A question which will occur immediately to the lawyer is whether Article XVIII interpretations by the Fund have binding effect on forums in member countries. This is, of course, quite different from the question whether they are binding on member governments. Indeed, there can be no question about that. The question whether they are binding on courts is particularly pertinent in view of the fact that two of the interpretations under Article XVIII, those involving Article VIII, Section 2(b), and Article IX, Section 7, have an impact on the rights or obligations of private persons or corporations. It is not likely that the problem will arise except in relation to interpretations under Article XVIII because under the charter only these are authoritative. However, this does not mean that a forum would ignore the persuasive effect of an interpretation made otherwise than under Article XVIII, if one of them was relevant to some issue before the forum.

There is very little authority on the question of the effect of interpretations on a forum in a member country. The most detailed examination of the question of the conclusiveness of Article XVIII interpretations in U.S. law has occurred not in a court but in a proceeding before the U.S. Federal Communications Commission.⁵³

The case arose in this way. In 1949 the U.S. cable companies proposed to adopt revised tariffs of charges under which the Fund⁵⁴ would be charged the same commercial rates for its official telecommunications messages as were payable by private persons. Before July 1, 1949, the Fund had paid the same rates as applied to governmental messages sent from the United States to other countries. These rates were substantially lower than the commercial rates. The Fund filed a complaint with the Federal Communications Commission which contended that the revised tariffs were unlawful on the ground that, so long as special governmental rates existed, the Fund was entitled to the same standard of treatment. The Fund’s case was based mainly on Article IX, Section 7, of its charter, which had been given “full force and effect” in the United States, its territories, and possessions by Section 11 of the U.S. Bretton Woods Agreements Act. It has been seen above that the Executive Directors of the Fund interpreted Article IX, Section 7, under Article XVIII to mean that it embraced the rates charged the Fund for its official telecommunications messages.

One of the major issues in the controversy was whether the interpretation was binding on the Federal Communications Commission. The cable companies argued that Article IX, Section 7, applied to such matters as priorities and freedom from censorship but not rates, and that the interpretation was not conclusive. The Commission held that the interpretation was binding on the U.S. Government and, therefore, on the Commission.

“We believe that the question as to the application of the term ‘treatment’ in the Bank and Fund Articles to rates has been conclusively determined by the Bank and Fund Executive Directors’ interpretation, by unanimous vote, that the language in question applies to rates charged for official communications of the Bank and the Fund. Under the terms of the Bank and Fund Articles of Agreement, this interpretation, in effect, is final. This procedure for issuing interpretations binding member governments does indeed appear novel; but it also appears to point the way toward speedy, uniform and final interpretations. This procedure is not only an integral part of the Bank and Fund Articles, which have been accepted by the United States, but its use was specifically invoked with respect to questions of interpretation by sections 12 and 13 of the Bretton Woods Agreements Act;⁵⁵ and the United States Congress, by directing that an amendment of the Articles be sought if the requested interpretations were not satisfactory, appears to have recognized in these two sections that the United States is bound by the results of the interpretations. The United States Government is therefore bound by the Executive Directors’ interpretation of the term ‘treatment’ and is under an international obligation to act in conformity therewith.”⁵⁶

The Commission also disposed of three subsidiary arguments directed against the interpretation by the cable companies. First, they contended that the National Advisory Council exceeded its authority in requesting the U.S. executive director in the Fund to obtain the interpretation. The Commission held that the National Advisory Council had ample authority. Secondly, the cable companies argued that the interpretation was ultra vires because the question with which it dealt did not arise between members or between any member and the Fund within the meaning of Article XVIII of the Fund’s charter but between private companies and the Fund. The Commission held that the question was one that involved all members of the Fund, and was requested by the National Advisory Council for the specific purpose of securing a uniform understanding among all members. The interpretation had an effect on the cable companies, but this could not in any way limit the interpretation procedure established by the Fund’s charter. Thirdly, the cable companies contended that the interpretation lacked finality because it had not been referred to the Board of Governors under Article XVIII (b). The Commission held that the interpretation had the requisite degree of finality. It had been adopted by the Executive Directors without a single dissenting vote and had been notified to all member governments. For the United States, the National Advisory Council had indicated that it had no intention of seeking an appeal, and no other member had taken any steps to appeal to the Board of Governors.

