un criterio económico es la que debe prevalecer.

En un caso en el Estado de Nueva York la cuestión consistió en determinar si como consecuencia del Convenio en general la “política pública” de los Estados Unidos impide a los tribunales de Nueva York negarse a conocer de una demanda por daños originada de una maquinación para evadir medidas de control de cambio del Brasil, no obstante que la “política pública” del Estado de Nueva York es contraria a dar efecto extraterritorial a leyes “tributarias” extranjeras. Se resolvió que el Convenio no ha producido semejante resultado, y la Corte Suprema de los Estados Unidos denegé la révision de este fallo. La Corte de Apelación interpreté de modo restrictivo el Artículo VIII, Sección 2(b), mas esta fue una declaración incidental y no debe ser considerada como un pronunciamiento de la sentencia.

La Corte Suprema de Filipinas parece haber resuelto que la facultad del Banco Central para imponer controles de cambio no alcanza al requisito de entregar divisas; empero, la Corte declaró que el hecho en sí de haber solicitado una licencia un exportador constituye un acto propio que le impide oponerse a las disposiciones del Banco, y que el Convenio no tolera una utilidad por concepto de entrega de divisas superior al cambio a la par. Esta sentencia ha sido recurrida.

En el Brasil un tribunal ha declarado que el tipo de cambio a los efectos de calcular el impuesto sobre la renta ha de ser el tipo efectivo (es decir, valor a la par más recargo) conforme al cual efectúan las transacciones cambiarias. Este es el criterio del Fondo en cuanto a los tipos de cambio, pero algunos de los fundamentos de la sentencia resultan discutibles.

Los tribunales del Distrito de Columbia han declarado que la propiedad que haya sido traspasada al Fondo con un titulo anulable en un procedimiento de expropiación forzosa, debe considerarse en virtud del Convenio inmune a todo proceso judicial.

In the tables throughout this issue, and in the English text of the papers

  • Dots (…) indicate that data are not available;

  • A dash (—) indicates that the figure is zero or less than half the final digit shown, or that the item does not exist;

  • A single dot (.) indicates decimals;

  • A comma (,) separates thousands and millions;

  • “Billion” means a thousand million;

  • A hyphen (-) is used between years or months (e.g., 1955–58 or January–October) to indicate a total of the years or months inclusive of the beginning and ending years or months;

  • A stroke (/) is used between years (e.g., 1962/63) to indicate a fiscal year or a crop year.

Recent Publications of the International Monetary Fund

Annual Report of the Executive Directors, 1964

Part I comprises a general survey of the world economy and a description of the Fund’s activities in the past fiscal year. Part II discusses the problem of international liquidity and makes suggestions for action to be taken. Part III details economic developments in the industrial and the primary producing countries, balances of payments, and the production and distribution of gold. There are supplementary notes on capital markets, incomes policies, the export performance of manufacturing countries, and the gold pool. Shortened versions of the Report are available in French, German, and Spanish.

The Fund and Bank Review: Finance and Development

This is a quarterly periodical, issued jointly by the Fund and the World Bank and designed to explain the operations of the two organizations to a wider public than is reached by their Annual Reports and other publications. Published in English, French, and Spanish. Thus far, Vol. I, No. 1 (June 1964) and No. 2 (September 1964) have been issued.

Introduction to the Fund

This reproduces an article with the same title, published in The Fund and Bank Review: Finance and Development, Vol. I, No. 1, describing the origin and the activities of the Fund. It includes also a glossary of Fund terminology. Published in English, French, German, and Spanish.

The International Monetary Fund: Its Form and Functions

This reproduces two lectures on the Fund given by Mr. J. Marcus Fleming at the SEANZA Banking Course in Karachi, Pakistan, in February and March 1964. It gives a fuller and somewhat more technical description of the Fund’s work than Introduction to the Fund. (English only)

All the above are available without charge.

