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Legal and institutional Aspects of the international Monetary System
Chapter

15 Trust Funds in International Law: The Contribution of the International Monetary Fund to a Code of Principles

Author(s):
International Monetary Fund
Published Date:
December 1984
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The arrangements that bear the name of the Trust Fund of the International Monetary Fund (IMF), of which the IMF is Trustee, were adopted on May 5, 1976.1 Problems of the law of trusts have been raised in the establishment and administration of the Trust Fund. The principles that have been applied by the IMF are the main topic of this Chapter. In view of the many trust funds that are administered by international organizations, the question is raised whether these principles have a broader relevance in international law.

IMF’s Trust Fund

The word “trust” is frequently applied without precise definition or connotation to certain arrangements that are governed by international law. Sometimes the word is used in a broad sense to suggest altruism, or an eleemosynary intent, or answerability for the administration of the arrangements. The looseness of terminology occurs in domestic practice also, as was noted in a remarkable case decided in 1977 in England,2 in which one of the complex issues was whether, in relation to royalties payable on the sale of phosphates, the Crown was trustee under a true trust for the inhabitants of an island colony (and former protectorate) in the Western Pacific or whether the Crown had a governmental obligation for their benefit that could not be classified as an obligation of trusteeship. On the former assumption, the claims of the inhabitants were justiciable in a court of equity, but on the latter assumption the claims were not.

… I must also consider what is meant by “trust.” The word is in common use in the English language, and whatever may be the position in this court, it must be recognised that the word is often used in a sense different from that of an equitable obligation enforceable as such by the courts. Many a man may be in a position of trust without being a trustee in the equitable sense; and terms such as “brains trust,” “antitrust,” and “trust territories,” though commonly used, are not understood as relating to a trust as enforced in a court of equity. At the same time, it can hardly be disputed that a trust may be created without using the word “trust.” In every case one has to look to see whether in the circumstances of the case, and on the true construction of what was said and written, a sufficient intention to create a true trust has been manifested.3

Among arrangements governed by international law, including the proper law of an international organization that administers the arrangements, to which the word “trust” or the words “trust fund” are applied, some are closer than others to the concept of the true trust of national law. It is not easy, however, to distinguish or define the class of arrangements that more closely resemble the trusts of national law and that are more appropriately called trusts. One criterion that would seem to be both reasonable and essential is that, in relation to the assets subject to the trust, there exists some division of the full rights of ownership between a trustee and a beneficiary, together with the intention that the assets may be used or disposed of only for the advantage of the beneficiary and not the trustee. This criterion alone is probably not sufficient, and it would seem that a further criterion should be an express or implied intention of the creators of the trust that general principles governing trusts in national law—perhaps those principles that can be regarded as inherent in the concept itself and particularly the ethical principles on which it is based—should regulate the arrangements. The ethical principles are of particular importance because they are likely to correspond to some extent to the principles that inspire fiduciary concepts analogous to the trust in those national systems that have not received the trust.

If the two suggested criteria are met, it is appropriate to treat the arrangements as a trust even if the word trust has not been used to describe them. The IMF’s Subsidy Account, which was established on August 1, 1975 with resources contributed by a number of members of the IMF to help some needy members to pay charges for balance of payments assistance under one of the IMF’s policies, is an example of this kind.4 There is sometimes a reluctance to use the terminology of trusts because the concept is not a universal one in national law. If the criteria are not met, use of the word “trust” will not cure the deficiency and create a trust.5

According to the English case that has been mentioned, an essential element in the definition of a trust in national law is subjection of the administration of a trust to the jurisdiction of courts of equity.6 This criterion could not be applied to the class of arrangements subject to international law that closely resemble the trusts of national law without disqualifying them from being considered as trusts because there are no international courts of equity with jurisdiction over the arrangements.

It is assumed that to constitute a trust in international law there must be an arrangement for the administration of assets. It is assumed further that the arrangement is indisputably a trust only if the creators of the arrangement intend it to be governed by general principles of the law of trusts as developed by systems of national law. A number of problems must then be faced in determining what those principles are. The first problem is one noted already. The trust, which originated in England, is not a concept known to all systems of national law, although some civil law jurisdictions, such as Scotland, Quebec, South Africa, Sri Lanka, and a substantial number of other jurisdictions, have received the concept. Moreover, there are analogies, which sometimes are close, in many systems that do not recognize the trust as such. The fideicommissum is the Roman law ancestor of many of these analogies, but there is a profusion of other legal arrangements that more or less closely fulfill the functions of the trust.7 It should be noted that many of the states that are parties to the creation of trusts governed by international law have systems of national law in which the trust is not recognized, but these states seem to be comfortable enough with the concept to join in international arrangements in the nature of trusts.