The cable companies relied also upon a number of arguments attacking the reasonableness of any interpretation of the language of Article IX, Section 7, to include rates. On these arguments the Commission commented:

“… assuming for purposes of argument, that if the interpretations of the term ‘same treatment’ by the Executive Directors of the Bank and Fund were so unreasonable, arbitrary or capricious as to constitute in fact an amendment of the Articles of Agreement rather than interpretations thereof we should not have to give effect to them, we think it clear that the interpretations made in this case cannot be so categorized. The language of the Articles of Agreement appears to be sufficiently broad and general to include rates, and nowhere is there any exclusion of the matter of rates, either expressed or implied, or any words of limitation.”⁵⁷

It is interesting to note in connection with the Commission’s decision that Article XVIII is not included among the provisions in the Fund’s charter which have been expressly given the force of law in the U.S. Bretton Woods Agreements Act. Nevertheless, the Commission concluded that the interpretation under Article XVIII was binding. The broad base upon which this conclusion rests is that the United States, in accepting the Fund’s Articles of Agreement, entered into an executive agreement authorized by Congress, with the result that the Articles, including Article XVIII, became the law of the land. Executive agreements have a dignity similar to that of treaties, and these are expressly made the law of the land by clause 2 of Article VI of the U.S. Constitution.

The Commission’s decision as to the conclusiveness of the interpretation thus rests upon the general law of the land, and not upon some special feature of the Commission’s activities as an administrative agency. This fact is emphasized in that part of the Commission’s opinion which dealt with the argument of the cable companies that the Fund could not invoke its charter or the Bretton Woods Agreements Act, because this involved questions of interpretation of international executive agreements and statutes which were foreign to the Commission’s jurisdiction. The Commission held that

“In inquiring as to the lawfulness of any new charge, classification, regulation or practice, or in ascertaining whether any unjust or unreasonable discrimination exists, the Commission can not be confined to a consideration only of the costs or value of services rendered or other such matters of fact; we have the authority also to consider whether rates or charges are affected by special legislation or by international agreements.”⁵⁸

It follows from what has been said of the Commission’s decision that its rationale would be as applicable to an action in a court in the United States as to a proceeding before a regulatory agency. In this connection, it is important to note that the record in the case contains two letters from the Department of State of the United States. A letter of June 2, 1950 contained the following paragraph:

“By virtue of its membership in the Fund and Bank, the United States is obliged to conform to the provisions of the respective Articles of Agreement, including the provisions of the respective Articles relating to interpretation of the Articles. As a consequence, the United States is obliged to carry out the Articles of Agreement as interpreted in accordance with the provisions of the Articles. Since the United States does not intend to require that the interpretations under reference be referred to the respective Boards of Governors, the United States is under an international obligation to act in conformity with the interpretations issued by the respective Executive Directors of the Fund and Bank.”

In a further letter, dated January 25, 1951, the State Department declared, in part, that

“Reference is made to the provisions of Article XVIII of the Articles of Agreement. Since that authority [i.e., the Fund and International Bank] held to the view that the Articles of the Agreement of the Bank and the Fund relate to the treatment to be accorded to official communications, including governmental privileges with respect to rates, this Department is of the opinion that the United States Government is committed to support that interpretation.”

The Commission remarked that its conclusion on the binding forces of the interpretation was reached independently of the letters from the State Department. However, the view of the State Department, the Commission continued, was entitled to great weight and constituted an additional basis for the Commission’s conclusion.⁵⁹

