The Fund Agreement in the Courts—XIV
  • 1 0000000404811396 Monetary Fund

This fourteenth installment in the series dealing with the impact of the Articles of Agreement of the International Monetary Fund on litigation 1 discusses cases decided in England, France, the Federal Republic of Germany, and the State of New York. All four cases are considered in relation to the effect of the Articles on issues involving the exchange control regulations of a member of the Fund that was not the country of the forum. The New York case has an additional interest because of its bearing on the enforcement of contractual obligations arising from Eurodollar loans.


This fourteenth installment in the series dealing with the impact of the Articles of Agreement of the International Monetary Fund on litigation 1 discusses cases decided in England, France, the Federal Republic of Germany, and the State of New York. All four cases are considered in relation to the effect of the Articles on issues involving the exchange control regulations of a member of the Fund that was not the country of the forum. The New York case has an additional interest because of its bearing on the enforcement of contractual obligations arising from Eurodollar loans.

This fourteenth installment in the series dealing with the impact of the Articles of Agreement of the International Monetary Fund on litigation 1 discusses cases decided in England, France, the Federal Republic of Germany, and the State of New York. All four cases are considered in relation to the effect of the Articles on issues involving the exchange control regulations of a member of the Fund that was not the country of the forum. The New York case has an additional interest because of its bearing on the enforcement of contractual obligations arising from Eurodollar loans.

The main provision of the Articles in relation to which the cases are examined is Article VIII, Section 2(b), which reads as follows:

Exchange contracts which involve the currency of any member and which are contrary to the exchange control regulations of that member maintained or imposed consistently with this Agreement shall be unenforceable in the territories of any member. In addition, members may, by mutual accord, cooperate in measures for the purpose of making the exchange control regulations of either member more effective, provided that such measures and regulations are consistent with this Agreement.

This provision was not modified by the sweeping Second Amendment of the Articles notwithstanding the differing interpretations of it that have been adopted by courts in various countries. There has already been some speculation 2 about the fact that the provision has not been modified. Nothing that bears on the interpretation of the provision should be read into this fact. The provision was not examined during the negotiation and drafting of the Second Amendment, and no proposal was made to modify it. An enormous range of issues of more obvious and more pressing economic and financial interest to members had to be resolved. The hope that agreement on the text of the Second Amendment could be reached promptly was not realized because of the number and complexity of these issues. Even the Jamaica Accord of the Interim Committee of the Board of Governors on the International Monetary System did not settle all essential issues, although the popular impression was that nothing controversial remained after that meeting of the Committee. It is impossible to say whether Article VIII, Section 2(b) would have been amended, or how it would have been amended, if amendment had been proposed in order to change its purpose or to encourage a greater uniformity of interpretation by tribunals. That members are content to go on leaving the task of interpretation to the courts is demonstrated by the absence of any request by a member for an authoritative interpretation by the Fund of some aspect of Article VIII, Section 2(b) that would complement the original interpretation of June 10, 1949. 3

I. Sing Batra v. Ebrahim 4 (England)

A question that arises in connection with Article VIII, Section 2(b) is whether the court in which an action is brought on an exchange contract that is unenforceable under the provision must apply the provision even though it is not cited and relied upon by a party to the proceedings. The question has practical as well as intrinsic importance because Article VIII, Section 2(b) and the provision of domestic law that gives domestic effect to it where that has been necessary are not always well known.

In Sing Batra v. Ebrahim, the lower court had given judgment for Sing Batra, the plaintiff, on a claim arising from two transactions in which, in consideration of payments by check in London, Ebrahim, the defendant, undertook to arrange for the payment of Indian rupees to the plaintiff by banker’s draft in India and to the account of the plaintiffs daughter at an Indian bank. The official exchange rate was 18 rupees to the pound sterling. The exchange rate contracted for was 30–31 rupees to the pound. The plaintiff claimed damages for breach of contract on the basis of the difference between the two exchange rates. The transactions were illegal under India’s Foreign Exchange Regulations Act, 1947. The lower court had not been referred to the Indian law, the Fund’s Articles, the Bretton Woods Agreements Act, 1945 of the United Kingdom, or the Bretton Woods Agreements Order in Council, 1946 5 that gives the force of law to Article VIII, Section 2(b) in the United Kingdom.

The Court of Appeal on May 2, 1977, reversed the judgment of the lower court and gave judgment for Ebrahim. The opinion of the Master of the Rolls, with whom the other two members of the Court of Appeal agreed, includes the following passage:

If the transactions were illegal it was the duty of the court to take the point. An appellate court should take the point of illegality of its own initiative, if not taken by the judge at trial….

An unauthorized contract to exchange sterling for Indian rupees was contrary to the exchange control regulations of both England and India. The courts must not enforce the contract if it was contrary to Indian exchange control. The object of the Indian regulations dealing with authorization by the reserve bank was to prevent Indian currency being depreciated by speculators. Black market deals were prohibited by law.

“The present transactions were plainly contrary to the Indian exchange control regulations and so were unenforceable by English law under the Bretton Woods Agreement (sic) Act and the order in council. Dr. Batra was claiming damages for breach of contract to obtain Indian currency at black market rates. The appeal should be allowed.6

It should be noted that the Court of Appeal held that it is the duty of the lower court to take the point, and that if the lower court does not, the appellate court must do so.

The Master of the Rolls treated the contracts as contrary to the exchange control regulations of both India and England. The reference to England in this context probably was based on the provisions of English law that give effect to Article VIII, Section 2(b). No provisions of English exchange control law were cited. If English exchange control law is relevant to litigation in an English court, no one would doubt that the law must be applied by virtue of its own force. Article VIII, Section 2(b), however, deals with the exchange control regulations of a member of the Fund other than the country of the forum. Special measures must be taken in some jurisdictions to give effect to a provision such as Article VIII, Section 2(b).

The most interesting feature of the case is the willingness of the court to entertain the defense based on Article VIII, Section 2(b) and the provisions of English law giving effect to it even though the contracts are declared to be unenforceable. What makes this aspect of the case interesting is that normally under Anglo-American law it is left to the defendant to plead the defense of unenforceability.7 If he does not rely on this defense, whether by deliberation or oversight, the court will not consider unenforceability. Indeed, it has been argued that the reference to unenforceability in Article VIII, Section 2(b) must be interpreted to mean invalidity because the cooperation among members of the Fund that the provision calls for by requiring respect for the exchange control regulations of other members should not depend on the pleadings of litigants. 8

The reply has been made to this argument that not all the incidents of the concept of unenforceability in domestic law have to be imported into the concept in Article VIII, Section 2(b).9 Therefore, courts should recognize the public interest and hold that the provision requires them to treat as unenforceable those exchange contracts declared by it to be unenforceable even though unenforceability has not been pleaded. Courts can act in this way without concluding that unenforceability means invalidity. The distinction between the two concepts should be observed, not only because there is no necessity to merge them to make the provision effective but also because invalidity would produce consequences that cannot be reconciled with the policy of Article VIII, Section 2(b). Some of these consequences are discussed below.

The Master of the Rolls refers to the illegality of the contracts but this reference is to illegality under Indian law. Nevertheless, this mention of illegality introduces a slight note of ambiguity into the court’s willingness to take the initiative in referring to the provisions of law overlooked by the defendant. The ambiguity is slight because the Master of the Rolls is clear in characterizing the contracts as unenforceable under English law. This point of law was the subject of an explicit ruling by the Court of Appeal in the earlier case of Sharif v. Azad,10 in which the Court refused to treat “unenforceable” as equivalent to “illegal.” Sharif v. Azad has been overruled by Wilson, Smithett & Cope Ltd. v. Terruzzi, 11 but not on this point. The Federal Supreme Court of Germany also has concluded that unenforceability is not the same as illegality for the purpose of Article VIII, Section 2(b).12

Other courts have examined the effect of Article VIII, Section 2(b) on the contracts they were considering, even though a litigant had not relied on the provision and the domestic law relating to it. The Karlsruhe Regional Court of Appeal seems to have done this in Loeffler-Behrens v. Beermann. 13 Certainly, the court took the initiative in addressing an inquiry to the Fund on whether the exchange control regulations in the case were within the scope of Article VIII, Section 2(b). 14 The Federal Supreme Court of Germany has left no doubt that a court must take the initiative in declaring a contract unenforceable as a result of Article VIII, Section 2(b), even though it has not been raised as a defense. The court held that the public interest must be vindicated for the same reasons that induce the courts to treat illegal contracts as such, even though no party has pleaded illegality. 15

The concept of unenforceability makes it possible for the courts to base their decisions on the facts when enforcement of a contract is sought. Invalidity would require the courts to make their determination on the basis of the facts when a contract is entered into. The purpose of Article VIII, Section 2(b) is to ensure that members of the Fund will not ignore the interests of another member by refusing to take account of its exchange control regulations if they are consistent with the Articles and meet the other criteria of Article VIII, Section 2(b). The determination that the interests of a member are affected should be made in relation to current circumstances and not to past circumstances that may have changed. To base the determination on past circumstances might result in recognizing public interests that no longer exist or in ignoring public interests that do exist.