The problem of deciding which systems of law go into the chemistry from which the general principles of an international law of trusts are to be distilled is made even more difficult because the law of trusts, even when strictly defined, is not uniform throughout all the jurisdictions in which the trust is recognized. The law has been developed in most jurisdictions by local judicial decisions and statutes to meet domestic needs. The law of trusts in each system has become encrusted with its own idiosyncrasies. Sometimes, local variations take the form of modifications of, or even departures from, what some experts would regard as fundamental principles. The problem of diversity is aggravated further by the great number of jurisdictions in which there is a law of trusts. For example, each of the states and provinces of federal common law countries has a law of trusts of its own. The tendency to cite authority from other jurisdictions, however, exercises some influence in favor of uniformity.

Although there are now many examples of trusts in the practice of international organizations and among states, there is nothing resembling an established code of principles relating to trusts at the international level. It follows that the principles applied in international practice must necessarily be drawn from systems of national law, with such modifications as the organization or parties to particular international arrangements see fit to adopt for their own purposes. In a search for principles, a natural tendency is to look first to those systems of law in which the trust is a recognized concept, but it might also be useful to pay attention to other systems that employ concepts comparable to the trust. The only safe course seems to be to distill those principles of trust law, and perhaps analogous principles, that most experts would regard as fundamental and to ignore those modifications or departures that are adjudged to be local.

The experience of the IMF in creating and administering its Trust Fund illustrates the need to determine fundamental principles. The Trust Fund was instituted under the Articles of Agreement of the IMF before the Second Amendment of the Articles became effective on April 1, 1978. The legal procedure for creating the Trust Fund did not take the form of an agreement between the IMF and any of its members. The constitutive act was a decision by which the Executive Board declared that it adopted the Instrument to Establish the Trust Fund that was annexed to the decision. Certain provisions that the IMF would observe in relation to the Trust Fund are set forth in seven paragraphs of the decision. The Instrument resembles a statute in form.

There was no specific authority in the Articles to create the Trust Fund. Authority was derived from the purpose of the IMF that is stated first in the list of its purposes:

To promote international monetary cooperation through a permanent institution which provides the machinery for consultation and collaboration on international monetary problems.8

The action of the IMF was in accordance with a phenomenon in the practice of international organizations that has been described as follows:

International organizations may create trust funds for specific activities outside the regular budget. These funds have a wide variety of purposes. The only general condition for their establishment is that their purpose should fall within the aims of the organization. … The competence to create trust funds appears to be inherent in any international organization. Many trust funds have been created in the absence of any constitutional provision.9

The author from whose work this passage is quoted cites as examples various trust funds administered by the United Nations, the Food and Agriculture Organization, the World Health Organization, the International Labor Organization, and the Inter-American Development Bank. A former General Counsel of that Bank has said:

… we received 500 million dollars from the United States Government in the form of a trust fund, when the charter says absolutely nothing specific about such funds. We have received trust funds from nonmember countries, when the charter says nothing about receiving funds from non-member countries in this way.10

The World Bank entered into an agreement in 1960 11 with a number of governments that provided for the creation and administration of, and contributions to, the Indus Basin Development Fund, the purpose of which is the effective utilization by Pakistan of the waters assigned to it by the Indus Waters Treaty, I960.12 Indonesia, the United Nations Fund for Population Activities (UNFPA), and the International Development Association (IDA) entered into an agreement in 1972 under which the IDA was to administer a grant by UNFPA for a population project in Indonesia. In 1969 the Holy See and the Inter-American Development Bank concluded an agreement to establish the Populorum Progressio Fund under which the Bank administers funds contributed by the Holy See for loans and technical assistance for various purposes, including agrarian reform, for the benefit of developing member countries of the Bank. These trust funds are a few illustrations of a steadily growing number of similar arrangements entered into by these and other international organizations.