International Financial Statistics, Supplement on Seasonal Adjustment of Data on Money

This volume provides seasonal adjustments of the data on money published in International Financial Statistics. The monthly data from which the adjustments were made, and the seasonal factors, are included. The volume also contains a description of the method of adjustment, an analysis of the results, and a set of charts. It will be sent to all recipients of International Financial Statistics.

The Secretary

International Monetary Fund 19th and H Streets, N.W., Washington, D.C. 20431

Mr. Gold, General Counsel, is a graduate of the Universities of London and Harvard. He is the author of The Fund Agreement in the Courts (Washington, 1962) and of various articles published in the law journals of a number of countries.

Entscheidungen zum Interzonalen Privatrecht, 1958–59, No. 135A.

The rest of the opinion dealt at some length with the question whether the plaintiff was a participant in a smuggling operation and concluded that it was not.

“The United Nations Monetary and Financial Conference


To the participating Governments that, in addition to implementing the specific monetary and financial measures which were the subject of this Conference, they seek, with a view to creating in the field of international economic relations conditions necessary for the attainment of the purposes of the Fund and of the broader primary objectives of economic policy, to reach agreement as soon as possible on ways and means whereby they may best:

(1) reduce obstacles to international trade and in other ways promote mutually advantageous international commercial relations, …”

See also Section 14 of the U.S. Bretton Woods Agreements Act (59 Stat. 512 (1945)).

Selected Decisions of the Executive Directors (Washington, Second Issue, September 1963), pp. 76–77.

For example: “… this court is entitled to be satisfied that the foreign law is a genuine foreign exchange law, i.e., a law passed with the genuine intention of protecting its economy in times of national stress and for that purpose regulating (inter alia) the rights of foreign creditors, and is not a law passed ostensibly with that object, but in reality with some object not in accordance with the usage of nations.” Re Helbert Wagg & Co., Ltd., (1956) 1 All E.R. 129, 142, per Upjohn, J.

This was put very well in the Report of the Special Sub-Group working on the relations between the Fund and the GATT in the field of quantitative restrictions for balance of payments purposes in the course of the Review Session of 1954–55:

“2. Generally there is a fairly clear division of work between the International Monetary Fund on the one hand and the Contracting Parties to the General Agreement on Tariffs and Trade on the other. The division, however, being based on the technical nature of government measures rather than on the effect of these measures on international trade and finance, is inevitably somewhat arbitrary in some respects. In many instances it is difficult or impossible to define clearly whether a government measure is financial or trade in character and frequently it is both. It follows that certain measures corne under the jurisdiction of both the IMF and the Contracting Parties and that decisions in relation to such measures have to be taken against a background of the objectives and rules both of the Fund and the General Agreement.” (General Agreement on Tariffs and Trade. Basic Instruments and Selected Documents, Third Supplement, June 1955, p. 196.)

Gold, The Fund Agreement in the Courts (Washington, 1962), pp. 62–66, 77–78.

Article XX, Section 2(g): “By their signature of this Agreement, all governments accept it both on their own behalf and in respect of all their colonies, overseas territories, all territories under their protection, suzerainty, or authority and all territories in respect of which they exercise a mandate.”

Note Article 6(4) of the Treaty: “France shall share with the Saar economy the international finance facilities which result from her sovereignty in the matter of currency”; and Article 13(2): “International agreements in the sphere of customs and currency, which have been or will be concluded by France with third countries, shall be applicable to the Saar Territory during the transitional period…”

Wertpapier-Mitteilungen, No. 21 of May 26, 1962, pp. 601–602.

See Gold, op. cit., pp. 89, 152.

“Except as authorized by Military Government, no person shall make or enter, or offer to enter, into any arrangement or transaction providing for payment in or delivery of a currency other than Marks.”

“Money debts may be contracted in a currency other than deutsche marks only with the permission of the competent foreign exchange control agency. The same rule applies to money debts, the deutsche mark amount of which is to be fixed in terms of the exchange rate for some other currency, or by the price or quantity of fine gold or other goods or performances.”

12 N.Y. 2d 371, 190 N.E. 2d 235, 239 NY.S. 2d 872 (1963).

Gold, op. cit., pp. 135–39.