Circumstances may change in a number of ways after a contract is entered into. Exchange control regulations may be imposed, modified, or abrogated. The Fund may approve exchange restrictions or cease to approve them. A party to a contract may change his residence so that exchange control regulations begin, or cease, to apply to him. These changes in circumstances are not the only ones that can create or terminate interests on the part of members that Article VIII, Section 2(b) is intended to protect. 16

The decision of the Court of Appeal in Sing Batra v. Ebrahim implies no departure from Wilson, Smithett & Cope Ltd. v. Ter-ruzzi, in which the Court of Appeal interpreted “exchange contracts” as restrictively as possible by considering them to be contracts for the purchase and sale of currencies. The contracts in Sing Batra v. Ebrahim fell within the scope of that narrow interpretation. The court followed two lines of argument to reach its conclusion in the Terruzzi case. One was a dictum in an earlier English case on the meaning of “exchange contracts” for another purpose, 17 and the other was what the court considered to be the normal understanding of these words. The dictum in the earlier case was obiter, and the decision itself has been overruled. 18 Furthermore, Lord Wilberforce, in a more recent case, has expressed the following view on the resort to English legal precedent in the interpretation of a treaty:

I think that the correct approach is to interpret the English text which after all is likely to be used by many others than British businessmen, in a normal manner, appropriate for the interpretation of an international convention, unconstrained by technical rules of English law, or by English legal precedent but on broad principles of general acceptation….19

The argument of the normal understanding of language in the Terruzzi case was supported with an analysis of various purposes and provisions of the Articles of Agreement. It has been submitted that most of this analysis was erroneous. 20 The interpretation of Article VIII, Section 2(b) that is most compatible with the purposes and provisions of the Articles is that “exchange contracts” are contracts requiring international payments or transfers in foreign or domestic currency. The word “exchange” in “exchange contracts” should be understood in the same way as in “exchange control,” which also is a normal understanding of language. This understanding is reinforced by the mission of the Fund, which is to concern itself not with a limited class of payments but with all payments and transfers for international transactions. Moreover, experience confirms that the contracts covered by the Terruzzi interpretation are likely to be the subject of litigation only rarely. It is scarcely credible that the Bretton Woods conferees, in the three weeks available to them for reaching agreement on a master plan for payments and transfers on a world scale, would have allowed their concentration to be diverted to the fashioning of a sledgehammer to crack so small a nut.

In the interpretation of the phrase that is recommended here, the words “international” and “foreign or domestic” are to be understood from the standpoint of the legislator whose exchange control regulations have not been observed. “International” in this formulation means “transnational” and not simply “intergovernmental.” The words “involve the currency of any member” in Article VIII, Section 2(b) should be understood to refer to the member whose balance of payments is affected by an exchange contract. The Fund is an international organization whose primary interest is the balances of payments of its members, for which reason its concern relates to all payments and transfers.

The criterion of the impact of payments or transfers under a contract on the balance of payments must be distinguished from certain other criteria that have been proposed and that have been discussed in earlier contributions to this series of articles. 21 In particular, although most often the criterion of protection of a member’s currency, or less often the protection of a member’s monetary reserves, may be adequate, these criteria are not sufficiently comprehensive and should be subsumed under the criterion of effect on the balance of payments.

In Sing Batra v. Ebrahim the court mentioned that the objective of the Indian exchange law was to avoid depreciation of the Indian currency by speculators. A troublesome consequence of the Terruzzi case is that it ignores the effects of all contracts other than contracts for the purchase and sale of currencies, even though other contracts fail to observe exchange control regulations that are consistent with the Articles of Agreement of the Fund. Moreover, the effect of not holding contracts to be unenforceable in these circumstances is that courts enforce contracts that can undermine the currencies and damage the economies of states with which the state of the forum has undertaken to collaborate to avoid such consequences. 22 It is even possible to foresee a situation in which the resources contributed to the Fund by the state of the forum may be made available by the Fund as balance of payments assistance to the member whose exchange control regulations have been flouted by the contract that the forum enforces. The exchange control regulations are likely to have the same objective as the balance of payments assistance provided by the Fund with the currency of the forum.

One other element in the case merits attention. The Court of Appeal held that the contracts were illegal under Indian law and unenforceable under English law. A finding of illegality under the law of which the exchange control regulations are part is not necessary to bring about the sanction of unenforceability under the law of the forum. The language of Article VIII, Section 2(b) is broad and avoids technicality: “contrary to the exchange control regulations.” For the purpose of Article VIII, Section 2(b), therefore, it would suffice if the foreign law attached some consequence other than illegality to the neglect of its exchange control regulations, such as voidness or even unenforceability. In short, whether the contract is illegal, void, or unenforceable under the foreign law, it will be unenforceable under the law of the forum.

II. Achour v. Perrot and Bouderghouma 23 (France)

In this case, decided by the Court of Appeals of Reims on October 25, 1976, the court refrained from raising the possible effect of Article VIII, Section 2(b) in circumstances in which it had not been relied on by a party to the litigation. The attitude of the court is surprising because it declared that

While the operation envisaged is manifestly illegal under Algerian law, it is not within the competence of the French courts to punish the evasion of foreign law, particularly in the domain of public economic order;it could be otherwise only insofar as such actions violate commitments undertaken by France…. 24 (Emphasis added)

In August 1964, Achour, a French national resident in Algeria, commissioned another French national, Bouderghouma, to transfer, by clandestine means, from Algeria to France, the sum of 310,000 French francs delivered by Achour to Bouderghouma and Perrot. Only two sums of F 60,000 each were transferred to Achour, who brought this action to recover the balance. The defendants pleaded, inter alia, that as the agreement violated Algerian exchange control law, the French customs code, and the Evian Agreements between Algeria and France, the suit was inadmissible. It appears that the defendants entered this procedural objection, rather than the substantive objection of illegality, because of the possibility that if the court held the contract ineffective because of illegality, it might decree the restitution of funds to which the defendants were not entitled. 25 In those circumstances, the effect of restitution could be the indirect enforcement of a contract that was illegal under Algerian law. The Court of Cassation did indeed reach this result in Constant v. Lanata, which has been discussed in an earlier article. 26 A similar result was achieved in Achour v. Perrot and Bouder-ghouma by a determination of a different kind. The court held that as the agreement was made between French nationals and was to be performed in France, they had implicitly intended to exclude the application of Algerian law and to subject the agreement exclusively to French law. The court found that the agreement did not violate French law or the Evian Agreements. It therefore accepted the appeal of Achour against the decision of the lower court in favor of the defendants and rejected their objection of the inadmissibility of the action.

The case suggests questions of the application of Article VIII, Section 2(b), even though the provision was not relied on by either party or mentioned by the court. First, the parties to the suit were no longer resident in Algeria at the time of the proceedings, and it may be assumed that the French francs delivered to the defendants had been transferred in some way from Algeria to France. Would an action on the agreement in France seeking damages for nonperformance fall within the scope of Article VIII, Section 2(b)? Could it be argued that, as a result of the transfer, Algeria’s currency was no longer “involved” within the meaning of Article VIII, Section 2(b) and its exchange control regulations no longer relevant? In the discussion of Constant v. Lanata already referred to, it was argued that Article VIII, Section 2(b) should not be frustrated by an interpretation that Article VIII, Section 2(b) no longer applied in such circumstances:

An approach of this kind would mean that whenever the parties succeeded in carrying out that part of the contract which was peculiarly within the mischief against which Article VIII, Section 2(b), was directed, the courts would be available to assist in completing their design. To avoid this result, it would be necessary to consider the contract on which a suit was brought as consisting of all the obligations for which it had provided and not simply of those that remained unperformed. 27

Some courts, 28 though not all, 29 have been willing to dissect a single arrangement into severable transactions and to enforce one of them even though it was an essential element in a design to evade the exchange control regulations of another country. This technique is different, however, from a finding that there is an unseverable transaction but that an obligation constituting part of it can be enforced because another component obligation has been performed.

Second, the case is a minor illustration of the difficulties created by the definition of “exchange contracts” in the Terruzzi case. In the desire to exempt payments for commercial transactions from Article VIII, Section 2(b), the court held in that case that the words must be understood to mean contracts for the purchase and sale of currency. According to this definition, if Achour had given the defendants Algerian currency in return for a promise to deliver French francs in France, the agreement would be an “exchange contract.” If, however, Achour had not paid Algerian currency but had promised some reward in French francs, the agreement would not be an “exchange contract.” The distinction is not a realistic one in relation to Article VIII, Section 2(b) or to any other provision of the Articles.

Third, the defendants based part of their defense on the Evian Agreements, apparently because the Agreements envisaged the possibility of exchange control regulations imposed by a joint commission if required to protect Algeria’s exchange resources. The defendants may have assumed that Algeria’s exchange control regulations were imposed in accordance with this element of the Agreements. It seems, however, that the regulations were imposed by Algeria unilaterally and not by the joint commission. The Evian Agreements provided that, in the absence of exchange control authorized by the joint commission, there was to be freedom for transfers between Algeria and France. 30

The facts as set forth in the preceding paragraph suggest questions involving the relationship of discriminatory practices to Article VIII, Section 2(b). Suppose that Patria discriminates in favor of Terra by permitting payments and transfers for current international transactions or capital transfers to Terra and impeding them to other members. The first question that arises is whether Patria and Terra are entitled under the Articles to engage in this practice, because Article VIII, Section 3 proscribes “discriminatory currency arrangements.” A discriminatory currency arrangement may be a measure adopted by a member as a unilateral policy or as the result of a bilateral or multilateral agreement.

Although Article VIII, Section 3 binds members to avoid discriminatory currency arrangements, the prohibition is not absolute. The Fund has interpreted this provision and Article VI, Section 3 to mean that the prohibition does not apply to capital transfers, although a reservation has been made with respect to exchange rates. Article VI, Section 3 provides that

Members may exercise such controls as are necessary to regulate international capital movements, but no member may exercise these controls in a manner which will restrict payments for current transactions or which will unduly delay transfers of funds in settlement of commitments, except as provided in Article VII, Section 3(b) and Article XIV, Section 2.

Subject to the reservation dealing with exchange rates, the interpretation declares that: “Members are free to adopt a policy of regulating capital movements for any reason, due regard being paid to the general purposes of the Fund and without prejudice to the provisions of Article VI, Section 1.” 31

The caveat with respect to the general purposes of the Fund was intended to be a reminder that the Fund is an organization devoted to collaboration in monetary matters, so that members should try to avoid discriminatory controls on capital movements. The caveat with respect to Article VI, Section 1 refers to a provision under which, in certain circumstances, the Fund can request a member to impose capital controls. The implication is that the controls should not be discriminatory if the Fund requests nondiscriminatory controls. The Fund has never made a request under Article VI, Section 1. The first caveat has been reinforced by Article IV, Section 1 of the Second Amendment, in which the exchange rate obligations of members are introduced by these words: “Recognizing that the essential purpose of the international monetary system is to provide a framework that facilitates the exchange of goods, services, and capital among countries,….” Notwithstanding the caveats and the new language in the Second Amendment, the basic principle remains that members are able to discriminate in the imposition and administration of capital controls.

