THIS LATEST INSTALLMENT in the series of articles dealing with jurisprudence in which the Fund’s charter has been involved1 discusses cases decided by the Federal Maritime Commission of the United States and the U. S. District Court for the Southern District of New York, the European Court of Justice, and the Supreme Court of the Netherlands. The issues raise or suggest some of the problems that the decline of the par value system has created or may create for the parties to transnational transactions and the drafters of international or private agreements.
Mr. Gold, the General Counsel and Director of the Legal Department of the Fund, is a graduate of the Universities of London and Harvard. He is the author of The Fund Agreement in the Courts (Washington, 1962), The Stand-By Arrangements of the International Monetary Fund (Washington, 1970), Voting and Decisions in the International Monetary Fund (Washington, 1972), and Membership and Nonmembership in the International Monetary Fund (Washington, 1974), as well as various pamphlets and articles.
Earlier articles were published in Staff Papers: Vol. I (1950–51), pp. 315–33; Vol. II (1951–52), pp. 482–98; Vol. III (1953–54), pp. 290–312; Vol. V (1956–57), pp. 284–301; Vol. VI (1957–58), pp. 461–75; Vol. VIII (1960–61), pp. 287–312; Vol. IX (1962), pp. 264–95; Vol. XI (1964), pp. 457–89; Vol. XIV (1967), pp. 369–402; Vol. XIX (1972), pp. 468–502. The first seven articles, together with another article that appeared in Vol. IV (1954–55), pp. 330–38, were subsequently issued in book form, as The Fund Agreement in the Courts (Washington, 1962).
Federal Maritime Commission, Docket No. 72–5, January 28, 1972.
The U. S. Administration had agreed as part of the Smithsonian agreement to propose to Congress an increase of 8.57 per cent in the price of gold in terms of U. S. dollars, which corresponded to a devaluation of the U. S. dollar by 7.89 per cent.
46 U.S.C.A. §817(b).
Shippers Rate Agreement, Article 23 (printed in Federal Maritime Commission, Docket 72–5, cited in footnote 2), p. 13.
337 F. Supp. 1032, at 1036 (1972).
Pikes and Fischer, 13 SRR 289–99.
Section 5 of the Bretton Woods Agreements Act (59 Stat. 514 (1945)): “Unless Congress by law authorizes such action, neither the President nor any person or agency shall on behalf of the United States … (b) propose or agree to any change in the par value of the United States dollar under Article IV, Section 5, or Article XX, Section 4, of the Articles of Agreement of the Fund, or approve any general change in par values under Article IV, Section 7….”
Cf. the frequent confusion between “par value” and “parity.”
Note, for example, the words “normally” and “generally” in the following passage: “The terms devaluation and revaluation normally are reserved for changes in the par value which make the currency concerned cheaper or more expensive in terms of other currencies. Where similar changes occur in an exchange rate that is not a par value, the terms depreciation and appreciation are generally used. Depreciation or appreciation may involve either discrete or gradual changes in value,” in “Glossary of Exchange Concepts,” IMF Survey, Vol. 1 (August 28, 1972), p. 32.
See also The International Monetary Fund, 1945–1965: Twenty Years of International Monetary Cooperation, ed. by J. Keith Horsefield (Washington, 1969), Vol. II, pp. 111 et seq.; Vol. Ill, pp. 24 and 111; Gottfried Haberler, “U. S. Balance of Payments Policy and the International Monetary System,” in Convertibility, Multilateralism and Freedom: World Economic Policy in the Seventies—Essays in Honour of Reinhard Kamitz, ed. by Wolfgang Schmitz (Vienna, 1972), pp. 187–91; “SDRs: New Look,” The Economist, Vol. 252 (July 6, 1974), p. 96.
Article IV, Section 8(b).
Article I (iii).
IMF Press Release No. 853, August 20, 1971, reproduced in International Financial News Survey (hereinafter referred to as IFNS), Vol. 23 (August 25, 1971), p. 261.
Decision No. 3399-(71/90), August 20, 1971. (This decision is paraphrased in IMF Press Release No. 853, cited in footnote 15.)
IFNS, Vol. 23 (December 22–30, 1971), p. 418; Annual Report of the Secretary of the Treasury on the State of the Finances for the Fiscal Year Ended June 30, 1972 (Washington, 1972), p. 370.
It occurred again with respect to the subsequent change in the par value of the U. S. dollar. The Secretary of the U. S. Treasury announced on February 12, 1973—IMF Press Release No. 957, February 13, 1973, reproduced in IMF Survey, Vol. 2 (February 26, 1973), p. 53—that the President was requesting Congress to authorize the change, which took effect with the concurrence of the Fund on October 18, 1973. Once again the proposed change became effective in the exchange markets immediately after the announcement.
