THREE CASES of importance are discussed in this installment of the survey of cases involving the Articles of Agreement of the International Monetary Fund.1 These have been decided by the International Court of Justice, the New York Court of Appeals, and the U.S. Federal Communications Commission. The issues relate to the right of a country to impose exchange control, the recognition by members of the Fund of the exchange control regulations of other members, and the privileges and immunities of the Fund.
Mr. Gold, Assistant General Counsel, is a graduate of the Universities of London and Harvard, and was formerly a Lecturer in Law in the University of London and a member of the British Merchant Shipping Mission, Washington, D. C. He is the author of articles in British, American, Canadian, French, and Belgian law journals.
Earlier installments appeared in Staff Papers, Vol. I, pp. 315–33 (April 1951), and Vol. II, pp. 482–98 (November 1952).
I.C.J. Reports, 1952, pp. 176–233. For a thorough analysis of the case, see A. de Laubadére, “Le Statut International du Maroc et 1’Arret de la Cour Internationale de Justice du 27 août, 1952”, Revue Juridique et Politique de l’Union Française, Vol. 6 (1952), pp. 429–73, in which the question of exchange control is discussed at pp. 453–69.
However, it was not disputed between the parties that, even after the establishment of the Protectorate, Morocco retained its personality as a State in international law. See I.C.J. Reports, 1952, p. 185.
An analysis of imports sans devises is to be found in the French Memorial, I.C.J. Pleadings, Vol. I, pp. 15–17. For the argument of the United States that the variations in the strength of the franc on the parallel market were not attributable to the volume of these imports, see I.C.J. Pleadings, Vol. II, pp. 239–41.
From the Application by France instituting proceedings; see I.C.J. Pleadings, Vol. I, p. 11.
I.C.J. Pleadings, Vol. I, pp. 78–89; Vol. II, pp. 196, 199–207.
Section 2. Exchange restrictions.—In the post-war transitional period members may, notwithstanding the provisions of any other articles of this Agreement, maintain and adapt to changing circumstances (and, in the case of members whose territories have been occupied by the enemy, introduce where necessary) restrictions on payments and transfers for current international transactions. Members shall, however, have continuous regard in their foreign exchange policies to the purposes of the Fund; and, as soon as conditions permit, they shall take all possible measures to develop such commercial and financial arrangements with other members as will facilitate international payments and the maintenance of exchange stability. In particular, members shall withdraw restrictions maintained or imposed under this Section as soon as they are satisfied that they will be able, in the absence of such restrictions, to settle their balance of payments in a manner which will not unduly encumber their access to the resources of the Fund.
Section 3. Scarcity of the Fund’s holdings.—(a) If it becomes evident to the Fund that the demand for a member’s currency seriously threatens the Fund’s ability to supply that currency, the Fund, whether or not it has issued a report under Section 1 of this Article, shall formally declare such currency scarce and shall thenceforth apportion its existing and accruing supply of the scarce currency with due regard to the relative needs of members, the general international economic situation, and any other pertinent considerations. The Fund shall also issue a report concerning its action.
(b) A formal declaration under (a) above shall operate as an authorization to any member, after consultation with the Fund, temporarily to impose limitations on the freedom of exchange operations in the scarce currency. Subject to the provisions of Article IV, Sections 3 and 4, the member shall have complete jurisdiction in determining the nature of such limitations, but they shall be no more restrictive than is necessary to limit the demand for the scarce currency to the supply held by, or accruing to, the member in question; and they shall be relaxed and removed as rapidly as conditions permit.
Section 1. Use of the Fund’s resources for capital transfers.—(a) A member may not make net use of the Fund’s resources to meet a large or sustained outflow of capital, and the Fund may request a member to exercise controls to prevent such use of the resources of the Fund. If. after receiving such a request, a member fails to exercise appropriate controls, the Fund may declare the member ineligible to use the resources of the Fund.
Section 2. Signature.—(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.
Section 3. Notification to the Fund.— Each member shall notify the Fund before it becomes eligible under Article XX, Section 4(c) or (d), to buy currency from the Fund, whether it intends to avail itself of the transitional arrangements in Section 2 of this Article, or whether it is prepared to accept the obligations of Article VIII, Sections 2, 3, and 4. A member availing itself of the transitional arrangements shall notify the Fund as soon thereafter as it is prepared to accept the above-mentioned obligations.
Reference was made to the prohibition of such imports by Italy in 1948; and to the abandonment by Greece, at a later date, of a proposal to permit them. It was pointed out that in this latter case Greece acted with the advice of experts, one of whom was from the Fund.
I.C.J. Pleadings, Vol. I, pp. 335–43.
International Monetary Fund, Annual Report, 1948, Appendix IV, pp. 74–75.
I.C.J. Pleadings, Vol. II, pp. 26–31.
Section 6. Consultation between members regarding existing international agreements.—Where under this Agreement a member is authorized in the special or temporary circumstances specified in the Agreement to maintain or establish restrictions on exchange transactions, and there are other engagements between members entered into prior to this Agreement which conflict with the application of such restrictions, the parties to such engagements will consult with one another with a view to making such mutually acceptable adjustments as may be necessary. The provisions of this Article shall be without prejudice to the operation of Article VII, Section 5.
I.C.J. Pleadings, Vol. II, p. 105.
Section 5. Effect of other international agreements on restrictions.—Members agree not to invoke the obligations of any engagements entered into with other members prior to this Agreement in such a manner as will prevent the operation of the provisions of this Article.
I.C.J. Pleadings, Vol. II, pp. 201–2, 309.
I.C.J. Pleadings, Vol. II, pp. 200, 205, 308–9. For the text of Article XVIII, see n. 44, infra.
