chapter 10 Article XX, Section 2 (g), and Dependencies
- International Monetary Fund
- Published Date:
- October 1985
The Articles have universal application in a certain sense because members undertake obligations to the Fund and to each other, assume certain obligations in relation to nonmembers, and accept the Articles not only on their own behalf but also in respect of certain territories, which for convenience will be referred to as dependencies. The provision under which members are responsible for dependencies is 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.
The Articles do not expressly require members to give the Fund notice of the territories in respect of which they have accepted the Articles. Members have not provided the Fund with comprehensive lists of their dependencies, and it has been necessary on occasion to inquire about the status of a territory. The Fund has received notices when a member has communicated initial par values for those of its dependencies that had separate currencies,1 or when the par values of these currencies have been changed,2 or when a new currency has been introduced. These communications have not referred to dependencies that were using the currency of the member that had accepted the Articles in respect of these territories, or were using the currency of some other member, or the currency of another dependency.
The Fund has never attempted to compile a complete list of the territories that are subject to Article XX, Section 2 (g). Some impression of their number at one time can be obtained from the response to certain inquiries by the United Nations. Under Article 73 of the Charter, members that “have or assume responsibilities for the administration of territories whose people have not yet attained a full measure of self-government” undertake to transmit to the Secretary-General certain information with respect to the territories for which they are responsible, other than those territories that are subject to the trusteeship system. The definition of the territories subject to Article 73 has been the subject of controversy.3 On June 29, 1946, the Secretary-General addressed a letter to the members of the United Nations on certain problems connected with Article 73, to which 22 members replied. In these replies or in statements made in the second part of the first session of the General Assembly, 74 territories were named for which members undertook to transmit information under Article 73.4 This number must be accepted with some reservation as indicating the number of dependencies that were subject to Article XX, Section 2 (g), because there are differences between the concepts of the two provisions and in the membership of the two organizations. Nevertheless, the number revealed by the inquiry of the Secretary-General probably indicates the order of magnitude of the number of territories that were subject to Article XX, Section 2 (g), in 1946. The number is, of course, much reduced at the present time, and is likely to be reduced even further in the future.
Another interesting feature of the replies received by the Secretary-General is that the members reporting territories for which they were responsible under Article 73 were not limited to those that are often thought to be “colonial” powers. The members that reported territories were Australia,5 Belgium, Denmark, France, the Netherlands, New Zealand,6 the United Kingdom, and the United States.
Nonadmission of Dependencies
Dependencies cannot be admitted to membership. They are not “other countries” within the meaning of Article II, Section 2. The member that accepts the Articles in respect of a dependency is responsible to the Fund for the observance of the Articles by the government of the dependency. The member has sole responsibility and does not share it with the dependency. There have been some dependencies with separate currencies and separate balances of payments that might have welcomed the opportunity to assume membership on their own behalf. It is also possible that the member responsible for some of these dependencies would have been just as willing to see them become members, particularly if they had full internal autonomy, but it is not possible to make exceptions even in these circumstances.
The treaties establishing some international organizations permit a country, when taking up membership, to exclude responsibility for dependent territories. The Articles of Agreement of the International Finance Corporation (ifc) provide that “[e]ach government on whose behalf this Agreement is signed shall deposit with the [World] Bank an instrument setting forth that it has accepted this Agreement without reservation in accordance with its law and has taken all steps necessary to enable it to carry out all of its obligations under this Agreement.” 7 The Explanatory Memorandum on the Proposed Articles of Agreement of the ifc commented as follows on the provision:
As regards the territorial application of the charter, it is understood that references in the charter to the territories of a member include all territories for whose international relations such member is responsible, except those which have been expressly excluded by the government concerned in its instrument of acceptance, and that such exclusion would therefore not be considered to be a reservation within the terms of Article IX, Section 2 (a). In view of the foregoing, a provision corresponding to the territorial application clause in the Bank’s Articles (Art. XI, Sec. 2 (g)) has not been included in the charter.8
Article XI, Section 2 (g), of the World Bank’s Articles corresponds to Article XX, Section 2 (g), of the Fund’s Articles and was drafted at the same time.
