Abstract

Under the General Arrangements to Borrow, the Fund is able to replenish its holdings of the currencies of ten members, but the Fund has no legal powers to borrow the currencies of nonmembers. In certain circumstances, however, when the Fund borrows under the General Arrangements in order to finance a transaction with a member which is intended to forestall or cope with an impairment of the international monetary system, it might be a useful contribution to that objective if Swiss francs could be made available to the member. The legal problem posed by the Fund’s inability to borrow Swiss francs has been solved by an agreement between the Fund and Switzerland which is in the nature of a stipulation pour autrui.91

Under the General Arrangements to Borrow, the Fund is able to replenish its holdings of the currencies of ten members, but the Fund has no legal powers to borrow the currencies of nonmembers. In certain circumstances, however, when the Fund borrows under the General Arrangements in order to finance a transaction with a member which is intended to forestall or cope with an impairment of the international monetary system, it might be a useful contribution to that objective if Swiss francs could be made available to the member. The legal problem posed by the Fund’s inability to borrow Swiss francs has been solved by an agreement between the Fund and Switzerland which is in the nature of a stipulation pour autrui.91

The agreement provides that if the Fund borrows under the General Arrangements in order to finance a transaction with a member, Switzerland will lend resources directly to that member. The agreement is much more complex than that simple statement, and in particular there are conditions qualifying Switzerland’s duty to lend. The agreement takes the form of an exchange of letters dated June 11, 1964 between the Ambassador of Switzerland to the United States and the Managing Director of the Fund.92 Paragraph (11) deals with interpretation:

“Any question of interpretation or application of these understandings will be settled to the mutual satisfaction of the Swiss Confederation and the Fund.”

No express reservation has been made for the settlement of questions of interpretation that fall within the purview of Article XVIII because it is difficult to see how they could arise under this agreement. However, it is not unlikely that questions pf interpretation under the General Arrangements might affect the agreement between the Fund and Switzerland. For example, paragraph (5) provides that “The effect of the terms and conditions for the timing of repayment of resources made available by Switzerland pursuant to this letter will correspond, to the maximum extent practicable, with the repayment provisions of Paragraph 11 of the General Arrangements.”