Authority for the IMF to perform specific services for members that are not mentioned in the Articles but are sufficiently related to the purposes of the IMF is made explicit by the Second Amendment:

If requested, the Fund may decide to perform financial and technical services, including the administration of resources contributed by members, that are consistent with the purposes of the Fund. Operations involved in the performance of such financial services shall not be on the account of the Fund. Services under this subsection shall not impose any obligation on a member without its consent.13

The establishment of trust funds for administration by existing international organizations under implied or express powers avoids the need to create new organizations with limited purposes and makes use of the experience and demonstrated skill of organizations already in the field. One effect of trust funds, therefore, is to increase the functions or the resources of the administering organization, although the criterion of consistency with its purposes places a limitation on its activities, at least if it is acting under implied powers.

Part of the IMF’s gold is being mobilized to finance the activities of the Trust Fund. Before the Second Amendment of the Articles, the procedure involved sale of the gold to certain members under the IMF’s power to replenish its resources of currency.14 The gold then ceased to belong to the IMF, but the purchasers were willing to resell the gold at the then official price for the benefit of the Trust Fund. The last stage of the procedure was sale by public auction by the IMF as Trustee at prices based on market prices. Under the Second Amendment the IMF can sell the gold by auction in the first instance.15

A portion of the proceeds that represents the capital value of the gold at the former official price of SDR 35 per ounce of fine gold is placed in the general resources of the IMF for use in its operations and transactions, and the rest of the proceeds, which represent profit beyond the capital value, is placed in the Trust Fund. The profit, together with the income earned by investing it, the income from loans through the Trust Fund, and any other resources contributed or lent by members, are administered by the IMF in accordance with the Trust Instrument that it has adopted. The total resources of the Trust Fund are likely to be substantial, and on certain assumptions based on average gold prices and average exchange rates over the 12 months ended February 1978 could be approximately SDR 1.3 billion. The purpose of the Trust Fund is to assist 61 members of the IMF that are eligible to receive loans through the Trust Fund, on the concessionary terms defined by the Trust Instrument, because the average per capita income in these countries was not in excess of SDR 300 in 1973.

The technique of a Trust Fund was employed for various reasons. The IMF had no express power to receive as part of its ordinary resources assets of the kind that became available. Moreover, in administering its ordinary (i.e., “general”) resources the IMF must observe a principle of uniformity that prevents it from giving more favorable treatment to a selected member or class of members than it would be prepared to give to all members facing a particular problem.16 Another reason, therefore, was the need to keep the resources of the Trust Fund distinct from those that the IMF uses in its ordinary operations and transactions. This reason helps to explain why the Trust Fund continues to be employed for the purposes it serves even after the Second Amendment.

The decision of the IMF that created the Trust Fund states that certain provisions of the Trust Instrument will not be modified. This undertaking is regarded by the IMF as binding because members have transferred resources to the Trust Fund, including the profits forgone by those members that resold gold at the former official price for the benefit of the Trust Fund. One of the safeguarded provisions declares the purpose of the Trust Fund to be the extension of additional balance of payments assistance on concessionary terms to eligible members that qualify for assistance in accordance with the Trust Instrument, in order to support their efforts to pursue programs of balance of payments adjustment. The assistance provided through the Trust Fund is additional because it supplements the assistance made available by the IMF from its general resources. Some of the other provisions of the Trust Instrument that may not be modified require that the Trust Fund shall be administered by the IMF as Trustee and that certain transfers of assets to the Trust Fund shall be irrevocable.

In administering the Trust Fund the IMF takes decisions according to the procedures it follows in taking other decisions. For example, decisions are taken by the Executive Board on the basis of weighted voting power. Whenever a special majority is not required by the Articles for the adoption of a decision, it can be taken by a majority of the votes cast if formal voting is resorted to. This rule would be observed if in the administration of the Trust Fund a particular decision were not taken by consensus but had to be voted on because of some disagreement in the Executive Board.

The IMF has been meticulous in observing what it has considered to be fundamental principles of the law of trusts, even though a less exacting standard applied to some opportunities for gain might have resulted in a greater yield. This practice has been followed even though, as Wilfred Jenks noted in connection with the Bank for International Settlements, one of the advantages of having such an organization act as a trustee is that it is governed only by its proper law and that there is no need to subject the trust agreement to any particular system of national law. Jenks also wrote that a possible disadvantage was that the proper law of the trustee might be far from fully developed, but that this disadvantage could be offset by precision in the terms of the trust agreement.17 These remarks apply to the Trust Fund of the IMF but are subject to the qualification that although the decision of the IMF creating the Trust Fund and the Trust Instrument are precise and reasonably detailed, much was left to administration and not all problems could be foreseen. In administering the Trust Fund and taking necessary decisions, the IMF has consciously limited its freedom by observing fundamental principles of the law of trusts.

