This installment in the series dealing with jurisprudence in which the Fund’s Articles of Agreement have been involved 1 discusses some important cases dealing with exchange control. The cases that are examined have been decided by the Court of Cassation and other courts of France, the Court of Appeals of the State of New York, the Queen’s Bench Division and the Court of Appeal of England, and the Commercial Court of Brussels. The broad topics with which the cases deal are the relation of the unenforceability of certain contracts under the first sentence of Article VIII, Section 2(b), of the Fund’s Articles of Agreement to delictual claims involving these contracts, certain restrictive interpretations of that provision by some courts, and the effect of the doctrine of public policy (ordre public) on a litigant’s reliance on the exchange control laws of members of the Fund other than the country of the forum. In the discussion of this last topic, it is proposed that the interdependence among countries that they have recognized by becoming members of the Fund should lead their courts to apply the doctrine of public policy in a manner favorable to the exchange control regulations of other members if the regulations are consistent with the Articles. This approach would be particularly appropriate when followed by courts that have taken a narrow view of Article VIII, Section 2(b).
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 numerous books, pamphlets, and essays on the Fund and on international and national monetary law.
The first seven articles, together with another article, were issued in book form as The Fund Agreement in the Courts (Washington, 1962); the next four articles were issued as The Fund Agreement in the Courts: Parts VIII-XI (Washington, 1976).
Selected Decisions of the International Monetary Fund and Selected Documents (Washington, Eighth Issue, 1976; hereinafter referred to as Selected Decisions), pp. 131–32.
The argument seemed to be that exchange restrictions are consistent with the Articles only when a member’s currency has been declared scarce under Article VII, Section 3, because the declaration is designed to safeguard the position of that member. The provision is designed, however, to safeguard the interests of other members.
Japan accepted the obligations of Article VIII, Sections 2, 3, and 4, on April 1, 1964, and therefore was no longer able to take advantage of the transitional arrangements of Article XIV in 1966 or at any later date.
The second paragraph of the letter reads as follows:
‘T have been authorized to inform you that Japan does not maintain any restrictions on the making of payments or transfers for current international transactions that would require approval under Article VIII, Section 2(a), and in this connection I refer you to Executive Board Decision No. 1034-(60/27), adopted June 1, 1960, which states in part: The guiding principle in ascertaining whether a measure is a restriction on payments and transfers for current transactions under Article VIII, Section 2, is whether it involves a direct governmental limitation on the availability or use of exchange as such.’”
La Semaine Juridique, No. 21 (May 26, 1971), II. Jurisprudence, 16751.
It has been argued that the cause of action in the Court of Commerce was based on contract but was transformed into one based on delict by the Court of Appeal. Article VIII, Section 2(b), was not relied on in the lower court. (Georges Durry, “Responsabilité civile,” Revue Trimestrielle de Droit Civil, Vol. 69 (1971), pp. 844–46)
See the judgment of March 16, 1974 of the Paris Court of Appeal, Fourth Chamber/B.
Joseph Gold, The Fund Agreement in the Courts (Washington, 1962; hereinafter referred to as Gold, Fund Agreement in the Courts), pp. 89–90, 97–100, and 118.
Jean-Pierre Eck, Note, Revue Critique de Droit International Privé (July/September 1974; hereinafter referred to as Eck, Note), pp. 497–98.
Ibid., pp. 493–94; Durry, “Responsabilité civile” (cited in fn. 7), pp. 844–46; François Gianviti, “Réflexions sur l’article VIII, section 2 b) des Statuts du Fonds Monétaire International,” Revue Critique de Droit International Privé (1973; hereinafter referred to as Gianviti, “Réflexions sur l’article VIII, section 2 b)”), pp. 657–59.
See Patrick Juillard, “La nullité d’un contrat de change conclu en violation de l’article VIII-2-b des statuts du Fonds Monétaire International: à propos de l’arrêt de la Cour de Paris du 14 mai 1970,” La Semaine Juridique, No. 21 (May 26, 1971), I. Doctrine, 2399.