U.S. Congress, House, Committee on Banking and Currency, To Provide Fora Modification in the Par Value of the Dollar, Hearings on H.R. 13120 (92nd Congress, 2nd Session, Washington, March 1–3 and 6, 1972), p. 4.
Article IV, Section 8 (b).
Article IV, Section 4(a).
See Joseph Gold, “The Legal Structure of the Par Value System,” Law and Policy in International Business, Vol. 5 (No. 1, 1973), pp. 194–98.
Selected Decisions of the International Monetary Fund and Selected Documents (Washington, Sixth Issue, 1972; hereinafter referred to as Selected Decisions), p. 12.
Regulation No. 129 adopted by the Council of the European Economic Community. “… whereas it is necessary to fix the exchange rates to be used for transactions within the framework of the common agricultural policy which involve expressing in one currency sums shown in another currency; whereas all Member States and a large number of third countries have declared a parity for their currency to the International Monetary Fund, which has recognised the same; whereas under this body’s rules the exchange rates applying to current transactions and quoted on foreign exchange markets, which, subject to supervision by the monetary authorities of countries the parity of whose currency has been recognised by the Fund, are allowed to fluctuate only within narrow limits about that parity figure; whereas in consequence the use of the exchange rate corresponding to the said parity normally makes it possible to avoid the monetary difficulties which might prevent the common agricultural policy being carried out …” Alan Campbell, Common Market Law (London, 1969), Vol. II, p. 502; hereinafter referred to as Campbell, Common Market Law.
Common Market Law Reports, Vol. 13 (February 1974), pp. 186–202; Recueil de la Jurisprudence de la Cour, Vol. 18 (No. 7, 1972), pp. 1071–90.
Article 177 of the Treaty Establishing the European Economic Community: “The Court of Justice shall be competent to make a preliminary decision concerning: (a) the interpretation of this Treaty; (b) the validity and interpretation of acts of the institutions of the Community; and (c) the interpretation of the statutes of any bodies set up by an act of the Council, where such statutes so provide.
“Where any such question is raised before a court or tribunal of one of the Member States, such court or tribunal may, if it considers that its judgment depends on a preliminary decision on this question, request the Court of Justice to give a ruling thereon.
“Where any such question is raised in a case pending before a domestic court or tribunal from whose decisions no appeal lies under municipal law, such court or tribunal shall refer the matter to the Court of Justice.”
Campbell, Common Market Law, Vol. 2, p. 503.
See also Article 3(1) of Regulation No. 129:
“1. Where monetary practices of an exceptional nature are such as to endanger effect being given to the meaures or provisions referred to in Article I, the Council or the Commission, acting in accordance with the powers conferred by such measures or provisions and the procedures laid down in such measures or provisions in each instance, may, after consulting the Monetary Committee, take measures which are exceptional to the present regulation, in particular in the following cases:
“(a) when a member country of the International Monetary Fund, having declared to that institution a parity for its currency and that parity being recognised by the same, permits fluctuations in the value of its currency in excess of the limits laid down under this body’s rules;
“(b) when a country resorts to abnormal exchange techniques such as variable or multiple exchange rates or applied a barter agreement;
“(c) in the case of countries whose currency is not quoted on official foreign exchange markets.” Campbell, Common Market Law, Vol. 2, pp. 503–504.
For subsequent action on the unit of account, see Campbell, Common Market Law, Vol. 2, pp. 535–37; and Council Regulation No. 2543/73 of September 19,1973, in Official Journal of the European Communities, Vol. 16, No. L 263 (September 19, 1973).
Article IV, Sections 3 and 4(b).
Article VIII, Section 3.
Decision No. 904-(59/32), July 24, 1959, Selected Decisions, p. 11.
Article IV, Section 8. See also Joseph Gold, Maintenance of the Gold Value of the Fund’s Assets, IMF Pamphlet Series, No. 6 (Washington, Second Edition, 1971).
Article IV, Section 4(b).
Article XXI, Section 2.
Rules and Regulations, Rule O–3.
Decision No. 3537-(72/3)G/S, January 4, 1972, reproduced in Annual Report of the Executive Directors for the Fiscal Year Ended April 30, 1972 (Washington, 1972), pp. 87–88 (hereinafter referred to as Annual Report).
Nederlandse Jurisprudentie, 1972, No. 269, pp. 728–38.