Another limitation has been observed, although it can be considered not so much a qualification of the fundamental principles as a reconciliation of them with other legal principles. It will be seen that one of the principles of trust law recognized by the IMF is that a trustee owes duties of care and loyalty to the beneficiary. Normally, in the exercise of this duty, the trustee must act on the basis of all reliable information that is available to him. Banks when acting in a capacity other than as trustee sometimes become aware of material “inside information” about the affairs of a corporation whose securities the banks are holding as trustees that reflects on the value of the securities. The dilemma for the banks is how to deal with the interests of the trusts, the corporations, and the investing public. This dilemma has been the subject of much debate and many proposals for resolving it.

The IMF is in a position somewhat similar to that of the banks. It has supervisory or regulatory functions with respect to exchange rates and exchange arrangements, and in the discharge of these functions it receives confidential information. The problem is whether it must use this information in the administration of the Trust Fund. The problem was resolved at first by investing the resources of the Trust Fund in securities denominated in a single currency deemed appropriate for the purpose and by not moving to securities denominated in other currencies in any circumstances. Under a later decision, investment is authorized in the obligations of an international financial organization denominated in the SDR as the IMF’s unit of account. By following these policies, the IMF avoids even the appearance of using its “inside information” about the probable development of the exchange rates of currencies.

Principles Recognized by IMF

The principles that have been recognized so far by the IMF as fundamental in the law of trusts are discussed in the following paragraphs.

(i) The rights of ownership of property subject to a trust are divided between the trustee and the beneficiary or beneficiaries. The IMF owns the resources of the Trust Fund as Trustee, but they may be used in accordance with the Trust Instrument solely for the benefit of the 61 members that have been selected as potential beneficiaries. The Executive Board has made it clear,18 however, that as the IMF is the owner of the resources of the Trust Fund, those resources are part of the “property and assets” of the IMF, and as such are covered by the various immunities conferred by the Articles on the IMF’s property and assets.19 Nevertheless, the resources of the Trust Fund cannot be used in the operations and transactions of the IMF, and the other property and assets of the IMF cannot be used in the activities conducted on behalf of the Trust Fund or to meet obligations or liabilities incurred on the account of the Trust Fund.

(ii) A trustee must keep trust property separate from his own property and from the property of other trusts, and must earmark trust property as such, unless relieved of this obligation by law or the terms of the trust. The Trust Instrument provides that the resources of the Trust Fund shall be kept separate from the property and assets of the IMF and from the property and assets of all other accounts (such as the Subsidy Account) that it administers in a fiduciary capacity. The procedure employed for the sale of gold before the Second Amendment resulted automatically in the segregation of the capital value, which enters into the general resources of the IMF, and the profits, which go into the Trust Fund. The Second Amendment produces a change in procedure as a result of which the two portions are not automatically separated from each other. In conformity with the principle of segregation, a new account in the nature of a suspense account has been established into which the proceeds are paid and from which the two portions are promptly transferred to their proper destinations.

One consequence of the segregation of the resources of the Trust Fund from those of the IMF in its non-trustee capacity is that the obligation of members to maintain the value of the IMF’s holdings of their currencies in its general resources 20 does not apply to the holdings of currencies that are part of the resources of the Trust Fund. The value of the IMF’s holdings of currencies in its general resources is maintained in terms of the SDR. The difference in relation to maintenance of value has been described as a consequence of segregation, but it is equally appropriate to conclude that another reason for segregation is that members have not undertaken to maintain the value of the resources of the Trust Fund.

(iii) A trust is not a legal entity in the sense that it is the bearer of rights or the subject of duties. The trustee and not the trust owns property, acquires claims, and incurs obligations and liabilities, although certain claims may have to be satisfied from the trust property. To give legal personality to a trust it is necessary to take action in accordance with applicable law beyond the creation of the trust itself. The aggregation of property, rights, and duties that are the elements of a trust are divided between beneficiary and trustee or among these two and the settlor. The IMF has observed this principle in connection with the Trust Fund. To take one example, before the Second Amendment, gold was sold by the IMF to members, which then resold it for the benefit of the Trust Fund. It has been said sometimes that this gold was resold to the Trust Fund. In fact, the gold was resold to the IMF as Trustee of the Trust Fund, and the IMF has auctioned the gold. The IMF as Trustee has exercised all the rights and has assumed all the obligations under the Invitation to Bid in the auctions. It follows also that agreements cannot be entered into between the IMF and the Trust Fund.