The charter of the International Development Association (ida), drafted three and a half years later, contains the following provision on territorial application:
By its signature of this Agreement, each government accepts it both on its own behalf and in respect of all territories for whose international relations such government is responsible except those which are excluded by such government by written notice to the Association.9
The exclusion of a territory under the implicit authority of the Articles of the ifc or the explicit authority of the Articles of the ida did not make the territory eligible for membership in either organization.
The provisions of the General Agreement on Tariffs and Trade (gatt) permit the exclusion of a territory, but a territory that has not been excluded may qualify for the status of a contracting party if it has or if it acquires autonomy in connection with the subject matter of the General Agreement.10 According to paragraph 5 of Article XXVI:
(a) Each government accepting this Agreement does so in respect of its metropolitan territory and of the other territories for which it has international responsibility, except such separate customs territories as it shall notify to the Executive Secretary to the Contracting Parties at the time of its own acceptance.
(b) Any government, which has so notified the Executive Secretary under the exceptions in sub-paragraph (a) of this paragraph, may at any time give notice to the Executive Secretary that its acceptance shall be effective in respect of any separate customs territory or territories so excepted and such notice shall take effect on the thirtieth day following the day on which it is received by the Executive Secretary.
(c) If any of the customs territories, in respect of which a contracting party has accepted this Agreement, possesses or acquires full autonomy in the conduct of its external commercial relations and of the other matters provided for in this Agreement, such territory shall, upon sponsorship through a declaration by the responsible contracting party establishing the above-mentioned fact, be deemed to be a contracting party.
Under paragraph 5 (c), full autonomy is not necessary for a territory to become a contracting party, but only autonomy in conducting its external commercial relations and others matters pertaining to the gatt.11 When the provision was drafted in 1947, Burma, Ceylon, and Southern Rhodesia were deemed to have the autonomy that was contemplated, were accepted as contracting parties, and signed the Final Act in October 1947. Burma and Ceylon became independent in time to become contracting parties without the need to rely on paragraph 5 (c) of Article XXVI.
The provision in the gatt is not confined to territories that have an autonomy in the matters covered by the gatt but are not yet independent, and many former colonies have become contracting parties by means of sponsorship under the provision on attaining independence. The Articles of the Fund contain no special provision under which the status of a territory subject to Article XX, Section 2 (g), can be transformed into membership when the territory ceases to be a dependency. A territory that qualifies for membership must go through the same procedure under Article II, Section 2, as any country that was never subject to Article XX, Section 2 (g).
Rhodesia became a contracting party to the gatt by sponsorship under paragraph 5 (c) of Article XXVI because it had the necessary autonomy. Its later status is said to be ambiguous,12 but whatever that status may be, the difference between paragraph 5 (c) of Article XXVI of the gatt and Article XX, Section 2 (g), of the Fund’s Articles produces an interesting anomaly. Paragraph 6 of Article XV of the gatt requires any contracting party that is not a member of the Fund to enter into a special exchange agreement with the Contracting Parties, and the obligations of the agreement thereupon become part of the obligations under the General Agreement. Under paragraph 7, the terms of a special exchange agreement must satisfy the Contracting Parties that the objectives of the General Agreement will not be frustrated as a result of action by the contracting party in matters of exchange, although the terms may not impose more onerous obligations than those involved in membership in the Fund. Special exchange agreements are discussed in Chapter 21 of this study.
A contracting party may have the degree of autonomy that satisfies paragraph 5 (c) of Article XXVI of the gatt but not be eligible for membership in the Fund because it is a dependency under Article XX, Section 2 (g), of the Fund’s Articles. It would seem, therefore, that such a territory cannot enter into a special exchange agreement because the assumption on which paragraph 6 of Article XV of the gatt is based is that a special exchange agreement is an alternative to possible membership in the Fund.13 The anomaly is not serious because if a territory is subject to Article XX, Section 2 (g), of the Fund’s Articles, a member is responsible to the Fund in respect of the territory, and the member will be held accountable for the observance of the provisions of the Articles in respect of the territory. Nevertheless, there is a difference in the legal position under the two treaties. Under the gatt the territory is itself accountable to the Contracting Parties, but under the Fund’s Articles another entity, the member that has accepted the Articles in respect of the territory, is responsible to the Fund. The member may be able to call the territory to account, but any responsibility of this kind will exist by virtue of the arrangements between the member and the territory and not by virtue of any provisions of the Articles.