See, for example, Article 22 of Convention for the Unification of Certain Rules Relating to International Carriage by Air, signed at Warsaw, October 12, 1929 (137 L.N.T.S. 11–33 (1933)); Article 6(1) of International Convention for the Unification of Certain Rules Relating to the Carriage of Passengers by Sea, done at Brussels, April 29, 1961 (Nagendra Singh, International Conventions of Merchant Shipping (London, Second Edition, 1973), p. 1359); Article 6(4) of International Convention for the Unification of Certain Rules Relating to Carriage of Passenger Luggage by Sea, done at Brussels, May 27, 1967 (ibid., p. 1364); Article 111(4) of Convention on the Liability of Operators of Nuclear Ships, done at Brussels, May 25, 1962 (ibid., p. 1370). The gold value of the Poincaré franc was fixed by the law of June 25, 1928 under the Poincaré Government.
For some cases decided by courts in the United States on the Warsaw Convention, see Koninklijke Luchtvaart Maatschappij N.V. KLM v. Tuller, 292 F. 2d 775, at 776 (D.C, Cir. June 23, 1961); Kelley v. Société Anonyme Beige D’Exploitation de la Navigation Aérienne, 242 F. Supp. 129, at 138 (U.S.D.C, N.Y., April 12, 1965); Pierre v. Eastern Air Lines, 152 F. Supp. 486, at 487–88, (U.S.D.C., N.J., June 27, 1957).
Article IV, Section 1.
International Convention on Civil Liability for Oil Pollution Damage, signed at Brussels, November 29, 1969, American Journal of International Law, Vol. 64 (April 1970), pp. 481–90.
Paul P. Heller, “The Warsaw Convention and the ‘Two-Tier’ Gold Market,” Journal of World Trade Law, Vol. 7 (January 1973), pp. 126–29. Mr. Heller has elaborated his views in “The Value of the Gold Franc—A Different Point of View,” Journal of Maritime Law and Commerce, Vol. 6 (October 1974), pp. 73–103.
Allan I. Mendelsohn, “The Value of the Poincaré Gold Franc in Limitation of Liability Conventions,” Journal of Maritime Imw and Commerce, Vol. 5 (October 1973), p. 127.
U. S. Congress, Senate, Committee on Foreign Relations, Subcommittee on Oceans and International Environment, International Compensation Fund for Oil Pollution Damage, Hearings on Executive K, 92nd Congress, 2nd Session, and S. 841, 93rd Congress, 1st Session (Washington, April 17–18, 1973), pp. 120–21.
Ibid., p. 121. According to the current draft of one international convention in the field of transportation that is being negotiated, the Poincaré franc would be used, and conversion would be made into the currency of the forum on the basis of the official value of the currency. If there were no official value, the competent authority of the state of the forum would determine what should be considered the official value for the purposes of the convention.
S. Royer, “De omrekeningskoers van goudfranken in guldens: pariwaarde of spilkoers?” Nederlands Juristenblad, Jaargang 48, 73/20 (May 19, 1973), pp. 601–606.
The Germinal franc was established after the French Revolution by the law of March 28, 1803 (7 Germinal of year XI of the revolutionary calendar) with a gold content of 10/31 gram, nine-tenths fine. In 1865 it was adopted as the gold franc of the Latin Union. Among the conventions in which it appears are International Convention Concerning the Carriage of Goods by Rail (CIM), done at Berne, February 25, 1961 (U.K. Cmnd. 2187) and International Convention Concerning the Carriage of Passengers and Luggage by Rail (CIV), done at Berne, February 25, 1961 (U.K. Cmnd. 2186).
Appendix 1 to each of the two Regulations deals with other situations, and prescribes the rate of exchange between currencies “on the official or generally accepted foreign exchange market” if there is no par value or central rate or if margins recognized by the Articles or the Fund’s decisions or previously established by an issuer are not being observed. The Regulations also provide that “[i]f there should be a radical change in the international monetary system (e.g.a substantial general change in the official price of gold, or if gold ceased to be used generally as a basic reference for currencies)” that invalidates or makes it inappropriate to apply the provisions of the Appendix, the administrations and agencies would be free to agree on different provisions pending revision of the Appendix.
Decision No. 3463-(71/126), December 18, 1971, Selected Decisions, pp. 12–15.
Decision No. 4083-(73/104), November 7, 1973, in Annual Report, 1974, Appendix II (Washington, 1974), pp. 103–105.
Decision No. 3637-(72/41)G/S, May 8, 1972, Selected Decisions, pp. 17–19.
For the margins under the amended decision, see paragraphs 1, 3, and 7 of the decision.
See IMF Press Release No. 74/29, June 13, 1974, reproduced in IMF Survey, Vol. 3 (June 17, 1974), pp. 177 and 185.
See T.M.C. Asser, “Golden Limitations of Liability in International Transport Conventions and the Currency Crisis,” Journal of Maritime Law and Commerce, Vol. 5 (July 1974), pp. 645–69. Mr. Asser quotes extensively from the judgment in the Hornlinie case.
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