“All of respondent’s acts allegedly in furtherance of the conspiracy took place in New York where it regularly did business.” (Footnote to the opinion of the majority)

See 63 Columbia Law Review (1963), p. 1336: “… the generally accepted view is that the provision applies to any transaction that affects the exchange resources of a member nation.”

See Article I (iii) and Article IV, Section 4(a), of the Fund Agreement.

81 S.Ct. 922 (1961); Gold, op. cit., pp. 128–35.

84 S.Ct. 657 (1964).

110 N.Y.S.2d 446 (1952); 304 N.Y. 533, 110 N.E.2d 6 (1953); Gold, op. cit., pp. 50–55.

Gold, op. cit., pp. 132–33. There was in the Kolovrat case a treaty between Yugoslavia and the United States, but it would be difficult to regard the treaty as implicitly bringing the case under the second sentence of Article VIII, Section 2(b): “In addition, members may, by mutual accord, co-operate in measures for the purpose of making the exchange control regulations of either member more effective, provided that such measures and regulations are consistent with this Agreement.” The effect of the treaty was not that the controls of each party should be made effective but, if anything, that controls should not be applied. The New York Court of Appeals noted that the second sentence of Article VIII, Section 2(b), has not been enacted into law in the United States. If there were a “mutual accord,” would U.S. courts refuse to apply it for this reason? See 62 Michigan Law Review (1964), p. 1234.

On this aspect of the case, it should be noted that exchange surrender requirements in themselves are not restrictions, do not require the approval of the Fund, and are consistent with the Fund Agreement. However, surrender at a rate of exchange which constituted a multiple rate of exchange, as in the Brazilian case, did require the approval of the Fund in order to be consistent with the Fund Agreement.

F. David Trickey, “The Extraterritorial Effect of Foreign Exchange Control Laws,” 62 Michigan Law Review (1964), pp. 1232–41: “The decision in the principal case, if followed by other state courts, will have the unfortunate effect of denying IMF members the right to seek compensation in American courts for acts which undermine their financial stability and economic development” (p. 1241). This author also questions the thesis that exchange control laws are “revenue laws” within the meaning of the traditional rule (p. 1238). “Bretton Woods Agreement Held Not to Provide Tort Action for Evasion of Foreign Exchange Control Laws,” 63 Columbia Law Review (1963), pp. 1334–41. “In light of American efforts to fulfill the purposes of the Bretton Woods Agreement, the dissent’s statement (in the Court of Appeals) that national policy requires New York to entertain the plaintiff’s suit is probably correct” (p. 1340). See also G. W. Pohn, “Court Refuses to Put Export-Import Contract Within Bretton Woods Agreement,” 15 Syracuse Law Review (1963), pp. 100–103. Contra: R. K. Baker, “Extraterritorial Enforcement of Exchange Regulations,” 16 Stanford Law Review (1963), pp. 202–209.

The decision, No. L-12610, is summarized in Complete Monthly Digest of Supreme Court Decisions, Quezon City, No. 10, October 1963, pp. 364–66.

The provisions as quoted by the Court have not been corrected to eliminate certain deviations in punctuation and the like from the authentic text.

The arguments of the petitioner and the replies of the respondent on the motion for rehearing are not reproduced here except to the extent that they involve the Fund Agreement.

Contribuinte Fiscal, Vol. 7, No. 82, Rio de Janeiro, Oct. 5, 1963, pp. 346–50.

Selected Decisions of the Executive Directors (Washington, Second Issue, September 1963), p. 86. Cf. Hans Aufricht, “Exchange Taxes,” XXII Zeitschrift für Nationalökonomie (1962), pp. 20–40, and especially p. 21.

Public Law 87–552, 76 Stat. 222. Report No. 1941 of the House of Representatives, 87th Congress, 2d Session, contains some information about the negotiations to purchase the property that preceded the Joint Resolution.

The Fund was not a party to these proceedings at any time.

USA. v. All of Square 59, District Court Docket No. 4–61 (1961).

65 S.Ct. 631, 324 ILS. 229 (1945).

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