One consequence of Article XX, Section 2 (g), is that a dependent territory is ineligible for membership even though its economic and financial weight in the world is greater than that of many members. Another consequence is that a dependent territory is ineligible for membership even though it has autonomy in monetary matters because it has its own currency and an independent balance of payments, whereas a territory with the status of a country is eligible even though it has no currency within its exclusive control. The gatt is not the only organization in which the eligibility for membership of territories that are regarded as dependencies in the Fund is determined by their autonomy in the field of competence of the organization.
Some organizations offer associate membership for dependent territories. The constitution of the World Health Organization (who), which in this respect has been the model for some other organizations, provides that “[t]erritories or groups of territories which are not responsible for the conduct of their international relations may be admitted as Associate Members by the Health Assembly upon application made on behalf of such territory or group of territories by the Member or other authority having responsibility for their international relations.” 14 The Health Assembly has defined the rights and duties of associate members.15 For example, they may participate in the deliberations of the Health Assembly and its main committees, but without vote. They may participate, vote, and hold office in other committees, with certain exceptions. They contribute to the budget of the who, but their difference in status is taken into account in determining the amounts of their contributions.16 The Articles of the Fund make no provision for anything but full membership.17
Membership or associate membership in international organizations for dependent territories on the theory that the organizations exercise functions of a predominantly technical character may nevertheless create political problems. Even these organizations have to deal sometimes with political issues, and it may be embarrassing if dependencies vote on questions of international politics. This experience has deterred two organizations from admitting additional dependent territories in recent years.18
The experience of the Fund does not support any strong argument for separate membership, or some special form of membership, for dependencies, although something of a case might be made for a small number of them. The currencies of most dependencies have been tied to the currency of the member that has accepted the Articles in respect of them, and few of them have engaged in a large volume of international trade and payments. There is evidence of the modest role of these dependencies in the virtual absence of any comment on their economic situation in the reports on consultations with the members that have accepted the Articles in respect of them under Article XX, Section 2 (g). At the same time, it must be admitted that many members play only a small part in international economic and financial activity, and the currencies of these members are often closely linked with the currency of the member that formerly had accepted the Articles in respect of them. Perhaps the most cogent arguments against separate membership, for which incidentally there has been little pressure, are administrative and political.
Rationale of Article XX, Section 2 (g)
The Advisory Opinion of the Permanent Court of International Justice on Free City of Danzig and International Labour Organization suggests one reason why it has been decided to withhold membership from dependencies in certain organizations. The question on which the Court gave an opinion was whether the special legal status of the Free City of Danzig prevented it from becoming a member of the International Labor Organization (ilo). Under the Treaty of Versailles, the Principal Allied and Associated Powers agreed to establish the Free City and place it under the protection of the League of Nations, which would guarantee its constitution. A treaty was to be negotiated between Poland and Danzig that would provide for the Government of Poland to conduct the foreign relations of Danzig, and this treaty was entered into. It was common ground between Poland and Danzig that Poland, in conducting the foreign relations of Danzig, was not entitled to impose a policy on Danzig against its will. At the same time, Danzig could not call on Poland to take any action in conducting the foreign relations of Danzig that was opposed to Poland’s own policy.
The Court concluded that some, at least, of the steps that a member of the ilo would take, or even be bound to take, in the normal course of the activities of membership would fall within the sphere of foreign relations. Danzig would not be able to take these steps without Poland’s consent, and Poland would be able to refuse its consent if they were prejudicial to important interests of its own. The Court concluded, therefore, that the special status of Danzig did prevent it from becoming a member of the ilo, although the Court was willing to come to a different conclusion if a special arrangement were made ensuring in advance that Poland would not object to any action that Danzig might wish to take as a member of the ilo.19
The power of a member of the Fund to interpose an objection within that sphere of the foreign relations of a dependency that lies within the province of the Fund is sufficient to explain the rationale of Article XX, Section 2 (g). It would not be possible, however, for a member to arrange for the membership in the Fund of a dependent territory by giving up effective control of this sphere of the territory’s foreign relations. The rationale of Article XX, Section 2 (g), is not made explicit in the Articles. A dependency is subject to Article XX, Section 2 (g), if it falls into one of the categories of the provision, whatever may be the extent of a member’s control over the dependency’s foreign relations.