(iv) A trustee may not engage in “self-dealing” in administering the trust. Claims to repayment against the IMF under borrowing agreements that it has entered into in order to finance certain policies on the use of its resources may be transferred with the prior consent of the IMF and on terms and conditions acceptable to it. 21 These claims are attractive assets. Among their attractions are a reasonably high rate of interest and maintenance of the value of the claims in terms of the SDR.

The acquisition of these claims with resources, and on behalf, of the Trust Fund, no matter how attractive the claims might be, would have been contrary to the principle that the purchase of a trustee’s own securities even from other parties, if not authorized by the trust instrument, is impermissible. There was no difficulty in concluding, therefore, that the IMF as Trustee could not invest in the claims of lenders to the IMF in disregard of the fundamental objection to “self-dealing,” because of a potential conflict of interest. It was not necessary to rely on the further objection that a trustee may not invest assets of the trust in his own obligations because he cannot enforce them against himself.

(v) A trustee must administer the trust solely in the interest of the beneficiary. A trustee, unless clearly authorized by the terms of the trust, must not use the assets that he holds in that capacity to make loans to himself. This action would be as objectionable as the acquisition with trust property of any outstanding obligation that the trustee may have incurred in his personal capacity to other parties. “The shepherd must not become a wolf.” 22 This principle also is based on the obvious risk that a conflict of interest might arise as the result of such “self-dealing,” because of the temptation the trustee might feel to act in his own interest in administering the trust. The prohibition against self-dealing is not overcome because the trustee believes in good faith, and is justified in believing, that the issuance of securities by the trustee to be held on behalf of the trust would be advantageous for the beneficiary. The decision of the IMF that creates the Trust Fund and the Trust Instrument have been drafted in conformity with fundamental principles of the law of trusts and the ethical principles on which they are based. Derogations from these principles have not been incorporated in either the decision or the Trust Instrument.

Under the Instrument establishing the Trust Fund, the IMF as Trustee is authorized to invest balances of currency held as part of the resources of the Trust Fund in marketable obligations of international financial organizations or in marketable obligations issued by and denominated in the currency of the member of the IMF whose currency is used to make the investment, provided that the concurrence is obtained of the member whose currency is used for investment. It was readily concluded that the reference to international financial organizations in the Trust Instrument does not include the IMF, even though it can be described in this way, if only because inclusion would offend the principle that a trustee must administer the trust for the exclusive advantage of the beneficiary. The clearest evidence of authority would have been necessary to permit conduct that might be inconsistent with this principle, but there was no evidence of such an intention.

(vi) In administering a trust the trustee must use reasonable care and skill and avoid unreasonable risk. The care and skill are those that a man of ordinary prudence would exercise in dealing with his own property. In applying this principle, the IMF, in conducting auctions of gold on behalf of the Trust Fund in order to raise resources for its operations, has not been willing to accept as a term of the Invitation to Bid authority for bidders to pay the necessary deposit with a particular form of financial instrument. Potential bidders might have found the instrument less costly and, therefore, they might have been encouraged to bid, but there was doubt about the validity of the instrument in certain jurisdictions.

Development of Principles

In view of the increasing number of trust funds that are governed by international law, including the proper law of the international organization that acts as trustee, it may be desirable to attempt a codification of the fundamental principles that should be observed in the administration of these trusts unless they are qualified by the trust instrument. The experience of the IMF is, of course, affected by its special character, but it is suggested that the principles recognized by the IMF so far may have a wider relevance. If it should be thought desirable to formulate principles of general application for the regulation of trusts resembling the trusts of national law, the principles that have emerged so far in the practice of the IMF would seem to deserve consideration.

Supplemental Note to Chapter 15

1. A noteworthy feature of the Trust Fund was that the IMF reserved the right, in its decision to create the Trust Fund, to modify the list of eligible beneficiaries set forth in Annex A to the Instrument to Establish the Trust Fund (Decision No. 5069-(76/72), Selected Decisions, 10th (1983), p. 302). A modification of the list was to give rise to a right, exercisable by a transferor to the Trust Fund of resources not related to the sale of the IMF’s gold, to make no further transfers and to obtain the return of the unused portion of its transfers according to a specified formula (Selected Decisions, 10th (1983), pp. 302, 304, and 310–11). A principle of the law of trusts is that a settlor may reserve a general power to change the terms of a trust or a power to change specified terms. In the absence of a reserved power, changes can be made with the consent of all beneficiaries.