Saiko Saibansho Hanrei-Shu (Supreme Court Reporter), Vol. 19, Pt. 2 (1965), pp. 2306–30. See also Teruo Doi, “The Validity of Contracts Made in Violation of the Forum’s Exchange Controls,” Law in Japan: An Annual, Vol. 2 (1968), pp. 180–93; Tomohei Taniguchi, “Comment on Tomita v. Inoue,” ibid., pp. 194–97. According to the minority opinion, the validity or invalidity of a contract could not be determined until a license was applied for and either granted or refused. Until then, it was “inconclusively invalid.” The position under French law with respect to the absence of authorization when required by French exchange control regulations differs from the result reached in Tomita v. Inoue. A contract for which authorization is not obtained is null, whereas formerly this was the result only if fraud was present. If, however, authorization is being sought, an obligation arises that cannot be repudiated even though it cannot be performed unless and until authorization is granted. Nullity gives rise to claims to restitution by both parties of what they have transferred pursuant to the purported contract. See Philippe Malaurie, Note, Recueil Dalloz Sirey (February 18, 1976), pp. 83 et seq.
Articles 27 and 42 of the Foreign Exchange and Foreign Trade Control Law (Law No. 228, December 1, 1949, as amended by Law No. 99, June 15, 1968):
Art. 27. “Unless authorized as provided for in this Law or in Cabinet Order, no person shall in Japan:
(1) Make any payment to a foreign country;
(2) Make any payment to an exchange non-resident, or receive any payment from an exchange non-resident; …”
Art. 42. “Unless authorized as provided for by Cabinet Order, no person shall contract for services involving payment, settlement or any other transaction governed by provisions of this Law.” (Japan: Laws, Ordinances and Other Regulations concerning Foreign Exchange and Foreign Trade (Osaka, 1976), pp. A-9-A-12)
See also Article 17 of the Cabinet Order Concerning Control of Foreign Exchange (Cabinet Order No. 203, June 27, 1950, as amended by Cabinet Order No. 324, August 28, 1972):
Art. 17. “Except for the following cases, any person may make contracts concerning services restricted or prohibited under the provisions of Article 42 of the Law:
(1) Where contract is made between an exchange resident and an exchange non-resident whereby the exchange resident receives offer of services, for which settlement of payment is to ensure …
(3) In addition to cases the exception coming under the prescription of item (1) above, where contract is made between an exchange resident and an exchange non-resident giving rise to settlement by the non-standard method of settlement …
2. Any person who obtained license of the competent Minister for making contracts concerning services prescribed under any of the items of the preceding paragraph may do so in accordance with the terms of such license, provided, however, that the competent Minister shall not grant such license in case license, validation, approval or certification under the provisions of laws and orders listed under Article 11 paragraph 1 items (1) through (5) is required for making contracts concerning such services.” (Japan: Laws, Ordinances and Other Regulations concerning Foreign Exchange and Foreign Trade (1976), pp. A-41-A-42)
See Gianviti, “Réflexions sur l’article VIII, section 2 b)” (cited in fn. 11), p. 641.
Excerpt from the third paragraph of the letter:
“Article VIII, Section 2(b), refers to ‘exchange control regulations’ but the Fund has not defined the scope of this term. To the extent that the Law and Cabinet Order cited above were deemed to involve ‘exchange control regulations’, such regulations would have been maintained consistently with the Articles….
Eck, Note (cited in fn. 10), pp. 491–92.
See the judgment of March 16, 1974 of the Paris Court of Appeal, Fourth Chamber/B. See also the judgment of May 19, 1976 of the Court of Cassation, First Civil Chamber, and Ph. Kahn, Note, Journal du Droit International, No. 3 (July 1976), pp. 687–91. Cf. Trendtex Trading Corporation v. Central Bank of Nigeria  3 All ER 437; The Times (London), January 18, 1977, p. 11; and Statni Banka and Banque d’État Tchécoslovaque v. Englander, discussed later in this article.
216 N.Y.S. 2d 669 (1961); 12 N.Y. 2d 371, 190 N.E. 2d 235, 239 N.Y.S. 2d 872 (1963); 376 U.S. 906, 84 S.Ct. 264 (1964).
36 N.Y. 2d 592, 331 N.E. 2d 502, 370 N.Y.S. 2d 534 (1975).
36 N.Y. 2d 592, at 596.
Ibid., at 597–98.
For a similar distinction, see Viscount Simonds in Regazzoni v. K. C. Sethia, Ltd.  3 All ER 286, at 289, and Re Lord Cable (deceased)  3 All ER 417.