It follows from what has been said so far that the proscription of discrimination in Article VIII, Section 3 applies to payments and transfers for current international transactions. Even with respect to them, however, the right to discriminate is recognized in certain circumstances. The Fund may approve a departure from the obligation, but it is not likely to do so because its policy is to eliminate discrimination. The outstanding example of the right of a member to discriminate without the necessity for approval by the Fund is the right it has to discriminate if it is availing itself of the transitional arrangements of Article XIV. It may then maintain or adapt, but not introduce, restrictions on payments and transfers for current international transactions in effect when it entered the Fund, even if the restrictions are discriminatory. The Fund discourages discrimination of this kind even if a member is availing itself of the transitional arrangements, 32 but this policy is not a legal limitation on the member’s privilege. The real limitation, however, derives from the fact that a member is not entitled to “introduce” restrictions under Article XIV, Section 2. As a result, the scope for discrimination in these days is not extensive. For completeness, it may be added that members are authorized to discriminate against a member whose currency has been declared scarce by the Fund under Article VII, Section 3, by limiting exchange operations in the scarce currency, including those necessary for payments and transfers for current international transactions. The Fund has never made a declaration of the scarcity of a currency.

After this brief survey of discrimination, the second question that arises on the facts in Achour v. Perrot and Bouderghouma can be posed. Patria and Terra have entered into an agreement that discriminates in favor of Terra and against other members. An action is brought on an exchange contract that is consistent with the agreement, and the defendant pleads that the agreement is inconsistent with the Articles because it is a discriminatory currency arrangement that is not approved under or authorized by the Articles. If the action is brought in Patria or Terra, the defense is not likely to prosper, if only because the courts may regard the agreement as binding on them. Even if the action is brought in the court of a third member, Article VIII, Section 2(b) may not be an impediment to the plaintiff. The provision declares that exchange contracts shall be unenforceable if they are contrary to exchange control regulations that are consistent with the Articles. The provision does not require exchange contracts to be treated as unenforceable if they are compatible with exchange control regulations. It would seem that this must be the effect of the provision even if the exchange control regulations are inconsistent with the Articles.

The second question suggested by the facts of Achour v. Perrot and Bouderghouma would arise if an agreement were entered into by Patria and Terra that discriminated in favor of Terra, but Patria then imposed exchange controls under the apparent authority of the Articles but in breach of the agreement. A plaintiff brings an action on an exchange contract, and the defendant contends that the contract is unenforceable under Article VIII, Section 2(b) because it is contrary to the exchange control regulations that Patria has imposed. The Articles contain nothing explicit on the effect of exchange control regulations that are authorized by the Articles but are inconsistent with an agreement between two members.

The problem can be even more complicated because the agreement itself can be either consistent or inconsistent with the Articles. Once again, special considerations may enter into the response of the court if the action is brought in Patria or Terra. If the action is brought in a third member country, and the agreement was inconsistent with the Articles, the court might treat the contract as unenforceable under Article VIII, Section 2(b). That is to say, the court might give no weight to the agreement and deal with the case as a straightforward one involving exchange control regulations that were consistent with the Articles and an exchange contract that was contrary to the regulations. The court might hesitate, however, if the agreement was consistent with the Articles, because this circumstance might neutralize Patria’s apparent authority under the Articles to impose the exchange control regulations.

The Fund has not had to face questions such as these. Nor were they considered by the French courts in Constant v. Lanata or Achour v. Perrot and Bouderghouma, even though in the latter case, the court, noting that the joint commission had not imposed the regulations, concluded that “regulations adopted solely within the context of Algerian legislation cannot be binding upon a French court.” 33 This dictum is valuable, but not as illuminating as it would have been had the action been brought in a court in a country other than France, which corresponds to Terra in the example that has been discussed, and had Article VIII, Section 2(b) been considered.

Fourth, the subject of discrimination in relation to Article VIII, Section 2(b) has been examined so far from the point of view of discrimination in favor of a particular member. The subject can be examined from the standpoint of discrimination against a particular member or even a particular class of person. The problem is that, as seen already, there is some authority in the Articles for discrimination, particularly in connection with capital transfers.

Whatever may be the relevance of Article VIII, Section 2(b), there is evidence that courts in the country that is discriminated against, or whose citizens or residents are discriminated against, are not going to be disposed to refuse remedies on contracts because they are contrary to the discriminatory exchange control regulations of another member.

A learned commentator has pointed out that, even apart from Article VIII, Section 2(b), the principle that the exchange control regulations of another country are part of its public law and therefore not entitled to recognition in the courts of another country is out of date.

It is to be hoped that the courts will rarely raise this objection, for such a position means not only a refusal to cooperate in the implementation of a foreign policy, but actual opposition to that policy. To uphold a contract whose purpose is the transfer abroad of foreign exchange, prohibited by the State in whose territory the currency is located, is to encourage that transfer. From the moment when the court recognizes its jurisdiction, it can choose only between an attitude of cooperation and an attitude of hostility. The first seems preferable in all but exceptional cases; it is not sufficient to oppose the foreign law with a principle of free movement of exchange which French law itself does not uphold.34

He goes on, however, to make a reservation in connection with discrimination:

On the other hand, when the prohibition on exports of capital means the dispossession of persons having legitimate and pressing reasons to leave the country, the objection should be raised. Moreover, in the case at hand, it is highly probable that the Court of Reims was aware that the Algerian legislation was intended to dispossess French nationals wishing to move to France after independence….35

Both Constant v. Lanata and Achour v. Perrot and Bouderghouma can be regarded as illustrations of the tendency not to withhold remedies if the exchange control regulations of another country are thought to be discriminatory against citizens or residents of the country of the forum. The principle in the passage quoted immediately above, however, is expressed broadly in terms of “persons having legitimate and pressing reasons to leave the country,” and not citizens or residents of the country of the forum.

The two French cases illustrate different techniques for giving a remedy. In Constant v. Lanata, the court seems to have held that as a result of Article VIII, Section 2(b), Algerian exchange control regulations governed the transfer of funds from Algeria to France, the contract was illegal because it was contrary to the regulations, and the plaintiff was entitled to restitution. In Achour v. Perrot and Bouderghouma, the court did not mention Article VIII, Section 2(b) and held that the parties had intended to exclude Algerian law and subject their contract to French law, so that the Algerian exchange control regulations were irrelevant.

J. Zeevi and Sons Ltd., et al v. Grindlays Bank (Uganda) Limited is an illustration of the distaste that the courts of a third country may have for discriminatory exchange controls that one country may impose against another. The material interests of the country of the forum, however, were involved because of the effect that withholding a remedy might have had on New York as a financial center. Article VIII, Section 2(b) was pleaded as a defense, but was dismissed with the brief finding that an “exchange contract” was not involved.

Fifth, perhaps the tacit policy of the court in Achour v. Perrot and Bouderghouma, as suggested by the commentator quoted above, took precedence over the principle of some systems of law that contracts are illegal if they call for the performance of an act in foreign territory that is illegal under the law of that territory. In Ceulemans v. John and Barbier, in which no consideration of discrimination was involved, a Belgian court applied the latter principle in an action on a contract that required dealing in currency in what is now Zaire in contravention of the law of that country. 36

III. Federal Supreme Court Decision of December 21, 1976, III ZR 83/74 37 (Federal Republic of Germany)

By a document drawn up in Paris on April 24, 1970 and by another drawn up in Madrid on May 11, 1970, the defendant, a Swedish citizen, acknowledged that he had received two loans totaling US$25,000 from the plaintiff, a U. S. citizen living in Paris. The defendant had lived only occasionally and for short periods in Sweden, but he had been registered as a resident and owned an apartment there. Since January 1973, he had been living in the Federal Republic of Germany. He repaid part of the loans in deutsche mark, and the plaintiff brought an action for the balance. The defendant argued that the contracts were invalid because they were contrary to Swedish exchange control regulations. The Regional Court found for the plaintiff, but the Appeals Court overruled the decision because of the violation of Sweden’s exchange control regulations. The plaintiff appealed to the Supreme Court, but before the case was decided on the merits a settlement was entered into.

The issue that remained was how the costs of the litigation were to be borne. Under German law, this issue was to be decided according to equity on the basis of the facts and the course of the litigation. The primary consideration is which party would have succeeded if there had been no settlement, because the party who is compelled to pay the costs is the one who would have been required to do so in the absence of a settlement. The determination for the purpose of costs only is made, however, without a complete analysis of all the issues that would have been undertaken had the case been decided on the merits. (It would seem, therefore, that views expressed in the court’s opinion should have less weight as a contribution to the elucidation of Article VIII, Section 2(b) than if the opinion had been delivered on the merits.)

(i) The Supreme Court agreed with the Appeals Court that the suit would have been inadmissible, and the plaintiff would have lost, if the loan agreements were exchange contracts within the meaning of Article VIII, Section 2(b), because the agreements would have been unenforceable. The court explained that if the debtor discharges an indebtedness that is unenforceable, he cannot claim return of the money under the provisions governing unjustified enrichment, because an unenforceable obligation is nevertheless an obligation.

(ii) The Supreme Court stated that the debtor’s acknowledgment of his obligation does not make an unenforceable obligation enforceable if it is unsatisfied. The attitudes of litigants cannot change the unenforceability of obligations that is established for the protection of currencies. It would follow from this view that the court must raise an objection based on Article VIII, Section 2(b) if the parties have not done so.

(iii) According to the court, because Article VIII, Section 2(b) is designed to protect currencies, only those obligations that can affect the balance of payments of the member or members involved are subject to the provision. The court held that it was unable to come to a definitive opinion on whether the balance of payments of Sweden was involved, because of the funds that were involved in the case. The plaintiff made the first loan from funds in the United States and the second from funds in Switzerland. The court also pointed out that the defendant invested the proceeds in Spain, with the knowledge of the plaintiff.

The court doubted that these capital movements fell under Article VIII, Section 2(b). The question whether Article VIII, Section 2(b) applied would depend on the facts at the time of repayment and whether the defendant’s assets in Sweden would be affected. When a resident borrows abroad, the resulting indebtedness affects the borrower’s currency (i.e., the balance of payments, it would seem) if a claim against the borrower’s assets in the country of his residence is not ruled out. The documents showed that the loans were to be repaid in U. S. dollars, but it was not clear whether or not suit could be brought against the defendant in Sweden and judgment satisfied from assets there. The court was of the opinion that no international transfer from the standpoint of Sweden would occur if the claim could be satisfied only from assets outside Sweden, even if the defendant was resident in Sweden.

