Abstract

A characteristic of the interpretative work of the Fund has been the reliance placed on what the late Judge Lauterpacht called “private law sources and analogies.”33 International monetary law is even more sparse than many other branches of public international law, and this in itself would have encouraged frequent resort to private law. In addition, the comparative treatment of private law makes it possible on occasion to distill concepts or principles with which many systems of law are familiar, and when there are broadly accepted concepts or principles, they make a useful contribution to the attainment of general consent among the Executive Directors and membership of the Fund. However, although private law has made a considerable contribution to the elucidation of the Articles, it has been necessary to observe a certain caution. The Fund and its activities are unique in many ways, and it would be misleading therefore to assume that the concepts of the Articles always have exact parallels in private law.

A characteristic of the interpretative work of the Fund has been the reliance placed on what the late Judge Lauterpacht called “private law sources and analogies.”33 International monetary law is even more sparse than many other branches of public international law, and this in itself would have encouraged frequent resort to private law. In addition, the comparative treatment of private law makes it possible on occasion to distill concepts or principles with which many systems of law are familiar, and when there are broadly accepted concepts or principles, they make a useful contribution to the attainment of general consent among the Executive Directors and membership of the Fund. However, although private law has made a considerable contribution to the elucidation of the Articles, it has been necessary to observe a certain caution. The Fund and its activities are unique in many ways, and it would be misleading therefore to assume that the concepts of the Articles always have exact parallels in private law.

A fairly recent and illuminating example of the use of private law sources and analogies was the adoption by the Fund of a decision and model agreement for the pledge of gold to the Fund. The Fund has the power to waive the conditions on which it makes its resources available to members and may require the “pledge” of “collateral security” in the form of gold, silver, securities, or other acceptable assets as a condition of granting a waiver.34 The Fund approved exchange transactions accompanied by gold collateral on a few occasions, and then decided that it would establish standard terms for this type of transaction. It was found that there was very little positive international law35 which helped in defining the legal incidents of the terms “pledge” and “collateral security,” and therefore virtually all of the features of the form of pledge established by the Fund had to be imported from private law. For example, the widespread principle of private law that the pledgor must make an effective surrender of possession of the pledged property to the pledgee or to someone on his behalf led the Fund to accept this principle and to decide that it could best be observed if gold pledged to the Fund were delivered to some depository of the Fund outside the territory of the pledgor.

Another and more troublesome feature of the private law of pledge that had to be coped with was the invalidity in many legal systems of terms in a pledge agreement that impaired the pledgor’s right to redeem the pledged property by providing that on default in the performance of the pledgor’s principal obligation ownership would pass automatically to the pledgee (“pacte commissoire”). The pledgee’s normal remedies are judicial foreclosure or sale and not unilateral appropriation of the pledged property. It was arguable that the pacte commissoire would not be improper in the case of a pledge of gold because this would not be an unconscionable burden on the pledgor. Transfer of the gold to the Fund would be at the parity price established under the Articles. Nevertheless, the Fund decided to adopt safeguards for the pledgor that would avoid a pacte commissoire to the maximum extent. It was provided, therefore, that after the due date the pledgor would be given a period of grace within which to discharge its obligation to the Fund; that at any time before the due date or within the period of grace the pledgor might sell the pledged gold and discharge its obligation either with the proceeds of sale or with any other holdings of currency or gold; and that the Fund would facilitate any such sale.36

There has been one resort to private law sources that deserves special mention because of broader issues that it raised in connection with the interpretation of the Articles. Ordinarily, an interpretation, once adopted, is assumed to have been effective at all relevant times. However, on one occasion this would have created special problems. The circumstances in which the issue arose are complicated, but some of the salient facts may be taken to be that on September 30, 1946 the Executive Directors agreed to recommend to the Board of Governors a quota increase for a member. The Resolution adopted by the Board of Governors contained no provision dealing with the gold subscription payable in respect of the increase in quota. The member consented to the increase, which became effective on January 14, 1947, at which date the member had not yet been required to pay and had not in fact paid the gold portion of its original subscription. Before the final date for that payment (February 28, 1947), there was discussion of the question of the gold subscription payable by the member. One view was that while the member was bound by Article III, Section 3(b),37 to pay an original gold subscription equal to the smaller of 25 per cent of quota or 10 per cent of the member’s net official holdings on a specific date, it was also bound by Article III, Section 4(a),38 to pay a further gold subscription in respect of the increase in quota. This additional gold subscription would be equal to 25 per cent of the increase (or such smaller amount as the Fund might determine if the member’s monetary reserves were below a certain level). A competing view was that if a quota increase became effective before the original subscription was due, the total gold subscription payable was governed by Article III, Section 3(b). On that assumption, the only gold subscription would be the smaller of 25 per cent of the increased quota or 10 per cent of the member’s net official holdings. If, as in this case, the member was paying on the basis of 10 per cent of its net official holdings, the increase in quota would not entail a larger gold subscription than was payable in respect of the original quota.

The adoption of the first view in this case would have caused the member prejudice if it had been led to believe that no further gold subscription would be payable in respect of the quota increase and if it had consented to the increase on that basis. A quota increase cannot be reversed by the member’s unilateral withdrawal of consent. Therefore, had the legal issue relating to the subscription been raised in time and left uncertain or resolved in favor of a further gold subscription, the member might not have consented or might have appealed the question to the Board of Governors.

The question of interpretation was not settled by the Executive Directors until July 1950, and it was then settled by a decision that any increase in quota is governed by Article III, Section 4(a), so that 25 per cent of an increase is payable in gold39 whether or not the increase takes effect before an original subscription is due.40 However, the Fund found with respect to the particular increase that had produced the controversy that the member in good faith had been led to understand before it consented to the increase in quota that a further gold subscription would not be payable under Article III, Section 4(a). In view of that finding and the other circumstances of the case, in particular the time that had elapsed before the adoption of the interpretation of Article III, Section 4(a), the Fund decided that the member was not required to make a further payment of gold in respect of the increase in its quota.

The effect of this decision was that the interpretation was not made retroactive to the particular quota increase which had produced the legal issue. The decision did not refer expressly to any particular doctrine of law, but it was clearly influenced by such doctrines as estoppel or preclusion and laches.41 There is authority in some systems of private law which, subject to many qualifications, asserts that estoppel is confined to representations of fact and does not extend to representations of law, or which denies the possibility of setting up an estoppel against a statute, or which prevents extension of the powers of a corporation beyond its charter by means of an estoppel.42 However, it has been said that “when international law borrows an idea from municipal systems, there is no reason why the international formulation of the rule should be identical with that of national law…,”43 This raises an interesting question. What constitutes the essence of a general concept or principle of law and what are the inessential local incidents that should not be carried over into international law? It is likely that this is a problem on which not much guidance can be found in general rules.

It is possible that there was, in any event, a radical difference between the Fund quota case and those cases in which an estoppel cannot be established under the rules of private law that have been mentioned. The Fund has the power to interpret its Articles and bind its members thereby. It would be difficult to justify the retroactive application of an interpretation to a member which had acted to its prejudice on the assumption induced by the Fund that some other interpretation was the correct one.44