There is a further aspect of the case which should be mentioned. A forum may decide, as the Commission did, that an interpretation under Article XVIII is binding on it, but it may feel called upon to interpret the interpretation. This happened in the case before the Commission. One of the issues was whether the United States was bound to ensure that in all circumstances U.S. cable companies extend to the Fund the same standard of rate treatment as prevailed for the messages of other member governments or whether the cable companies were required to do so only where their foreign correspondents observed certain conditions of reciprocity such as the division of tolls on the basis of reduced rates. Counsel for the Fund argued that the obligation of the United States to ensure that U.S. cable companies accord the Fund the same preferential rate treatment as member governments receive did not depend on any showing of reciprocity by the foreign correspondents of U.S. cable companies. The Commission took a different view. It pointed out that international cable service is a bilateral process, and before it can be instituted a U.S. cable company had to make appropriate arrangements with its foreign correspondent. Where the U.S. cable company granted reduced rates this was generally the result of a reciprocal arrangement. If U.S. companies were required unilaterally to give reduced rates to the Fund without reference to the action of their foreign correspondents, they would not be giving the Fund the “same” treatment under Article IX, Section 7, but better treatment. The Commission was of the opinion that the interpretation itself supported this view. There was no express language or necessary implication in it that placed an unconditional unilateral obligation on member countries. There was in fact an indication in the interpretation that no such unilateral obligation was contemplated. One of the questions submitted to the Executive Directors, and answered by them in the negative, was whether a member’s obligation would be satisfied if the Fund’s communications could be sent only at rates exceeding the rates accorded the official communications of other members “in comparable situations.” A comparable situation would not exist where there was no arrangement for reciprocity between the U.S. cable company and its foreign correspondent, and in such a situation the U.S. company could charge the Fund higher rates than it charged member governments.⁶⁰

There is a certain amount of judicial authority in the United States on the question of the binding effect of Article XVIII interpretations on courts in the United States. In Southwestern Shipping Corporation v. National City Bank of New York,⁶¹ the issue was whether certain contractual arrangements entered into by Italian residents in violation of Italian exchange control legislation were enforceable in New York. The New York Supreme Court noted that under Article VIII, Section 2(b), “our courts, under the Bretton Woods Agreement, are expressly prohibited from furnishing any assistance to the enforcement of any agreements made in violation of the Foreign Exchange Control Laws of Italy,” and the court quoted the material part of the Fund’s interpretation of the provision. The court held that “even in the absence of the Bretton Woods Agreement,” the plaintiff could not recover, but the clear implication was that the court considered the interpretation binding on it.⁶²

The New York Court of Appeals has referred to the same interpretation in the more recent case of Banco do Brasil, S.A. v. A.C. Israel Commodity Co., Inc.,⁶³ in which the court held that Article VIII, Section 2(b), was not a basis for a claim to damages for conspiracy to evade Brazilian exchange control regulations. The court said:

“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.’ … 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.”

Once again the implication is consistent with the binding force of the interpretation.

In another American case, Theye y Ajuria v. Pan American Life Insurance Co.,⁶⁴ the plaintiff, while a resident of Cuba, applied for a policy of insurance through the Havana representative of the defendant, a Louisiana corporation. The application was forwarded to and approved by the defendant’s head office in New Orleans, and a policy was issued to the plaintiff. It stipulated that all premiums and proceeds were payable at the home office. The plaintiff left Cuba as a refugee in November 1960 and became a resident of Florida. He claimed the cash surrender value of the policy at the New Orleans office, but the defendant refused the demand on the ground, inter alia, that under the Fund’s Articles Cuban exchange control legislation prevented payment anywhere except in Cuba. The plaintiff sued in the Louisiana courts, and the Court of Appeal of Louisiana, Fourth Circuit, held that the plaintiff must fail. The court based itself on Article VIII, Section 2(b), and quoted a considerable portion of the Fund’s interpretation in presenting its opinion. It prefaced the quotation as follows:

“By accepting and implementing the above [the Bretton Woods Agreement], our Congress has undertaken to make the above principle [Article VIII, Section 2(b)], a part of our national law. On June 14, 1949, the International Monetary Fund, binding on all its members, including Cuba and the United States, issued the following interpretation of Article VIII, Section 2(b): …”

Of course, “binding on all its members” is not the same as “binding on the courts of all its members,” but the latter seemed to have followed from the former in the view of the court. On further appeal, the Supreme Court of Louisiana held that Article VIII, Section 2(b), did not apply in the particular circumstances of the case and reversed the lower court without mentioning the interpretation.⁶⁵

In Société ‘Filature et Tissage X. Jourdain’ v. Epoux Heynen-Bintner, the Tribunal d’Arrondissement de Luxembourg (Civil) clearly regarded itself as bound by the Fund’s interpretation of Article VIII, Section 2(b).⁶⁶ A French resident sued a Luxembourg resident in a French court, and was met with the defense that the debt for which suit was brought had been discharged by a third party. The French court rejected this defense on the ground that the alleged payment was not in accordance with French exchange control regulations, and gave judgment for the plaintiff. The plaintiff then sought execution of the judgment in Luxembourg and was met with the objection that French exchange control legislation on which the judgment was based was contrary to Luxembourg public policy. The Luxembourg court set forth the principles of the Fund’s interpretation, and held that as Luxembourg courts were bound by the Articles, and France was a member of the Fund, a Luxembourg court could not refuse to apply French exchange control regulations that were maintained or imposed consistently with the Articles on the ground that they were contrary to Luxembourg public policy.