110 N.Y.S. 2d 446 (1952); 304 N.Y. 533, 110 N.E. 2d 6 (1953). See Gold, Fund Agreement in the Courts (cited in fn. 9), pp. 28–30 and 50–55.
36 N.Y. 2d at 599.
36 N.Y. 2d at 602 and 604.
 1 Q.B. 683;  1 Q.B. 703 (C.A.).
Bretton Woods Agreements Order in Council 1946 (S.R. & O. 1946 No. 36).
See fn. 2.
“Article XVIII of the fund agreement deals generally with its interpretation but is unfortunately of no assistance for present purposes. It only applies if any question arises between a member and the fund or between member states, in which cases any question of interpretation is to be submitted to the executive directors for their decision with a right of appeal to the board of governors. However, if any such decision had been given throwing light on the questions which I have to decide, then I would clearly have given great weight to it.” ( 1 Q.B. 683, at 693)
If a decision of the kind referred to had been adopted under Article XVIII, the duty of members of the Fund would be to take any steps that might be necessary under their law to make it binding and not merely persuasive. This conclusion follows from the assurance that a country gives on joining the Fund 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.” (Article XX, Section 2(a)) The obligations are the obligations as interpreted authoritatively by the Fund under Article XVIII. A member is bound to take whatever steps are necessary to ensure that its governmental authorities, acting within the sphere of their competence, will act in accordance with the member’s obligations as authoritatively interpreted. A member is also bound to take the necessary steps to ensure that its courts will act in the same way in relation to obligations of the member that are to be performed through the courts.
 1 Q.B. 683, at 694.
154 So. 2d 450 (1963); 161 So. 2d 70 (1964); 377 U.S. 997, 84 S.Ct. 1922 (1964); Joseph Gold, The Cuban Insurance Cases and the Articles of the Fund, IMF Pamphlet Series, No. 8 (Washington, 1966; hereinafter referred to as Gold, Cuban Insurance Cases), pp. 11–15, 21–22, 26, and 30.
 1 Q.B. 683, at 693–94.
Ibid., at 696.
Resolution No. 1-6, adopted effective October 2, 1946.
Article III, Section 3(d); Article XIV, Section 2; Article XX, Sections 2(h), and 4(a), (d), (e), and (g); Schedule B, paragraph 4.
See Joseph Gold, Membership and Nonmembership in the International Monetary Fund: A Study in International Law and Organization (Washington, 1974), pp. 71–76.
Resolution No. 1-6, paragraph 4.
Eighth Annual Report on Exchange Restrictions, 1957 (Washington, 1957), p. 202.
Unless the restrictions were multiple currency practices as well. See Selected Decisions (cited in fn. 2), p. 151.
Ibid., p. 139.
Article VIII, Section 5(a).
Article VI, Section 3.
 A.C. 1007, at 1059.
Ibid. The dictum was obiter in the case in which it was delivered, and the decision itself has since been overruled. See Miliangos v. George Frank (Textiles) Ltd.  3 All ER 801.
 3 All ER 785. See Joseph Gold, The Fund Agreement in the Courts: Parts VIII-XI (Washington, 1976; hereinafter referred to as Gold, Fund Agreement in the Courts: Parts VIII-XI), pp. 43–50.
Ironmonger and Co. v. Dyne, 44 T.L.R. 497 (1928).
Ibid., p. 498.
 1 Q.B. at 713 (C.A.).
Article XII of the General Agreement on Tariffs and Trade.
See, for example, the Fund’s decisions on bilateralism and convertibility, retention quotas, discrimination for balance of payments reasons, and payments arrears (Selected Decisions, cited in fn. 2, pp. 134–43).
 1 Q.B. 683, at 713–14 (C.A.).
Ibid., at 714.
Ibid., at 715.
Ibid., at 716.
See Gold, Fund Agreement in the Courts (cited in fn. 9), pp. 114–15.
 1 Q.B. 683, at 724.
Resolution VII of the United Nations Monetary and Financial Conference, Proceedings and Documents of the United Nations Monetary and Financial Conference, Bretton Woods, New Hampshire, July 1–22, 1944, Department of State Publication 2866, International Organization and Conference Series I, 3 (Washington, 1948; hereinafter referred to as Procs. and Docs.), p. 941.