The court’s view is not consistent with its premise of effect on the balance of payments. If the defendant was a resident of Sweden at the time of the action, whether it was brought in Sweden or elsewhere, the location of his assets should not determine whether Swedish currency was involved according to the criterion of effect on the balance of payments. The currency of Sweden would be “involved” according to Article VIII, Section 2(b) by the fact of the defendant’s residence. “The balance of payments of a given economy will record either an entity’s transactions with the rest of the world, if the entity is considered a resident of the economy, or an entity’s transactions with the economy, if the entity is considered a nonresident.” 38 A change in the ownership of an asset as between a resident and a nonresident enters into the balance of payments of the resident’s country (and the nonresident’s) wherever the asset is situated. 39

The court noted that all the cases dealing with Article VIII, Section 2(b) decided by the Supreme Court up to the date of its opinion had related, as the objects of the plaintiff’s claims, to assets located in the state whose exchange control regulations required that a license be obtained for entry into the contracts that gave rise to the claims. Furthermore, the cases had dealt with claims involving payment or security for payment for goods or services or obligations under bills of exchange. If the court was implying that Article VIII, Section 2(b) is limited to these categories, it must be noted that nothing in the provison or in its rationale suggests that it is restricted in this way. Even these limited categories of contracts, however, are in sharp contrast to the view of exchange contracts that prevailed in the Terruzzi case.

(iv) In addition to raising the question whether the use of a resident’s assets abroad had an effect on the balance of payments of the resident’s country, the court hinted at the possibility that the use of these assets might not be covered by the words “[payments] for the purpose of transferring capital” in the former Article XIX(i) (the present Article XXX(d)). The implication was that the payments in the case might not have been capital transfers even if “exchange contracts” in Article VIII, Section 2(b) applied to contracts calling for payments of a capital character. The court seemed to suggest that an actual movement of an asset across boundaries might be a necessary element of “transfer.” This kind of movement is not necessary to constitute a “transfer.” The word connotes a change of ownership of an asset between resident and nonresident and covers assets situated outside the territory of the resident’s country, as explained in (iii) above. In Statni Banka and Banque d’État Tchécoslo-vaque v. Englander, a French court held that the performance in France by an obligor subject to Czechoslovak exchange control regulations from funds located in France would be a transfer subject to the Czechoslovak regulations. 40 This conclusion is of the utmost importance in connection with Article VIII, Section 2(b). Often, suit is brought in a forum other than that of the legislator of the exchange control because the defendant has assets within the jurisdiction of the forum with which his obligation could be satisfied if Article VIII, Section 2(b) did not apply.

(v) The Supreme Court recognized that Article VIII, Section 2(a) is intended to prevent restrictions on payments and transfers for current international transactions, and it wondered therefore whether restrictions on any capital transfers were covered by Article VIII, Section 2(b), but the court expressed no opinion on this question.

The language of Article VIII, Section 2(b) is not limited to the restrictions covered by Article VIII, Section 2(a). The latter provision is designed to promote a multilateral system of payments and transfers for current international transactions, but certain derogations are permitted, and it is to these derogations that the obligation of members under Article VIII, Section 2(b) applies. The drafters of the original Articles were as concerned to ensure that members would be free to control capital movements as they were to ensure that members would not restrict payments and transfers for current international transactions, except when restrictions were authorized by or under the Articles. The concern with freedom to control capital transfers was inspired by the chaos that flows of “hot money” had produced in the period between the two World Wars. Therefore, the controls imposed on capital movements, which were authorized by the Articles, were to be the subject of the same cooperation among members that is the objective of Article VIII, Section 2(b) when derogations from the multilateral system of payments and transfers for current international transactions are authorized. This reason of policy explains why Article VIII, Section 2(b) is formulated without qualification.

(vi) The Supreme Court cited its decision of February 17,1971, in which it held that a contract unenforceable when made because it was contrary to exchange control regulations at that time ceases to be unenforceable if the exchange control regulations are repealed before performance is sought. 41 This conclusion should apply with equal force if exchange control regulations are not repealed but no longer apply to the debtor because he has ceased to be a resident of the country that has imposed the regulations. The Sveriges Riksbank had stated that the Swedish regulations would not apply to the defendant in this case if he had become a resident of the Federal Republic of Germany. The Appeals Court had held that the defendant remained a resident of Sweden but had not pursued the inquiry that could have been made as a result of the statement by the Sveriges Riksbank.

The Supreme Court concluded that, in the circumstances of this case, there were doubts whether the contract would have been considered enforceable or unenforceable had the action proceeded without settlement. These doubts justified the conclusion that, on the basis of equity, each party should bear its own costs.

IV. Irving Trust Company v. Mamidakis 42 (New York)

The decision adopted by the New York Court of Appeals in J. Zeevi and Sons, Ltd., et al v. Grindlays Bank (Uganda) Limited43 has been criticized because it offered no definition of the expression “exchange contracts” in Article VIII, Section 2(b) but held that an exchange contract was not involved in circumstances in which the narrow interpretation of the Terruzzi case, the narrowest so far, would have led to a different conclusion.44 On October 19, 1978 the United States District Court for the Southern District of New York delivered a judgment in which there is not even an express mention of Article VIII, Section 2(b), although there are quotations from the opinion in the Zeevi case on other aspects of that case.

The plaintiff bank, chartered in New York State, sued the defendant, a citizen of Greece, who had his office in Athens. He had the controlling interest in a Cypriot and two Panamanian shipping corporations. One corporation had received a Eurodollar loan from the plaintiff in 1975, and all three had received Eurodollar loans from the plaintiff in 1977. The defendant had guaranteed the performance of all obligations under the loan agreements and the payment of attorneys’ fees if the plaintiff placed collection with an attorney. One agreement of guaranty was executed in London, and the other in Greece. One loan was disbursed through the plaintiffs branch in London, the other was a refinancing of accrued obligations. The corporations defaulted, and the plaintiff sued the defendant for approximately $2.5 million. The court gave judgment for the plaintiff.

The guaranty agreements provided that they “shall be governed by and construed and interpreted in accordance with the laws of the State of New York.” The customary legal language of similar transactions entered into in the State of New York was employed. The underlying loan agreements and promissory notes also provided that they were “deemed to have been made under and governed by the laws of the State of New York as to all matters of construction, validity, effect and performance.” Each note contained a covenant that payments to be made at New York should be “free and clear of and without deduction for any … restrictions or conditions of any nature hereafter imposed by the Republic of Panama, the Republic of Greece, the Republic of Cyprus or the United States of America.” Repayment of the loans was to be made by requiring the charterers of certain vessels to pay hire to an account at the plaintiff bank in New York. Under the loan agreements, all notices, requests, and other communications were to be addressed to the plaintiff in New York. The plaintiff retained the power to transfer the loan, from time to time at its sole discretion, from any one of its branches to another branch. Any legal action was to be brought in the courts of the State of New York or of the United States for the Southern District of New York, as the plaintiff might elect. The defendant consented to all these provisions.

The defendant pleaded that the foreign exchange control regulations of Greece prevented the payment of U. S. dollars in New York to satisfy the guaranties without a license from the Bank of Greece, and that the guaranties were null and void under Greek law because they had not been licensed. The court held that Greek law had not been proved to its satisfaction, but the court would assume, although it did not decide, that in the absence of a license, the defendant would be subject to criminal penalties under Greek law.

The court held that it would apply the New York rule on the choice of law. That rule, with respect to commercial transactions, is that the selection by the parties of the domestic law to govern their agreement is binding when, as in this case, the law bears a reasonable relationship to the agreement. The guaranty of an agreement to be performed in New York in itself would be a sufficient contact with New York for this purpose. The court would have concluded that the law of New York was the governing law even in the absence of a choice-of-law clause. A passage from the opinion in the Zeevi case was quoted in which it was pointed out that New York could maintain its preeminent financial position only if the justified expectations of the parties to a contract were protected. A further passage was quoted for the proposition that foreign legislation will not be given effect if it conflicts with the public policy of New York. The Fund’s interpretation of Article VIII, Section 2(b), however, emphasizes that the objection of the public policy of the forum cannot be raised against foreign exchange control regulations in circumstances in which Article VIII, Section 2(b) applies. 45

The court disposed of an argument, based on §40 of the Restatement of the Law (Second): Foreign Relations Law of the United States, that a court when exercising its enforcement jurisdiction should compare the vital national interests of each state whose laws are involved in litigation. 46 The court held that it was doubtful whether this principle was applied by New York courts, but in any event the interests of New York were paramount in this case.

… it is doubtful that the New York courts would permit a borrower-guarantor from a New York bank in an international transaction having sufficient contacts with New York to justify exercise of its jurisdiction, [to] avoid his commercial obligation so easily. To do so would impede international financial transactions of precisely the sort present here. Traditionally, in the absence of treaty provisions to the contrary, our courts have not enforced the foreign exchange controls of other nations, because these controls are contrary to our professed faith in the free enterprise system. See Zeevi, supra.

Although the qualification of “treaty provisions to the contrary” was mentioned, there was no discussion, as noted already, of Article VIII, Section 2(b) as a possible provision of this kind. There is a reference to the opinion in the Zeevi case,47 but there the provision was dimissed in two sentences on the basis of the tentative and obiter view of “exchange contracts” advanced in an earlier case. 48

In another line of thought in the opinion, the court held that the defendant had undertaken to obtain the licenses required by Greek law, and he had to accept the consequences if he had failed to obtain them. A similar thought was based on the defendant’s express warranty that payments were valid, and that he would compensate the plaintiff for any increased costs occasioned by the imposition of any regulation that conditioned the plaintiff’s rights under the notes.

On the first of these conclusions, the court said:

Assuming that Greek law would be violated by making payment as required by these agreements, Mr. Mamidakis would be obligated under his agreement with the Bank to seek and obtain the currency control licenses which he claims are necessary. Both plaintiff’s and defendant’s experts on Greek law agree in their affidavits, that payment of the debt could be made if a license were obtained from the Bank of Greece. Under those conditions, the risk of future inability to obtain such a license, and its refusal by a government is ordinarily not a defense in a suit for breach of contractual agreements. Corbin on Contracts §1347 (1962).