Responsibility for Dependency
The nature of the responsibility of a member to the Fund as a result of Article XX, Section 2 (g), was settled in 1948 in connection with a subsidy that Southern Rhodesia was paying to its gold producers. An executive director called attention to the subsidy, and the executive director appointed by the United Kingdom, after making inquiries, informed the Fund that the United Kingdom had suggested to the Government of Southern Rhodesia that it should change the subsidy in order to make it compatible with the Articles and the Fund’s policy on the payment of subsidies to gold producers.20 The Southern Rhodesian Government had replied that it felt compelled to proceed with the proposed legislation, except for minor modifications, for the period up to the end of March 1949, because plans for production for that period had been based on the proposed subsidy. The director appointed by the United Kingdom stated that the United Kingdom could take no further action because Southern Rhodesia was a self-governing territory and the United Kingdom was not in a position to require action. The Executive Directors called for a study of the subsidy and of the legal questions it raised.
The staff concluded that the subsidy was inconsistent with the Articles and the Fund’s policy. Southern Rhodesia was not a Dominion of the Commonwealth or equal in status to a Dominion. It was a self-governing colony with responsible government, but its external affairs were conducted by the Government of the United Kingdom. The constitution of Southern Rhodesia, which was based on Letters Patent and Instructions issued to the Governor in September 1923, provided that the Governor was not to assent to any law if its provisions appeared to be inconsistent with British treaty obligations unless he had first obtained the instructions of the British Government or unless the law provided that it was not to take effect until the views of the British Government had been expressed. The United Kingdom had accepted the Articles in respect of Southern Rhodesia and appeared to be in a position, as a result of the Southern Rhodesian constitution, to prevent any action by the Southern Rhodesian Government that was inconsistent with the obligations of the United Kingdom under the Articles. The obligations of the United Kingdom would not have been curtailed, however, even if there had been no such constitutional provision. A member’s responsibility under Article XX, Section 2 (g), was unqualified, and amounted to an undertaking that the obligations of the Articles would be observed by its dependencies. A member could not rely on its constitutional organization or domestic law to justify the nonperformance of obligations under the Articles.
The staff noted that the common characteristic of the territories listed in Article XX, Section 2 (g), was that their foreign relations were conducted by the member that had accepted the Articles in respect of them. “It was assumed … that whatever the relations between a parent government and dependent territory might otherwise be, the parent government’s right to conduct the foreign relations of the dependent territory would entitle it to require the latter to recognize, and join in the performance of, the obligations entered into in respect of it.” This statement in the staff’s memorandum was not meant to deny that the obligations to the Fund are those of the “parent,” or to assert that the obligations undertaken by the “parent” “in respect” of the dependency become the obligations of the dependency.
The United Kingdom accepted responsibility toward the Fund. Representatives of the United Kingdom accompanied by Southern Rhodesian officials engaged in consultations with the Fund and the United Kingdom “notified the Fund that the Southern Rhodesian Government has undertaken to modify the present legislation to conform with the Fund’s principles and intends to introduce legislation to that end at the next session of the Southern Rhodesian Parliament.”21
The issue has never arisen again and it is normal practice for a member that has accepted the Articles in respect of a dependency to request any approval that is necessary under the Articles for measures that the government of the dependency wishes to adopt. The practice is not without its difficulties for members. For example, under Article IV, Section 9, a member proposing a change in the par value of its currency is deemed to be proposing a corresponding change in the par value of the separate currencies of all territories in respect of which it has accepted the Articles under Article XX, Section 2 (g), unless the member declares that the proposal is more limited. Special procedures have been followed sometimes when the United Kingdom or France changed the par value of sterling or the French franc, in order to permit a brief interval in which it could be ascertained what effect the change was to have on separate currencies. The interval was necessary because many of the authorities of the dependencies enjoyed much local autonomy, and it was necessary for the member to ascertain their intentions.
The most remarkable illustration of the difficulties that have been mentioned occurred on November 22, 1967. In the morning of that day, the Executive Directors concurred in changes proposed by the United Kingdom in the par values of certain of its separate currencies. Among these were the currencies of Hong Kong and Fiji, and the devaluation of them in which the Fund concurred was in the same proportion as the devaluation of sterling that had taken place on November 18, 1967. During the afternoon of November 22, the executive director appointed by the United Kingdom informed the Executive Directors that the authorities in Hong Kong and Fiji, who enjoyed considerable local autonomy, had reconsidered their position and had decided that they did not wish to devalue in the same proportion as sterling. Thereupon, the Executive Directors, on the same day, concurred in a revaluation the effect of which was to bring about a net devaluation of the two currencies smaller than the one originally accepted by the Fund.