I.C.J. Pleadings, Vol. II, p. 257. The French reply to this argument was that exchange control and import control are not identical, but they are not necessarily independent. Exchange control may apply where no import is involved, as in the case of capital transfers. Similarly, import control may involve no financial considerations, as in the case of controls for reasons of public health, trading with the enemy, or protection of a new industry. But exchange control may apply to current transactions, and then it necessarily involves import control. This is shown by Article VIII, Section 5 (a)(v), (vi), (xi); and Article XIX (i)(l) of the Fund Agreement. The Decree of December 30, 1948 is based on financial considerations. A prohibition of imports sans devises could not be characterized otherwise. It is, therefore, a measure of exchange control. I.C.J. Pleadings, Vol. II, pp. 304–5.
I.C.J. Pleadings, Vol. II, pp. 257–61, 319–21. On the Fund’s E.R.P. decision, France replied that the decision was revoked because of the termination of the first U. S. aid program. This does not mean that the decision was ineffective for the period 1948–52, or that thereafter the dollar ceased in fact to be a scarce currency. Ibid., pp. 308–9.
I.C.J. Reports, 1952, pp. 183–86.
As a result of the decision, France could have extended the control of imports sans devises to imports from the franc area or could have removed this control altogether. It chose the latter course, making it clear at the same time that the existing control over the allocation of foreign exchange would be continued. In addition, importers who were free to import because they had not received an official allocation of exchange would be required, when requested by the competent authorities, to describe the use of funds from the sale or utilization of these imports. See U.S. Department of State Bulletin, Vol. XXVII, No. 695, p. 623, October 20, 1952, and A. de Laubadère, op. oil, pp. 463–65.
That this was the basic French argument appears more clearly in the Application instituting proceedings, from which a passage has been quoted on page 292 of this article. In oral argument, however, France argued that, if the Court did not accept the Fund Agreement as helping to determine the content of the concept of economic liberty without any inequality under the Act of Algeciras, it should regard the Fund Agreement as establishing an exception to that Act. I.C.J. Pleadings, Vol. II, pp. 199, 303.
Staff Papers, Vol. II, pp. 490–92 (November 1952).
110 N.Y.S. (2d) 446 (1952).
304 N.Y. 533, 110 N.E. (2d) 6 (1953).
For the text of Article XVIII, see n. 44, infra.
For the text, see International Monetary Fund, Annual Report, 1949, Appendix XIV, pp. 82–83. It has also been published in Staff Papers, Vol. I, pp. 326-27 (April 1951); Revue Critique de Droit International Privé, Vol. XL (1951), pp. 586-87; U.S. Federal Register, August 19, 1949, pp. 5208–9.
59 Stat. 512 (1945).
That this is the correct view of the Perutz case has already been argued in the supplemental memorandum of law submitted to the Supreme Court of New York by the intervenor in Bata v. Bata a.s.
See, for example, In re Liebl’s Estate, 106 N.Y.S. (2d) 715 (1951).
B. S. Meyer, “Recognition of Exchange Controls after the International Monetary Fund Agreement”, Yale Law Journal, Vol. 62 (1953), pp. 868–910.
F. A. Mann, “The Private International Law of Exchange Control Under the International Monetary Fund Agreement”, International and Comparative Law Quarterly, Vol. 2 (1953), pp. 106–7.
Ibid., p. 106.
Arthur Nussbaum, “Exchange Control and the International Monetary Fund”, Yale Law Journal, Vol. 59 (1950), pp. 426–27, and Money in the Law, National and International (Brooklyn, 1950), pp. 542–43.
F. A. Mann, op. cit., p. 102 and “Money in Public International Law”, British Yearbook of International Law, Vol. 26 (1949), p. 279. Dr. Mann has abandoned an earlier view that an “exchange contract” is one that provides for consideration in the form of exchange; see “The Exchange Control Act, 1947”, Modern Law Review, Vol. 10 (1947), p. 418. This was not the same as Professor Nussbaum’s view because a contract may provide for the payment of exchange otherwise than in return for another currency. The sale of goods for exchange is an obvious example. In the supplemental memorandum of law of the intervenor in Bata v. Bata a.s. (see n. 32, supra), it was argued that “the Court of Appeals [in the Perutz case] could have founded its decision on Article VIII, Section 2(b) only if it determined that the words ‘exchange contract’ in the section were intended to include all monetary transactions which affected the exchange resources of a member country.”
Arthur Nussbaum, “Exchange Control and the International Monetary Fund”, Yale Law Journal, Vol. 59 (1950), p. 427, and Money in the Law, National and International (Brooklyn, 1950), p. 543.
F. A. Mann, “The Private International Law of Exchange Control Under the International Monetary Fund Agreement”, International and Comparative Law Quarterly, Vol. 2 (1953), p. 104.
staff Papers, Vol. II, pp. 482–89 (November 1952)
F.C.C. Docket No. 9362.
For convenience, the case will be discussed here in terms of the Fund and the Fund Agreement, but all such discussion should be understood to apply equally to the Bank and its Articles of Agreement.
(a) Any question of interpretation of the provisions of this Agreement arising between any member and the Fund or between any members of the Fund shall be submitted to the Executive Directors for their decision. … (b) In any case where the Executive Directors have given a decision under (a) above, any member may require that the question be referred to the Board of Governors, whose decision shall be final. Pending the result of the reference to the Board the Fund may, so far as it deems necessary, act on the basis of the decision of the Executive Directors.
For the text of the interpretation, see International Monetary Fund, Annual Report, 1950, Appendix XI, pp. 118–19.
59 Stat. 669 (1945).