The effect of this reasoning is to place in the hands of any party who is subject to the exchange control regulations of a country the power to decide that they shall not apply to him. All that he has to do is to undertake to obtain a license to make him liable under an exchange contract even if he applies for the license and it is refused. This result would negate the intent of Article VIII, Section 2(b), which is to place national welfare above private interest.

A distinction can be made between the refusal of a license by exchange control authorities and a party’s failure to apply for one or to take all reasonable steps to obtain one if the conclusion can be reached that he had a duty to apply. In the latter event, a party may be liable in tort in some legal systems even though he cannot be made liable on the contract because of Article VIII, Section 2(b). Liability in tort may have an effect equivalent or comparable to a recovery on the contract, and so produce a financial result that Article VIII, Section 2(b) seeks to prevent. Nevertheless, the provision is confined to the field of contract.49

V. A Questionnaire

The four cases discussed in this article raise problems of the understanding and application of Article VIII, Section 2(b), many but not all of which have arisen in earlier cases. Some of the problems suggested by these cases, and the answers that they should receive, are set forth below.

(1) If the parties fail to plead Article VIII, Section 2(b) when it is applicable, should the court exercise an initiative and take the provision into account?

Courts in a member country should give effect to Article VIII, Section 2(b) whenever it applies. Promotion of the public policy expressed in the provision should not depend on the will of litigants.

(2) Are “exchange contracts” confined to contracts for the purchase and sale of currencies?

The word “exchange” in the expression “exchange contracts” should be understood in the same way as in the expression “exchange control.” Exchange contracts are contracts between a resident and a nonresident calling for a payment or transfer in currency, whether domestic or foreign from the standpoint of the member referred to in (3) below, that can affect its balance of payments.

(3) The balance of payments of which member must be affected as a basis for treating an exchange contract as unenforceable?

The balance of payments must be that of the member whose exchange control regulations have not been observed by the parties entering into an exchange contract. The currency of that member is “involved” in the sense of Article VIII, Section 2(b).

(4) Is a country’s balance of payments affected only if assets situated within its territorial jurisdiction can be resorted to in satisfaction of obligations under an exchange contract?

An exchange contract affects a country’s balance of payments even if a resident enters into an exchange contract under which the resident’s obligations are to be performed exclusively with assets he owns that are situated abroad.

(5) Must the exchange control regulations be designed for the purpose of protecting the currency involved or increasing the monetary reserves of the member that imposed them?

Normally, the exchange control regulations referred to in Article VIII, Section 2(b) will be imposed for the purposes mentioned in the question, but they need not be. For example, they may be imposed in order to bring pressure to bear on the balance of payments of a country as a sanction under a resolution of the United Nations. As for increasing monetary reserves, exchange control regulations may be designed to limit the inflow of capital.

(6) Does Article VIII, Section 2(b), in referring to an exchange contract as “contrary” to exchange control regulations, mean that the law of which the regulations are part must treat the contract as illegal or void?

The exchange contract need not be treated as illegal or void by the law of which the exchange control regulations are part in order to require the foreign forum to hold the contract to be unenforceable. The forum should reach this result even if the contract is only unenforceable under the law of which the exchange control regulations are part.

(7) As of what date should the facts be considered in order to determine whether an exchange contract is unenforceable?

The policy of Article VIII, Section 2(b) and the concept of unenforceability lead to the conclusion that the facts at the time when enforcement of an exchange contract is sought should be decisive. In particular, the facts at the time when the contract was entered into should not be decisive if they have changed in any one of a number of ways that would remove the contract from, or bring it within, the scope of Article VIII, Section 2(b).

(8) Should the performance of the obligation of one party under an exchange contract be regarded as a change for the purposes of (7) above?

If one party has performed its obligation and performance was contrary to the exchange control regulations of the member whose currency was involved, a court should not enforce the obligation of the other party on the ground that this performance would not, in itself, affect the balance of payments of the member whose balance of payments has already been affected. If courts did not treat the contract as unenforceable, on the ground that it had been partially performed, they would be helping to carry out arrangements in opposition to the policy of the member whose exchange control regulations had been breached.

(9) Are capital controls included among the exchange control regulations referred to in Article VIII, Section 2(b)?

Article VIII, Section 2(b) requires members to collaborate by not enforcing exchange contracts that are contrary to other members’ exchange control regulations that are consistent with the Articles, whether the regulations control payments and transfers for current international transactions or capital transfers. Article VIII, Section 2(b) promotes the policy of the Articles, on the one hand, of authorizing certain derogations from the multilateral system of payments and transfers for current international transactions, and, on the other hand, of authorizing members to control capital transfers.

(10) If a party guarantees that it will perform its obligations under an exchange contract notwithstanding any exchange control regulations that may apply, can the contract be enforced notwithstanding Article VIII, Section 2(b)?

The contract should be treated as unenforceable, because if it were not, any obligor could immunize his contract from the effect of the provision.

(11) If a member agrees with another member not to impose exchange control regulations on payments and transfers for current international transactions or on capital transfers to the other member, but then imposes them under some authority in the Articles notwithstanding the agreement between the parties, does Article VIII, Section 2(b) apply to the regulations?

The answer might be affected in practice by such considerations as the validity of the agreement between the members under the Articles and the court in which an action on an exchange contract contrary to the exchange control regulations is brought, but the problem has not been examined by the Fund or by any tribunal.

(12) If exchange control regulations are discriminatory, are they within the reach of Article VIII, Section 2(b)?

The Articles authorize discriminatory exchange control regulations under certain provisions, so that, prima facie, Article VIII, Section 2(b) applies. In practice, however, courts might be reluctant to apply the provision if the discrimination is against the citizens or residents of the country of the forum, or even if it is directed against another member.


Exchange Rate Policy for a Small Developing Country, and the Selection of an Appropriate Standardleslie lipschitz (pages 423–49)

This paper examines two questions: (a) What basket of currencies should a small developing country use as the exchange rate standard for its currency? and (b) When are discretionary changes of the value of its currency against the standard warranted?

The exchange rate policy of a small, price-taking country cannot influence the terms-of-trade fluctuations imposed upon it by deviations from purchasing power parity (PPP) among trading partner countries. It can, however, influence changes in the distribution of income, the allocation of resources, and the internal terms of trade that occur as a consequence of such shocks. This paper analyzes these influences.

When PPP does not hold, so that the inflation rate in the price-taking country may deviate from the average of its trading partners’ inflation rates, the paper argues that the real exchange rate is the important variable for allocation and the balance of payments and suggests that this variable be monitored closely. Large, sustained changes in this variable, from a situation seemingly in external payments equilibrium, are prima facie indicators of the need for change in the nominal exchange rate vis-à-vis whatever standard has been adopted. Such situations will generally be coupled with external imbalances, and it is argued that the normal, or medium-term, overall external balance (excluding transitory influences) is the variable of concern to exchange rate policy. Notably, however, while sustained differences in financial policies between a country and its trading partners, leading to different rates of inflation, might require a nominal exchange rate adjustment to restore a tenable real rate, structural changes in an economy will often require that the real exchange rate itself adjust toward a new equilibrium.

The paper introduces two types of calculations that are helpful in analyzing the questions raised and employs Indian data to illustrate their use. First, by defining various currency baskets as proxies for an ideal exchange rate standard for the Indian rupee, it compares actual variances of the rupee against the currencies of India’s major trading partners with the variances that would have occurred had it been fixed to one of these standards. Second, the paper defines various real effective exchange rate indices for the rupee and, for each, decomposes its variance into the variance of the effective nominal exchange rate, that of the external relative price, and the covariance of the two. By thus identifying the separate sources of real exchange rate variations, the paper sheds light on the question of whether a change in the exchange rate standard could reduce the variance of the real exchange rate.

Financial Reform and Capital Flows in a Developing Economy—DONALD J. MATHIESON (pages 450–89)

Several developing countries have found that a combination of exchange rate and financial reform can result in capital inflows that make it difficult, if not impossible, for the authorities to control the growth of monetary aggregates. This paper examines how financial reform can be integrated with exchange rate and monetary policy so as to allow the authorities to limit the size of any capital inflow and achieve their policy objectives.

When authorities are attempting to achieve a set of growth and inflation objectives, it is shown that capital inflows will be manageable under a patient, anti-inflation policy but may become overwhelming under an impatient, growth-oriented policy. The optimal policy mix under a patient, anti-inflation program will involve an initial phase with moderate, discrete increases in domestic nominal interest rates and an overdepreciation of the exchange rate followed by a second phase involving gradual declines in nominal interest rates and an appreciation of the exchange rate. This program will yield an adjustment process that is superior to those generated either in the absence of capital flows or in the presence of capital controls. The results of the study are used to examine why Korea experienced large capital inflows in the 1960s.

Domestic Credit and Money Ceilings Under Alternative Exchange Rate Regimeswilliam h. l. day (pages 490–512)

Under fixed exchange rates, controlling domestic credit achieves maximum short-term stability for the overall balance of payments. However, it does not in itself necessarily ensure that trade balance adjustment will be smooth and stable, or that realized rates of monetary expansion will be consistent with the long-term maintenance of fixed exchange rates. For countries with open, well-developed financial systems, the danger exists that increases in the demand for money caused by inflationary developments may be accommodated by inflows of money from abroad. This danger can be countered by accompanying a domestic credit ceiling with a supplementary money supply ceiling. Supplementary money supply ceilings that are designed to sterilize the impact of capital flows into countries with underlying deficits will perpetuate any incentive for capital to flow from surplus to deficit countries but will prevent any undesirable impact on the expenditure adjustment mechanism.