Exchange Regimes of Dependencies
A member’s acceptance of the Articles in respect of its dependencies requires it to ensure that the obligations of the Articles are performed in respect of all its dependencies, but the exchange arrangements applied by the member need not prevail in its dependencies, and the exchange arrangements of the dependencies need not be uniform among them. For example, a member may treat a particular dependency as if it were a separate territory for the purposes of exchange control, although any restrictions the member applies on the making of payments and transfers for current transactions to residents of the dependency will not be regarded as restrictions on the making of payments and transfers for current “international” transactions within the meaning of Article VIII, Section 2 (a).22 A member is able, therefore, to treat a dependency less favorably under its exchange control regulations than it treats foreign countries.
There are two outstanding examples of the principle that the exchange arrangements need not be the same throughout a member’s territory and its dependencies. The first of the two examples involves French Somaliland (now renamed the French Territory of the Afars and the Issas), a dependency for which France is responsible under Article XX, Section 2 (g). The Articles require a member to permit within its territories exchange transactions between its own currency and the currencies of other members only within the margins prescribed by the Articles. This obligation must be performed through appropriate measures that are consistent with the Articles. It is provided that if a member’s monetary authorities settle their international transactions by the practice of freely buying and selling gold in return for their own currency with the monetary authorities of other members at prices for gold that are consistent with the Articles, the member will be deemed to be performing its obligation with respect to rates for exchange transactions within its territories.23 In 1949, France concluded that it was not possible to adopt appropriate measures that would ensure performance of the obligation with respect to margins for exchange transactions in French Somaliland involving the Djibouti franc, the currency of the dependency. At that time, the United States had declared that it was maintaining the value of the U. S. dollar by the free purchase and sale of gold. France decided, therefore, to impose no restrictions of any kind on payments and transfers by residents of French Somaliland and to provide them with U. S. dollars in exchange for Djibouti francs without impediment. The Fund agreed that this practice amounted to the free purchase and sale of gold by France with respect to the Djibouti franc provided that the combined costs of exchange transactions involving the Djibouti franc and the U. S. dollar and the sales of these dollars to the United States for gold did not exceed the margins prescribed by the Fund for gold transactions.24 This episode is pertinent to the present inquiry because France did not elect, and has not at any time elected, to follow the practice of the free purchase and sale of gold in respect of the French franc.
The second example involves Ruanda-Urundi, a dependency in respect of which Belgium had accepted the Articles. If a member proposes a change in the par value of its currency, the provisions of the Articles regulate the relationship of the proposal to the par values of the separate currencies of the member’s dependencies. The proposal is taken to encompass a proposal for corresponding changes in these other par values, but a member may declare that its proposal is confined to its own currency, or to one or more separate currencies, or to its own currency and one or more separate currencies.25 Similar provisions in the Articles govern the communication of initial par values.26 The Articles contain no such provisions with respect to a member’s decision to perform the obligations of convertibility. A member communicates this decision to the Fund by giving it notice that the member “is prepared to accept the obligations of Article VIII, Sections 2, 3, and 4.” If a member gives this notice, the Fund assumes that the notice applies not only to the member’s currency but also to any separate currencies that it may have. In 1961, Belgium gave notice to the Fund that it was accepting the obligations of Article VIII, Sections 2, 3, and 4, but that it did not want this notice to apply to the separate currency of Ruanda-Urundi, a territory for which Belgium was at that time the administering authority under the trusteeship system of the United Nations. The territory had not only a central bank and a currency of its own, but also separate monetary reserves, its own exchange control regulations, which differed from those of Belgium, and its own system for licensing imports from all territories, including Belgium. In these circumstances, and in view of the precedent of French Somaliland and the treatment of separate currencies under the Articles, the Fund concluded that Belgium could accept the obligations of convertibility without extending them to the currency of Ruanda-Urundi.