2. Gold was sold for the purpose of balance of payments assistance to eligible developing members during the period June 1976 to May 1980. A profit of US$4.6 billion was transferred to the Trust Fund, through which US$1.3 billion was distributed directly to developing members and the remainder, with other receipts, was lent to eligible developing members. The Trust Fund was terminated as of April 30, 1981 or the date of the completion of the last loans, whichever was later, subject to the completion of any unfinished business and the winding up of its affairs. The termination took place on April 30, 1981. The unused resources and subsequent receipts of the Trust Fund are to be transferred to the Special Disbursement Account, from which an amount equivalent to SDR 750 million is to be used in accordance with the terms of the Supplementary Financing Facility Subsidy Account established on December 17, 1980. (On all the matters referred to here, see Selected Decisions, 10th (1983), pp. 302–29; Annual Report 1981, pp. 81, 104–106, and 146–47.)

3. An object of the Bank for International Settlements (BIS) under Article 3 of its Statutes is “to act as trustee or agent in regard to international financial settlements entrusted to it under agreements with the parties concerned.” For an illuminating discussion of this function of the BIS, see G. K. Simons and L. G. Radicati, “A Trustee in Continental Europe: The Experience of the Bank for International Settlements,” Netherlands International Law Review, Vol. 30 (1983), pp. 330–45.

Note.—This essay was published originally in The American Journal of International Law, Vol. 72, No. 4 (October 1978), pp. 856–66.

Decision No. 5069-(76/72), Selected Decisions, 8th (1976), pp. 185–95.

Tito and others v. Waddell and others (No. 2) [1977] 3 A11 ER 129.

Ibid., p. 216.

Decision No. 4773-(75/136), Selected Decisions, 8th (1976), pp. 81–83. Contributions to the Subsidy Account were invited from members of the IMF in a sufficiently strong position to make them. The objective is to assist the 39 members that have been most seriously affected by the increase in the cost of importing petroleum and petroleum products to pay charges for the use of the IMF’s resources under its policy called the “oil facility” for 1975. The charges levied by the IMF for the use of its resources under a policy must be uniform for all members (Article V, Section 8(d)).

See Tito and others v. Waddell and others (No. 2) [1977] 3 A11 ER 129, p. 220.

Decision No. 5069-(76/72), Selected Decisions, 8th (1976), pp. 185–95.

International Encyclopedia of Comparative Law (Property and Trust, Vol. 6, chap. 11, ‘Trust/’ ed. William F. Fratcher (The Hague, 1972), pars. 101–41.

Article I(i).

Henry G. Schermers, International Institutional Law, Vol. 2 (Leiden: A.W. Sijthoff, 1972), pp. 419–20.

Elting Arnold in The Effectiveness of International Decisions, ed. Stephen M. Schwebel (Leiden: A.W. Sijthoff, 1971), p. 384.

United Nations Treaty Series, Vol. 444, p. 259 and Vol. 503, p. 388.

United Nations Treaty Series, Vol. 419, p. 125.

Article V, Section 2(b).

Article VII, Section 2(ii), original and first.

Schedule B, paragraph 7.

Joseph Gold, “Uniformity as a Legal Principle of the International Monetary Fund/’ Law and Policy in International Business, Vol. 7 (1975), pp. 765–811. See also Gold, Selected Essays, pp. 469–519.

C. Wilfred Jenks, The Proper Law of International Organisations (London: Stevens and Sons, Ltd., 1962), p. 187.

The Commentary in the Report on Second Amendment contains the following passage in explanation of Article V, Section 2(b): “Operations and transactions involved in the performance of these financial services would not be on the account of the Fund. That is to say, the assets in the Accounts of the General Department or any assets in the Special Drawing Rights Department would not be available to meet obligations or liabilities incurred in the course of these services. The assets administered by the Fund under this provision might be owned by the Fund if certain legal techniques, such as a trust, were employed, and, therefore, to take one example, the assets would be assets of the Fund for the purposes of the immunities and privileges of Article IX even though they would not be held within the General Department (Article XVI, Section 2). Services rendered by the Fund under Article V, Section 2(b) cannot impose obligations on a member unless it agrees to assume them. As in the past, the Fund would be able to absorb the administrative costs of the services or agree with members on some other arrangement.”

Article IX.

Article V, Section 11.

Selected Decisions, 8th (1976), pp. 122–28.

Tito and others v. Waddell and others (No. 2) [1977] 3 A11 ER 129, p. 241.

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