Under flexible exchange rates, there is no real case for replacing domestic credit ceilings with money supply ceilings as the linchpins of financial programs. If there were reasonable certainty concerning the future magnitude of net official intervention in the exchange market—whether small or large—it would make no difference in general whether there was a money ceiling or an equivalent domestic credit ceiling. However, if the authorities are imposing a target level or path on the exchange rate, or if there is a possibility that a target rate may be adopted at a later date, the case for a domestic credit ceiling is the same as under fixed rates. Moreover, if the authorities are giving overriding importance to achieving a money supply target, an appropriate domestic credit ceiling will place a constraint on the maintenance of an overvalued exchange rate. As under fixed rates, accompanying a domestic credit ceiling by a supplementary money ceiling may be beneficial. It may facilitate the external adjustment process by placing a constraint on the maintenance of an undervalued exchange rate.

A Model of Currency Substitution in Exchange Rate Determination, 1973–78—ARTURO BRILLEMBOURG AND SUSAN M. SCHADLER (pages 513–42)

Before the movement toward a generalized system of floating exchange rates, it was hoped that flexible rates would permit countries to pursue independent monetary policies. Experience with the system has led both policymakers and theoreticians to recognize the high degree of monetary interdependence that exists among countries even when exchange rates are allowed to fluctuate. One of the reasons for this interdependence is that in a world of exchange rate uncertainty many currencies provide competing as well as complementary services. In this paper, these relationships are accounted for in a model that determines seven exchange rates and one price level. The underlying framework is a general disequilibrium portfolio model which includes bonds and goods as well as currencies. By streamlining the model through the imposition of restrictions which seem plausible a priori or which are derived from portfolio theory, we arrive at a relatively simple monetary model of exchange rate determination. This model, however, departs from previous models in that it explicitly accounts for the effects of changes in demand for one currency on the value of other currencies. These effects are estimated and are found to have a statistically significant impact on the model. Two important conclusions are reached. First, the theoretical and empirical literature on the monetary approach to exchange rates should concern itself with cross-currency effects. Second, policymakers attempting to manage an exchange rate must be concerned with the monetary policies of a number of other countries. In fact, the multicurrency model indicates that among countries with complementary currencies, coordinated policy action is likely to yield stronger effects than would have been predicted by simple one- or two-currency models.

A Multilateral Exchange Rate Model for Primary Producing Countriesandrew feltenstein, morris goldstein, and susan m. schadler (pages 543–82)

The significant increase in exchange rate variability over the last several years has made it necessary for all countries, regardless of their exchange rate policies, to consider the effect of multilateral exchange rate changes on their balance of payments. This study presents an attempt to examine this problem from the point of view of primary commodity producing countries. A model is developed to calculate the effect on the trade balance of a primary producing country of changes in its exchange rate vis-à-vis currencies of its trading partners and competitors.

Foreign exchange earnings from commodity exports are determined for each primary producer in a series of simple commodity models that describe supply and demand for each commodity exported. In these models, an exchange rate change is viewed as a shift in the relevant country’s supply of or demand for each commodity. Imports of each primary producer are determined in aggregate import demand equations. While each primary producer is assumed to be small enough not to have any impact on the world price in terms of U. S. dollars of its imports, it may have an effect on the world price of the primary commodities it exports if its share in the world market is large. Thus, exchange rate changes may affect a primary producer’s export earnings both by changing worldwide supplies and therefore the world price of its exports or simply by affecting the quantity of the commodity the country itself produces.

To illustrate how the model can be used, it is applied to data from four copper producing countries, Chile, Peru, Zaïre, and Zambia. Parameter estimates are taken from models describing the markets for the major export commodities of these four countries and other empirical studies of these countries. Simulations are performed to measure the trade balance effects of the actual real and nominal exchange rate changes that occurred between these four primary producing countries and other countries that import the commodities. A final simulation examines the change in the world copper price that results from an increase in the world price elasticity of demand for copper. Finally, a method for calculating an index of effective exchange rates from the model is described. This index indicates the change in the actual exchange rate of a country’s currency against a numeraire that would have the same effect on the country’s trade balance as the set of exchange rate changes that actually occurred.

The Fund Agreement in the Courts—XIVjoseph gold (pages 583–611)

This installment of the survey of litigation involving the Fund’s Articles discusses four cases decided in England, France, the Federal Republic of Germany, and the State of New York in which the issues were related to the exchange control regulations of a member of the Fund other than the country of the forum. The New York case deals also with the enforcement of a Eurodollar loan contract.

The main issues that are discussed relate to Article VIII, Section 2(b). Some of the issues raised by the provision and the cases are whether the court must consider the effect of the provision even if the parties do not cite it, the meaning of “exchange contract,” the meaning of “contrary” to exchange control regulations, the currency that is “involved,” the effect of the location of assets that can be used to satisfy contractual obligations, whether exchange control regulations must be designed to protect the monetary reserves of the legislator, the date as of which the facts must be considered, the role of capital controls, and the effect of guarantees of performance. These and other questions are examined analytically and in relation to earlier cases decided in the same and in other jurisdictions. There continues to be an unfortunate absence of uniformity in the interpretation of Article VIII, Section 2(b) in the courts of member countries. There is a tendency to narrow the scope of the provision so that it becomes unrealistic, and even to ignore it.

A novel aspect of this latest installment is a discussion of the effect of discriminatory exchange control regulations under Article VIII, Section 2(b). The issue arises because certain regulations of this kind are permitted by the Articles. Judicial reactions to discriminatory regulations, particularly when detrimental to interests of the country of the forum, are likely not to be confined to a precise analysis of the provision.


Politique du taux de change pour un petit pays en développement et sélection d’un étalon appropriéleslie lipschitz (pages 423–49)

Ce document examine deux questions: a) Quel panier de monnaies un petit pays en développement devrait-il utiliser comme étalon de change pour sa monnaie? b) Dans quelles circonstances des modifications de la valeur de sa monnaie par rapport à l’étalon sont-elles indiquées?

La politique du taux de change d’un petit pays qui doit adopter les prix fixés à l’extérieur ne peut pas influencer les fluctuations des termes de l’échange auxquelles il se trouve soumis à la suite de déviations de la parité des pouvoirs d’achat de partenaires commerciaux. Elle peut toutefois influencer les changements dans la répartition des revenus, l’affectation des ressources et les termes de l’échange intérieurs, qui sont occasionnés par des chocs de cette nature. La présente étude analyse ces influences.

Selon l’auteur, lorsque la parité des pouvoirs d’achat ne se maintient pas, de sorte que le taux d’inflation du pays auquel les prix sont imposés peut s’écarter du taux d’inflation moyen de ses partenaires commerciaux, c’est le taux de change réel qui est la variable importante en ce qui concerne l’affectation des ressources et la balance des paiements; en conséquence, l’auteur recommande que ce taux de change soit surveillé de près. Des changements importants et continus de cette variable, à partir d’une situation d’équilibre apparent des paiements extérieurs, sont des signes indiquant que le taux de change nominal doit étre modifié par rapport à l’étalon qui a été adopté. Une telle situation ira généralement de pair avec des déséquilibres extérieurs et l’auteur pense que l’équilibre extérieur global normal, ou à moyen terme (d’où les influences passagères sont exclues), est la variable à prendre en considération dans la politique du taux de change. Il convient toutefois de remarquer que, si des différences persistantes entre la politique financière d’un pays et celles de ses partenaires commerciaux, qui entrainent des taux d’inflation différents, peuvent nécessiter un ajustement du taux de change nominal de façon à rétablir un taux réel soutenable, des changements structurels au sein d’une économie exigeront souvent que le taux de change réel lui-méme soit ajusté pour atteindre un nouvel équilibre.

Deux méthodes de calcul permettant d’analyser les questions soulevées sont présentées dans cette étude et sont illustrées à l’aide de données relatives à l’lnde. Tout d’abord, en définissant divers paniers de monnaies pouvant servir d’étalons de change idéaux pour la roupie indienne, l’auteur compare les variances de la roupie par rapport aux monnaies des principaux partenaires commerciaux de l’Inde avec celles qui auraient été enregistrées si la roupie avait été rattachée à l’un de ces étalons. Ensuite, il définit divers indices du taux de change réel effectif de la roupie et décompose la variance de chacun de ces indices en trois éléments: la variance du taux de change nominal effectif, celle des prix extérieurs relatifs et la covariance des deux. A la question de savoir si une modification de l’étalon de change pourrait réduire la variance du taux de change réel, la présente étude apporte, en identifiant les différentes sources de variations du taux de change réel, deséléments de réponse.

Réforme financière et flux de capitaux dans une économie en développementdonald j. mathieson (pages 450–89)

Plusieurs pays en développement se sont aperçus qu’une politique de change conjuguée à une réforme financiére pouvait entrainer des entrées de capitaux qui rendent difficile, sinon impossible, la maitrise, par les autorités, de la croissance des agrégats monétaires. La présente étude examine comment une réforme financiére peut étre intégrée à une politique de change et à une politique monétaire de faço à permettre aux autorités de limiter l’ampleur des entrées de capitaux et d’atteindre leurs objectifs de politique.

Lorsque les autorités s’efforcent de réaliser un ensemble d’objectifs en matière de croissance et d’inflation, il apparaít que les entrées de capitaux peuvent être contrôlées par le biais d’une politique anti-inflationniste patiente, alors qu’elles demeurent impossibles à maitriser dans le cadre d’une politique impatiente orientée vers la croissance. Le dosage optimal de mesures dans le cadre d’un programme anti-inflationniste où la patience est de règle comprendra une phase initiale d’augmentations modérées et discrètes des taux d’intérêt nominaux intérieurs et de surdépréciation du taux de change, suivie d’une seconde phase marquée par une baisse progressive des taux d’intérêt nominaux et une appréciation du taux de change. Ce programme engendrera un processus d’ajustement plus efficace que ceux qui se produisent en l’absence de flux de capitaux ou lorsque ces derniers sont contrôlés. On s’est servi des résultáis de la présente étude pour expliquer pourquoi la Corée a rçcu d’importantes entrées de capitaux au cours des années 1960.