 1 Q.B. 683, at 717.
Menendez v. Saks and Company, 485 F. 2d 1355, at 1367 (1973).
Gold, Cuban Insurance Cases (cited in fn. 32).
Gold, Fund Agreement in the Courts: Parts VIII-XI (cited in fn. 46), pp. 78–79.
See Eck, Note (cited in fn. 10), pp. 491–98.
37 N.Y. 2d 220, 333 N.E. 2d 168, 371 N.Y.S. 2d 892 (1975).
37 N.Y. 2d at 227, 371 N.Y.S. 2d at 898.
See French v. Banco Nacional de Cuba, 295 N.Y.S. 2d 433, 23 N.Y. 2d 46 (1968). (Gold, Fund Agreement in the Courts: Parts VIII-XI (cited in fn. 46), pp. 64–72)
37 N.Y. 2d at 229, 371 N.Y.S. 2d at 900.
John S. Williams, “Foreign Exchange Control Regulation and the New York Court of Appeals: J. Zeevi & Sons, Ltd. v. Grindlays Bank (Uganda), Ltd.,” Cornell International Law Journal, Vol. 9 (May 1976), pp. 243–44. Cf. the severance of the check from the underlying transaction that gave rise to it in Sharif v. Azad  1 Q.B. 605. (Gold, Fund Agreement in the Courts: Parts VIII-XI (cited in fn. 46), pp. 43–50)
“To a Continental lawyer this might appear as a somewhat surprising result, because the giving of these cheques was clearly part of an overall exchange transaction which might well be considered as falling within the object of article VIII, section 2(b). But to an English lawyer the decision would appear correct and logical because we tend to favour a more precise analytical approach to construction and interpretation.” (Wilson, Smithett & Cope Ltd. v. Terruzzi  1 Q.B. 683, at 699, per Kerr J.)
Miriam Camps, The Management of Interdependence: A Preliminary View (New York, 1974), pp. 42–59. See also Cebora S.N.C. v. S.I.P. (Industrial Products) Ltd.  1 Lloyd’s Rep. 271 (C.A.), at 274–75 and 279.
 3 All ER 801.
“Any erosion of the certainties of the application by our Courts of the law merchant relating to bills of exchange is likely to work to the detriment of this country, which depends on international trade to a degree that needs no emphasis.” (Cebora S.N.C. v. S.I.P. (Industrial Products) Ltd.  1 Lloyd’s Rep. 271 (C.A.), at 278, per Sir Eric Sachs)
81 S.Ct. 922, 366 U.S. 187 (1961). See Gold, Fund Agreement in the Courts (cited in fn. 9), pp. 128–35; Joseph Gold, The International Monetary Fund and Private Business Transactions: Some Legal Effects of the Articles of Agreement, IMF Pamphlet Series, No. 3 (Washington, 1965), pp 28–29.
International Law Reports, ed. by E. Lauterpacht, Vol. 47 (London, 1974), pp. 157–63.
If the case involved a capital transfer, authority to control it would have been granted by Article VI, Section 3, and not by Article XIV, Section 2.
International Law Reports (cited in fn. 73), p. 162.
Ibid., p. 163.