A learned author has expressed doubt that the Fund’s interpretation of Article VIII, Section 2(b), has legal effect in England,⁶⁷ and this even though the provision has been given the force of law in England.⁶⁸ A dictum by Lord Justice Evershed (as he then was) seems to suggest a different view:

“An interesting argument was addressed to us on the scope and effect of the Bretton Woods Agreements Order in Council, 1946 (S. R. & O., 1946, No. 36) (made under s. 3 of the Bretton Woods Agreements Act, 1945), which gave the effect of law in England to certain parts of the Final Act of the United Nations Monetary and Financial Conference, 1944, commonly known as the Bretton Woods Agreements. The argument turned largely on the interpretation to be given to the term ‘Exchange contracts’ found in the Articles of Agreement of the International Monetary Fund, Art. VIII, s. 2(b). The term is not defined in the Agreement—or in the Order in Council—but provision is made by Art. XVIII of the Agreement to the effect that any question of interpretation of the provisions of the Agreement arising as therein stated should be submitted to the executive directors of the International Monetary Fund. On the view I take of the case, it is unnecessary for me to express any view on the argument referred to, and, having regard particularly to the interpretation provisions of the Agreement itself, it is, I think, undesirable that I should do so.”⁶⁹

This dictum can be understood to mean that if there had been a relevant interpretation under Article XVIII, Lord Evershed would have followed it. However, the absence of such an interpretation should not discharge a court from its duty to construe a relevant provision in the Fund’s Articles which has been given the force of law.⁷⁰ In the case in which the dictum was delivered the provision referred to was one which has clearly become part of English law. At the same time, it is only fair to point out that Lord Evershed thought it unnecessary, on his view of the case, to decide the question of interpretation of the Fund’s charter which had been raised.

The Court of Appeal in England has now construed Article VIII, Section 2(b), in Sharif v. Azad.⁷¹ The court was not at all reluctant to pass upon certain features of that provision because they have not been the subject of any interpretation by the Fund. Indeed, the court made no reference to the Fund’s interpretation of the provision even though it was relevant to certain other aspects of the case. The court’s views were consistent with the interpretation, and perhaps for this reason the court felt it unnecessary to raise the question of the binding force of an Article XVIII interpretation on English tribunals.

Finally, what of the position where it is established that under the existing law in a member country an interpretation under Article XVIII is not binding on the courts of that country in cases in which the provision interpreted should be applied under the Articles of Agreement? Article XX, Section 2(a), provides that

“Each government on whose behalf this Agreement is signed shall deposit with the Government of the United States of America an instrument setting forth that it has accepted this Agreement in accordance with its law and has taken all steps necessary to enable it to carry out all of its obligations under this Agreement.”

A more specialized provision of the kind is to be found in Article IX, Section 10, the concluding section of the Article which establishes the Fund’s status, immunities, and privileges:

“Each member shall take such action as is necessary in its own territories for the purpose of making effective in terms of its own law the principles set forth in this Article and shall inform the Fund of the detailed action which it has taken.”

If, under the existing law in a particular member country, an interpretation under Article XVIII were not binding on the local courts, it would follow, if the interpretation related to one of the obligations of the member, that the member would be failing to perform its undertaking in Article XX, Section 2(a). In view of Article XVIII, the undertaking in Article XX, Section 2(a), must refer to the obligations of members as interpreted under Article XVIII where the Fund has adopted such an interpretation. In addition, the member would be failing to perform its undertaking in Article IX, Section 10, if the interpretation related to any matter covered by Article IX. In such cases as are discussed here, it may be expected that the necessary change in the member’s law to make the interpretation binding would be forthcoming.