L’imposition de plafonds au crédit intérieur et à la masse monétaire sous différents régimes de taux de changewilliam h. l. day (pages 490–512)

En régime de taux de change fixes, la régulation du crédit intérieur permet, à court terme, une stabilité maximale de la balance globale des paiements. Toutefois, cette politique ne garantit pas, à elle seule, que l’ajustement de la balance commerciale sera aisé et durable, ni que les taux d’expansion monétaire réalisés seront compatibles avec le maintien, à long terme, de taux de change fixes. Dans les pays qui ont des marchés financiers ouverts, suffisamment développés, les augmentations de la demande de monnaie causées par des facteurs inflationnistes risquent d’être satisfaites par des entrées de devises. On peut éliminer ce danger en ajoutant au plafond imposé au crédit intérieur un plafond supplémentaire limitant la masse monétaire. Ces plafonds supplémentaires sur la masse monétaire sont destinés à neutraliser l’incidence des entrées de capitaux dans les pays enregistrant des déficits structurels. lls accentueront la tendance des mouvements de capitaux des pays excédentaires vers les pays déficitaires, mais empécheront toute incidence défavorable sur le mécanisme d’ajustement des dépenses.

En régime de taux de change flexibles, il n’y a aucune raison valable pour qu’on adopte, comme pivot des programmes financiers, une politique consistant à remplacer les plafonds imposés au crédit intérieur par des plafonds limitant la masse monétaire. Si l’on pouvait prévoir avec assez d’exactitude l’ampleur des interventions officielles nettes sur le marché des changes—quelle qu’elle soit—le fait d’imposer un plafond à l’expansion de la masse monétaire ou un plafond équivalent limitant le crédit intérieur ne modifierait pas la situation dans son ensemble. Toutefois, si les pouvoirs publics imposent au taux de change un niveau à atteindre ou une trajectoire à suivre, ou s’il est possible qu’un niveau de taux de change soit fixé ultérieurement, les arguments en faveur d’un plafond au crédit intérieur sont les mémes que sous un régime de taux fixes. En outre, si les pouvoirs publics accordent une importance excessive à la réalisation d’un objectif déterminé en matiére de masse monétaire, un plafond au crédit intérieur, s’il est judicieusement choisi, limitera la surévaluation du taux de change. Comme en régime de taux fixes, ajouter un plafond sur le crédit intérieur au plafond limitant la masse monétaire peut être une mesure salutaire. Cette politique peut en effet faciliter le processus de l’ajustement externe en limitant la sous-évaluation du taux de change.

Modèle de substitution des monnaies dans la détermination des taux de change, 1973–78arturo brillembourg et susan m. schadler (pages 513–42)

Avant l’apparition du mouvement qui devait aboutir à un système généralisé de taux de change flottants, on espérait que la flexibilité des taux permettrait aux pays de mener une politique monétaire indépendante. Or, l’expérience de ce système a conduit les responsables de la politique économique, comme les théoriciens, à reconnaître la forte interdépendance monétaire qui existe entre les pays, mêm lorsque ces derniers laissent fluctuer leur taux de change. L’une des raisons de cette interdépendance est que, dans une situation d’incertitude à l’égard des taux de change, de nombreuses monnaies fournissent des services à la fois concurrentiels et complémentaires. Dans la présente étude, ces relations sont expliquées dans un modèle qui détermine sept taux de change et un niveau des prix. Le cadre de référence est un modèle général de désé quilibre de portefeuille composé à la fois d’obligations, de marchandises et de monnaies. En simplifiant le modèle par l’imposition de contraintes plausibles a priori ou reposant sur la théorie du portefeuille, nous obtenons un modéle monétaire relativement simple de dètermination des taux de change. Ce modèle se distingue toutefois des modèles antérieurs en ce qu’il tient explicitement compte des effets des variations de la demande d’une monnaie sur la valeur des autres monnaies. Ces effets sont estimés et il est établi qu’ils ont une incidence statistiquement significative sur le modèle. Le modèle permet d’aboutir à deux conclusions importantes: premièrement, les auteurs des ouvrages théoriques et empiriques consacrés à l’approche monétaire des taux de change devraient prendre en considération les effets d’interaction des monnaies; deuxièmement, les responsables de la politique économique qui souhaitent gérer le taux de change doivent tenir compte des politiques monétaires d’un certain nombre d’autres pays. En fait, le modèle à monnaies multiples montre que, dans les pays dont les monnaies sont complémentaires, une action coordonnée sur le plan de la politique monétaire a des chances d’être plus efficace que celle que des modèles simples à une ou deux monnaies laisseraient prévoir.

Un modèle multilateral de taux de change pour les pays de production primaireandrew feltenstein, morris goldstein et susan M. schadler (pages 543–82)

L’accroissement sensible de la variabilité des taux de change au cours des dernières années oblige tous les pays, quelle que soit leur politique de taux de change, à surveiller l’effet qu’exercent les variations multilatérales des taux de change sur leur balance des paiements. Dans la présente étude les auteurs cherchent à examiner cette question du point de vue des pays de production primaire. Un modéle est construit afin de calculer l’effet sur la balance commerciale d’un pays de production primaire des variations de sa monnaie par rapport à celles de ses concurrents et partenaires commerciaux.

Les recettes en devises provenant de l’exportation de produits primaires sont déterminées, pour chaque pays producteur, au moyen d’une série de sous-modèles simples qui décrivent l’offre et la demande de chaque produit primaire exporté. Dans chaque sous-modèle, les variations de taux de change sont considérées comme des changements dans l’offre ou la demande de chaque produit dans le pays concerné. Les importations de chaque pays de production primaire sont exprimées dans deséquations de la demande d’importations globale. Bien que l’on suppose que chacun de ces pays est trop petit pour avoir une incidence sur le prix mondial en dollars E.U. de ses importations, il peut influer sur le cours mondial des produits primaires qu’il exporte si sa part de marché mondial est importante. Les variations de taux de change peuvent donc influer sur les recettes d’exportation d’un pays de production primaire en faisant varier l’offre mondiale et, par conséquent, le prix mondial de ses exportations ou simplement en modifiant quantitativement la production de ce produit dans le pays.

A titre d’illustration, le modèle est appliqué à des données portant sur quatre pays producteurs de cuivre : le Chili, le Pérou, le Zaire et la Zambie. Les estimations des paramètres sont tirées de modèles des marchés des principaux produits primaires d’exportation de ces quatre pays et d’autres études empiriques sur ces mêmes pays. Des simulations sont effectuées pour calculer les effets sur la balance commerciale des variations effectives de taux de change exprimées en termes réels ou nominaux, intervenues entre ces quatre pays et ceux qui importent les produits primaires considérés. Un dernier exercice de simulation permet d’étudier la variation du cours mondial du cuivre qu’entraîne une augmentation de l’élasticité-prix mondiale de la demande de cuivre. L’étude s’achève par la description d’une méthode permettant de calculer, à partir du modéle, un indice des taux de change effectifs. Cet indice indique comment devrait varier, par rapport à une monnaie de référence, le taux de change effectif de la monnaie d’un pays pour qu’il en résulte sur sa balance commerciale un effet égal à celui de la série de variations de taux de change qui s’est effectivement produite.

Les statuts du Fonds devant les tribunaux—XIVjoseph gold (pages 583–611)

Cette étude, la quatorzième de la série portant sur des litiges mettant en cause les statuts du Fonds, est consacrée à l’examen de quatre jugements rendus en Angleterre, en France, en République fédérale d’Allemagne et dans l’Etat de New York sur des questions relatives à la réglementation des changes adoptée par un pays membre du Fonds autre que celui du for. L’espèce soumise au tribunal de New York portait également sur l’exécution d’un contrat de prét en euro-dollars.

Les principaux points examinés se rapportent a la section 2b) de l’article VIII. Entre autres questions soulevées par cette disposition et par les jugements rendus, on peut citer les suivantes : le tribunal doit-il prendre en considération l’effet de cette disposition, méme si les parties ne l’ont pas invoquée? Qu’entend-on par “contrat de change”? Que signifient étre “contraire” à la réglementation des changes et “mettre en jeu” la monnaie d’un membre? Quel peut étre l’effet du lieu où se trouvent les avoirs qui peuvent étre utilisés pour satisfaire des obligations contractuelles? La réglementation des changes doit-elle avoir pour objet de protéger les réserves monétaires du pays qui l’a adoptée? A partir de quelle date les faits doivent-ils étre considérés? Enfin, quel est l’objet du contrôle des capitaux et quel est l’effet des garanties d’exécution? Ces questions, parmi d’autres, sont analysées et comparées aux jugements précédemment rendus par le méme tribunal ou par d’autres juridictions. Les interprétations de la section 2 b) de l’article VIII par les tribunaux des pays membres continuent à accuser une absence regrettable d’uniformité. Quand ils ne l’écartent pas totalement, ces derniers ont tendance à limiter la portée de cette disposition, à tel point qu’elle en devient inapplicable.

Pour la première fois dans cette série, l’auteur examine l’incidence que peuvent avoir, au regard de la section 2 b) de l’article VIII, les mesures de contrôle des changes discriminatoires. Cette question se pose parce que certaines réglementations de ce genre sont permises par les Statuts. Lorsqu’il aura à connaître de litiges portant sur des réglementations discriminatoires, et surtout lorsque celles-ci vont à l’encontre des intéréts du pays où siège le tribunal compétent, le pouvoir judiciaire ne se contentera probablement pas d’analyser avec minutie les dispositions de l’article.


Política de tipos de cambio de un país pequeño en desarrollo y elección de una norma cambiaria adecuadaleslie lipschitz (páginas 423–49)

En el presente estudio se examinan dos cuestiones: a) ¿Qué cesta de monedas debe adoptar un país pequeño en desarrollo como norma cambiaría para su moneda? ¿Cuándo está justificada la modificación discrecional del valor de su moneda respecto a la citada norma?

La política cambiaria de un país pequeño cuyos precios le vienen impuestos del exterior no puede influir en las fluctuaciones de la relación de intercambio que le imponen las desviaciones respecto a la paridad del poder adquisitivo (PPA) entre países que comercian entre sí. En cambio, puede influir en las variaciones de la distribución de la renta, la asignación de recursos y la relación de intercambio interna que se producen como consecuencia de aquellas conmociones. En el presente estudio se analizan esos influjos.