Ibid., p. 162. The “Bretton Woods Agreements of July 1944” were cited by the Court of Cassation in its judgment of January 25, 1966 in Cassan v. Koninklijke Nederlandsche Petroleum Maatschappij (International Law Reports (cited in fn. 73), pp. 58–60) and by the Tribunal de grande instance of the Seine in its judgment of June 29, 1966 in Plichon v. Société Koninklijke Nederlandsche Petroleum Maatschappij (International Law Reports (cited in fn. 73), pp. 67–72) to support rejection of the argument that recognition of the effect of a Dutch Decree on French nationals holding in France share certificates issued by Dutch corporations was contrary to French ordre public. The Decree required the holders to declare the certificates in order to enable them to be validated. If certificates were not declared, they would be cancelled and substitutes issued to the rightful possessors or, if there were none, to the Dutch authorities. To protect French shareholders, with the agreement of the Dutch authorities, a law was passed in France to establish a special validation procedure in France. Cassan and Plichon had not declared their share certificates in Royal Dutch. Cassan requested the French court to order Royal Dutch to issue to him the certificates that had been issued in substitution for those he held. Plichon requested similar relief, or, as a subsidiary remedy, the value of the certificates. Both argued that forfeiture under the Dutch Decree was contrary to French ordre public. The courts held that the purpose of the Decree was not confiscation but the restoration of plundered property. In holding the Decree to be in conformity with the Bretton Woods Agreements, as well as with the London Declaration of January 5, 1943 (U.S. Department of State Bulletin, January 9, 1943, pp. 21–22), the courts were referring not to the Articles of Agreement but to Resolution VI of the Bretton Woods Conference (on Enemy Assets and Looted Property). (Procs. and Docs. (cited in fn. 58), pp. 939–40)
See Basso v. Janda, Recueil Dalloz Sirey, July 3, 1968, Jurisprudence, p. 445 (Gold, Fund Agreement in the Courts: Parts VIII-XI (cited in fn. 46), pp. 87–89); French v. Banco Nacional de Cuba, 23 N.Y. 2d 46, 295 N.Y.S. 2d 433 (1968) (Gold, Fund Agreement in the Courts: Parts VIII-XI (cited in fn. 46), pp. 64–72); Stephen v. Zivnostenska Banka National Corporation, 140 N.Y.S. 2d 323 (1955) (Gold, Fund Agreement in the Courts (cited in fn. 9), pp. 77–78). See also Gold, Cuban Insurance Cases (cited in fn. 32), pp. 20 and 45–46.
Jurisprudence commerciale de Belgique, 1968, n. 11–12, Pt. IV, pp. 765-85; Pasicrisie Beige, 1969, Pt. III, pp. 22–28.
Jurisprudence commerciale de Belgique (cited in fn. 79), p. 772.
Ibid., pp. 777–85.
Ibid., p. 783.
Ibid., p. 785.
Kahler v. Midland Bank, Ltd.  2 All ER 621, at 623–24, 629, and 642.
Regazzoni v. K. C. Sethia, Ltd.  3 All ER 286, at 293.
See Hornlinie v. Société Nationale des Pétroles Aquitaine, Nederlandse Jurisprudentie, 1972, No. 269, pp. 728–38 (Gold, Fund Agreement in the Courts: Parts VIII-XI (cited in fn. 46), pp. 110–21); Transarctic Shipping Corporation, Inc. Monrovia, Liberia v. Krögerwerft (Kröger Shipyard) Company, European Transport Law, Vol. 9 (1974), pp. 701–10 (Gold, Floating Currencies, Gold, and SDRs: Some Recent Legal Developments, IMF Pamphlet Series, No. 19 (Washington, 1976; hereinafter referred to as Gold, Floating Currencies, Gold, and SDRs), pp. 17–33); Miliangos v. George Frank (Textiles) Ltd.  3 All ER 801 (Gold, Floating Currencies, Gold, and SDRs, pp. 35–38).
One kind of cooperation that was contemplated is suggested by the following passage in the Questions and Answers on the International Monetary Fund issued by the U. S. Treasury on June 10, 1944: “Even though it never becomes necessary for a country to prevent a flight of capital, a country may find it helpful to cooperate with other member countries in controlling capital movements. Such cooperative measures might appropriately include a refusal to accept or permit acquisition of deposits, securities, or investments by nationals of any member country imposing restrictions on the export of capital except with the permission of the government of that country and the Fund. Member countries might also undertake to make available to the Fund or to the government of any member country information on property, deposits, securities, and investments of the nationals of that member country.” (The International Monetary Fund, 1945–1965: Twenty Years of International Monetary Cooperation, ed. by J. Keith Horsefield (Washington, 1969), Vol. III, p. 179)
Lord Somervell of Harrow in Regazzoni v. K. C. Sethia, Ltd.  3 All ER 286, at 297.
See French v. Banco Nacional de Cuba, 295 N.Y.S. 2d 433, 23 N.Y. 2d 46 (1968) (Gold, Fund Agreement in the Courts: Parts VIII-XI (cited in fn. 46), pp. 64–72).
See Ceulemans v. Jahn and Barbier, Jurisprudence commerciale de Belgique, 1968, n. 11–12, Pt. IV, pp. 765 et suiv.; Pasicrisie Beige, 1969, Pt. III, pp. 22–28. See also Foster v. Driscoll  1 K.B. 470 (C.A.).
See Re Lord Cable (deceased)  3 All ER 417.