The example of French Somaliland carried weight, even though the monetary effect was the reverse of the result reached for Ruanda-Urundi. The Fund recognized that France freely bought and sold gold within the meaning of the Articles in order to maintain the value of the currency of French Somaliland, which therefore was convertible in this sense,27 even though the French franc was not. In the case of Ruanda-Urundi, the Fund recognized that its currency need not become convertible under Article VIII, Sections 2, 3, and 4, when Belgium made its own currency convertible.
The conclusion that the currency of a dependency can have a legal status under the Articles that differs from the status of the currency of the member that has accepted the Articles in respect of the dependency is consistent with the Fund’s purpose of assisting members to undertake the obligations of convertibility. A member need not delay the assumption of those obligations until the authorities are ready to declare the convertibility of the separate currencies of all the dependencies for which the member is responsible under Article XX, Section 2 (g). The effect of the Fund’s practice is that a member need not avail itself, and will not be deemed to be availing itself, of the transitional arrangements of Article XIV in respect of its own currency because it is availing itself of those arrangements in respect of separate currencies.
There is a limit, however, to the distinction that can be made between the currency of a member and the currency of its territories. If the member has a single balance of payments for itself and its dependencies, or some of them, the member’s willingness to assume the obligations of convertibility under Article VIII, Sections 2, 3, and 4, means that it has no justification based on its balance of payments for continuing to avail itself of the transitional arrangements of Article XIV. The retention of the transitional arrangements for a territory for which there is no separate balance of payments could not be justified in these circumstances.
Effects of Articles on Relations Between Member and Dependency
The effects of the Articles on the relations between a member and its dependency are complex, and it may be useful to gather some of these effects under a single heading. It has been seen that a member must establish, and may change, a par value for the separate currency of its dependency. The par value may be the same as, or may differ from, the par value for the member’s own currency. Whatever the par values of the two currencies may be, the member must adopt appropriate measures to ensure that exchange transactions involving the two currencies within the territories of the member and the dependency will occur only within margins around the parity relationship between them that are consistent with the Articles. In connection with the observance of margins for exchange transactions, therefore, the currency of a dependency is treated in the same way as the currencies of other members. The margins must be observed even though Article IV, Section 4 (b), the provision enforcing them, refers to transactions between members. The result may seem odd, but if the member were not responsible for seeing that margins are observed in exchange transactions involving its currency and the separate currency of its dependency, there would be little point in requiring the member to establish a par value for the currency of the dependency, and little hope that the margins would be observed in exchange transactions involving the currency of the dependency and the currencies of other members. It has been seen that the member can discharge its obligation with respect to exchange transactions involving the currency of a dependency by complying with the provision on the free purchase and sale of gold in exchange for the currency, even though the member does not follow this practice in relation to its own currency.
Notwithstanding the legal position with respect to exchange transactions, current transactions between a member and its dependency are not regarded as “international” and therefore the member may impose restrictions on the making of payments and transfers for current transactions between itself and the dependency, or between residents of the two, without obtaining the approval of the Fund. Similarly, the Fund has held that sales of a dependency’s gold production within the member’s territories were not “international.” The Fund’s statement of June 18, 1947 on external sales of gold deprecated “international transactions” in gold at premium prices and recommended that members take action to prevent them with other countries or with the nationals of other countries, but did not object to domestic transactions at a premium unless they were found to have certain consequences. In October 1948, Belgium consulted the Fund on a proposal to establish a market in Belgian territory in which producers of gold in the Belgian Congo would be allowed to sell their gold to bona fide dentists, industrialists, and goldsmiths resident in Belgium or the Belgian Congo. The Fund concluded that these sales would not be international. In November 1949, access to the market was extended to similar buyers who were resident in the Belgian trusteeship territory of Ruanda-Urundi.28
Under Article IV, Section 2, of the Articles, a member may not buy gold at a price above par value plus the margin prescribed by the Fund, or sell gold at a price below par value minus the margin. In National Bank of Belgium v. Bank of the Belgian Congo and National Committee of the Kivu, the Belgian Court of Cassation considered a case involving purchases of gold by the National Bank of Belgium from the Bank of the Belgian Congo. The former bank is the central bank of Belgium, and the latter was a fiscal agency of the Belgian dependency. The court assumed without question, and correctly, that Article IV, Section 2, applied to the transactions in issue.29