It has been suggested on occasion that the Fund should take an initiative in issuing formal interpretations more frequently. This suggestion has been made in connection with Article VIII, Section 2(b), on the ground that this provision has an impact on the rights and obligations of private parties and the courts have not been expert in their understanding of it. The interpretations that are referred to in this connection are not confined to the text of Article VIII, Section 2(b), but include interpretations of other provisions that may be necessary in order to enable the courts to apply Article VIII, Section 2(b). The point has been made most recently in connection with the litigation involving a vast number of life insurance policies issued to Cuban residents by U.S. and Canadian companies that had been doing business in Cuba.⁷² The policyholders became refugees after the present regime came to power in Cuba, and then sued on the policies in courts in the United States and Canada. One of the defenses advanced by the insurance companies was the argument that the new regime had adopted exchange control regulations which prevented payment to the policyholders outside Cuba. The companies argued that the courts were bound by Article VIII, Section 2(b), to recognize these regulations. The cases undoubtedly raised many difficult issues of the interpretation of Article VIII, Section 2(b), and other provisions of the Articles. No one of the three members that had some connection with the litigation, Canada, Cuba, and the United States, requested an interpretation, and the Fund volunteered none. In response to requests by counsel for a number of litigants, the Fund did provide a statement which dealt in general terms with the sole question of the consistency of Cuban exchange control regulations with the Articles.⁷³

It is certainly true that the Fund’s role has been a reserved one in relation to the litigation in many countries in which Article VIII, Section 2(b), has been or should have been relied on. The Fund’s formal interpretation of June 10, 1949 of certain basic features of Article VIII, Section 2(b), has been mentioned several times in this pamphlet. The purpose of that interpretation was to draw the attention of members of the Fund and the legal profession to the fact that the provision had brought about important changes in the private international law and public policy of many countries. It was apparent at the time, and experience has certainly confirmed, that the provision would raise many problems that go beyond the scope of the interpretation, but the Fund has not adopted any further interpretations.

The last paragraph of the interpretation of June 10, 1949 declares that

“The Fund will be pleased to lend its assistance in connection with any problem which may arise in relation to the foregoing interpretation or any other aspect of Article VIII, Section 2(b). In addition, the Fund is prepared to advise whether particular exchange control regulations are maintained or imposed consistently with the Fund Agreement.”

In practice, the Fund has acted only under the second of these two sentences. It has frequently provided information, in response to requests, on the consistency of particular exchange control regulations with the Articles. It has done this without hesitation on the ground that these were requests for information of a kind that was likely to be available only to the Fund. It is virtually impossible for anyone else to make the determination of consistency, and it certainly cannot be derived from a perusal of the Articles. The Fund’s legal advisors have provided other information of a factual character, and have been prepared to do this for the benefit of both parties to an action.

The reluctance of the Fund to go beyond this, notwithstanding the last paragraph of the interpretation, should not be attributed to any lack of concern with the judicial application of Article VIII, Section 2(b). The reasons why the Fund has not adopted further interpretations, and has not appeared as amicus curice in any proceeding notwithstanding occasional invitations from governments or litigants, have not been formulated explicitly. A probable reason for the reluctance to become involved in pending litigation has been the reflection that the contests are between private parties. In addition, the Fund could not intervene without taking a position that would necessarily be partisan in its impact. The reluctance to adopt further interpretations has also been influenced by the feeling that this could turn the Fund, in effect, into a court of appeal from the tribunals of its members. The interpretations would inevitably deal with those issues that had arisen or should have arisen in the courts. The interpretation of June 10, 1949 was itself the result of the misunderstanding or neglect of the provision by courts and litigants. The embarrassments that might be involved in a policy of readiness to correct the courts whenever necessary would not be the only deterrent. The demands on the Fund, once it decided to issue interpretations of or in connection with Article VIII, Section 2(b), could be quite considerable. The cases have produced a stream of issues, and the Fund would have had to give much time to this work if it had decided to react on all of these issues.

It must be emphasized that there has been no deliberate decision to leave to the courts exclusively the task of the further interpretation of the Articles for the purpose of applying Article VIII, Section 2(b). It is not impossible, therefore, that the Fund might conclude, on occasion, that events had made it desirable for the Fund to adopt an interpretation on some aspect of Article VIII, Section 2(b), or some other provision. For example, if the Fund were to receive a request from a member for an interpretation under Article XVIII, the issue would no longer be confined to private litigants.

Members have not hitherto requested further interpretations in connection with Article VIII, Section 2(b). The reasons for this are not clear. It must not be assumed that members have been unconcerned with the outcome of litigation in the courts of other members involving Article VIII, Section 2(b), and affecting their residents. But the implications of some of the issues raised in litigation may go far beyond the litigation itself and may have a much broader impact on the relations between the Fund and its members. For example, one issue might be whether a particular exchange control regulation restricted payments and transfers for current international transactions or whether it restricted capital transfers. This was one of the issues in the cases involving insurance policies issued to former residents of Cuba by foreign insurance companies. This issue might arise because Article VIII, Section 2(b), establishes the sanction of unenforceability for certain contracts if they are contrary to exchange control regulations “maintained or imposed consistently with this Agreement.” The basic rule of the Articles is that a member must obtain the prior approval of the Fund for restrictions on payments and transfers for current international transactions,⁷⁴ but normally a member has full freedom to impose controls on capital transfers.⁷⁵ Accordingly, if the Fund’s approval has not been obtained where it is necessary, the exchange controls will not be maintained or imposed consistently with the Articles. If approval is not required, the regulations will be consistent with the Articles. In any particular action, it may be helpful to a litigant, or to the member of which the litigant is a resident, to obtain a ruling from the Fund that the exchange control regulation in question restricted paymerits and transfers for current international transactions, and therefore required Fund approval, which approval had not been granted. A ruling of this kind may help to dispose of the case to the litigant’s satisfaction, but it will also establish the proposition that all restrictions on the kind of payments and transfers involved in the case are subject to the Fund’s jurisdiction and cannot validly be introduced by a member unless it obtains the approval of the Fund.

It is, of course, possible that in some particular case the issue is not one of general interpretation but one of special determination, i.e., whether in the circumstances of that case the control in question is on payments and transfers for current international transactions or on capital transfers. There is a provision in the Articles which enables the Fund to deliver a judgment in this kind of case even though the Fund is not called upon to deliver an interpretation of general application. Article XIX (i) concludes by declaring that

“The Fund may, after consultation with the members concerned, determine whether certain specific transactions are to be considered current transactions or capital transactions.”