Cuando la PPA no se cumple, con la posibilidad de que la tasa de inflación del país con precios impuestos se desvíe respecto al promedio de tasas de inflación de los países con quienes aquél comercia, el autor sostiene que el tipo de cambio real es la variable pertinente a efectos de asignación y balanza de pagos, y sugiere que se siga muy de cerca la evolución de dicha variable. Pues cuando varía de manera importante y sostenida a partir de una situación de aparente equilibrio de los pagos externos, ello constituye la primera indicación de que es necesario modificar el tipo de cambio nominal respecto a la norma que se haya adoptado. Una situación semejante irá generalmente acompañada de desequilibrios externos, por lo cual trata de demostrar que la balanza global externa normal, o sea, a medio plazo (en que no se incluyen los influjos transitorios), es la variable que interesa a efectos de política cambiaria. Sin embargo, es digno de notar que si bien la persistencia de políticas financieras distintas entre países que comercian entre sí, conducentes a tasas de inflación diferentes, podría exigir un reajuste del tipo de cambio nominal con el fin de restablecer un tipo real sostenible, será a menudo necesario que el propio tipo de cambio real se vaya ajustando a un nuevo equilibrio al producirse modificaciones estructurales de la economía.

El autor presenta dos tipos de cálculo que resultan útiles para analizar las cuestiones planteadas y recurre a datos de India para explicar la manera de utilizarlos. Primeramente, definiendo diversas cestas de monedas que pudieran servir a modo de norma cambiaria ideal para la rupia india, compara las varianzas efectivas de la rupia respecto a las monedas de los principales países con quienes India comercia, con las varianzas que hubieran resultado de haberse fijado su tipo de cambio en función de una de dichas normas. En segundo lugar, define diversos índices de tipos de cambio reales efectivos para la rupia y descompone la varianza de cada uno de esos índices en la varianza del tipo nominal efectivo, la del precio relativo externo y la covarianza de ambos. Determinando de esa manera cada una de las fuentes de variación del tipo de cambio real, en su análisis trata de esclarecer si se puede reducir la varianza del tipo de cambio real modificando la norma cambiaria.

La reforma financiera y los flujos de capital en una economía en desarrollodonald j. mathieson (pàginas 450–89)

A juzgar por la experiencia de varios países en desarrollo, a las autoridades les puede resultar difícil, si no imposible, regular el crecimiento de los agregados monetarios cuando se producen entradas de capital a consecuencia de una combinación de reformas cambiaría y financiera. En el estudio se demuestra que cuando las autoridades se proponen lograr un conjunto de objetivos de crecimiento e inflación, la afluencia de capital es controlable si se pone en práctica una política antiinflacionaria perseverante, pero puede llegar a ser abrumadora cuando se sigue con impaciencia una política de crecimiento. La combinación óptima de políticas, conforme a un programa antiinflacionario tesonero, entrañará una fase inicial de aumentos moderados y discretos del tipo de interés nominal interno y una sobredepreciación del tipo de cambio, seguida de una segunda fase que incluirá la reducción gradual de los tipos de interés nominal interno y una sobredepreciación del tipo de cambio, seguida de una segunda fase que incluirá la reducción gradual de los tipos de interés nominales y la apreciación del tipo de cambio. Con este programa se puede llegar a un proceso de ajuste que es superior a los que se producen o bien en ausencia de flujos de capital o cuando se aplican controles de capital. Los resultados obtenidos en el estudio se han utilizado para examinar la razón por la cual se registraron grandes entradas de capital en Corea en los años sesenta.

Topes al credito interno y a la oferta monetaria en dos regímenes cambiarlos diferenteswilliam h. l. day (páginas 490–512)

En un régimen de tipos de cambio fijos, el control del crédito interno logra el máximo de estabilidad a corto plazo en la balanza global de pagos. Sin embargo, esto no garantiza que el ajuste de la balanza comercial se produzca sin tropiezos y en forma estable, o que las tasas de expansión monetaria obtenidas sean consecuentes con la mantención a largo plazo de los tipos de cambio fijos. En los países que cuentan con sistemas financieros abiertos y bien desarrollados, existe el peligro de que los aumentos de la demanda de dinero causados por la inflación se compensen mediante entradas de dinero del exterior. Este peligro puede contrarrestarse estableciendo, además del tope al credito interno, un tope adicional a la oferta monetaria. Este último, que tiene por objeto esterilizar el impacto de las corrientes de capital hacia los países que tienen un déficit fundamental, preservará los incentivos necesarios para que las corrientes de capital de los países superavitarios fluyan hacia los deficitarios pero evitará su repercusión nociva en el mecanismo de ajuste del gasto.

En un régimen de tipos de cambio flexibles no se justifica remplazar los topes al crédito interno por topes a la oferta monetaria, como elemento clave de los programas financieros. Si se tuviera alguna certeza con respecto a la magnitud futura—pequeña o grande—de la intervención oficial neta en el mercado de divisas, no habría diferencia, en general, entre establecer un tope al dinero o un tope equivalente al crédito interno. No obstante, si las autoridades desean fijar un nivel o una trayectoria del tipo de cambio como meta, o si existe la posibilidad de que se adopte ulteriormente una meta para el tipo de cambio, las razones para establecer un tope al crédito interno serían las mismas que en un régimen de tipos de cambio fijos. Por otra parte, si las autoridades otorgan una importancia primordial al logro de una meta para la oferta monetaria, un tope adecuado al crédito interno limitará el mantenimiento de un tipo de cambio sobrevalorado. Al igual que en un régimen de tipos de cambio fijos, puede resultar ventajoso complementar el tope al credito interno con un tope a la oferta monetaria. Esto puede facilitar el proceso de ajuste externo, al limitar el mantenimiento de un tipo de cambio subvalorado.

Un modelo de sustitución de monedas en la determinación del tipo de cambio, 1973–78arturo brillembourg y susan m. schadler (páginas 513–42)

Antes del paso hacia un sistema generalizado de tipos de cambio flotantes, se había expresado la confianza de que los tipos de cambio flexibles permitirían a los países seguir una política monetaria independiente. La experiencia con el sistema ha servido para que formuladores de política y teorizantes estén más conscientes del alto grado de dependencia monetaria que existe entre los países incluso cuando se deja que los tipos de cambio fluctúen. Uno de los motivos de esa interdependencia es que, en presencia de la incertidumbre del tipo de cambio, muchas de las monedas prestan servicios competitivos y complementarios. En este estudio se ofrece un modelo que comprende esas relaciones y en el que se determinan siete tipos de cambio y un nivel de precios. La estructura fundamental es la del modelo general de desequilibrio de cartera en la que figuran bonos, bienes y monedas. Perfeccionando el modelo con la incorporación de restricciones que cabe concebir a priori o que se derivan de la teoría de cartera, se obtiene un modelo monetario relativamente sencillo para determinar el tipo de cambio. No obstante, este modelo difiere de otros en que tiene explícitamente en cuenta los efectos de la variación de la demanda de una moneda en el valor de las demás. Se estiman los efectos y se observa que tienen un impacto significativo en el modelo. Se desprenden dos importantes conclusiones. Primero, el estudio teórico y empírico del enfoque monetario del tipo de cambio debe tener en cuenta los efectos cruzados. Segundo, los formuladores de política cuyo propósito sea la gestión del tipo de cambio deberán tener presente la política monetaria de otros países. Es más, con el modelo de monedas múltiples se observa que, en el grupo de países cuyas monedas son complementarias, es probable que la coordinación de las medidas de política produzca efectos más sensibles que los que se habían previsto con modelos más sencillos de una o dos monedas.

Un modelo multilateral de tipos de cambio para países de producción primaríaandrew feltenstein, morris goldstein y susan m. schadler (páginas 543–82)

El aumento significativo en la variabilidad de los tipos de cambio durante los últimos años ha obligado a todos los países, sea cual sea su política de tipos de cambio, a considerar el efecto que ejercen sobre su balanza de pagos las modificaciones multilaterales de los tipos de cambio. En el presente estudio se trata de examinar este problema desde el punto de vista de los países de producción primaria. Se elabora un modelo para calcular el efecto ejercido en la balanza comercial de un país de producción primaria por las variaciones en su tipo de cambio frente a la moneda de los países con quienes comercia y compite.

Para cada país de producción primaria se determinan los ingresos en divisas procedentes de la exportación de productos básicos, utilizando una serie de modelos sencillos de productos básicos en los que se describe la oferta y la demanda de cada producto exportado. En estos modelos, se considera a las variaciones del tipo de cambio como un desplazamiento en la oferta o demanda de cada producto en el país respectivo. La importación de cada país de producción primaria se determina mediante ecuaciones de la demanda agregada de importaciones. Si bien se supone que cada país de producción primaria es suficientemente pequeño como para no tener impacto en el precio mundial de sus importaciones, midiéndolo en dólares de EE.UU., puede en cambio influir en el precio mundial del producto básico que exporta, si es grande su participación en el mercado mundial. Por consiguiente, las variaciones del tipo de cambio pueden afectar a los ingresos de exportación de un país de producción primaria, tanto al modificar la oferta mundial, y por ende el precio mundial de sus exportaciones, o simplemente al afectar la cantidad de dicho producto básico producido por el país.

Para ilustrar la forma en que puede utilizarse el modelo, se le aplica a los datos de cuatro países productores de cobre: Chile, Perú, Zaire y Zambia. Se toman estimaciones de los parámetros a partir de los modelos que describen los mercados de los principales productos básicos de exportación de estos cuatro países y basándose en otros estudios empíricos de estos mismos países. Se realizan simulaciones para medir los efectos causados en la balanza comercial por las variaciones registradas en los tipos de cambio reales y nominales entre esos cuatro países de producción primaria y otros países que importan sus productos. En una última simulación se examina la variación del precio mundial del cobre causado por un aumento de la elasticidad de la demanda mundial del cobre con respecto al precio. Por último, se describe un método para calcular un índice de los tipos de cambio efectivos por medio del modelo. Este índice indica la variación del tipo de cambio registrado de la moneda de un país frente a un numerario, que tendría el mismo efecto sobre la balanza comercial del país que el conjunto de variaciones del tipo de cambio efectivamente ocurridas.

El Convenio Constitutivo del Fondo en los tribunales—XIVjoseph gold (páginas 583–611)

En el presente capítulo del estudio de los litigios que tienen alguna relación con el Convenio Constitutivo del Fondo se examinan cuatro fallos de tribunales del Reino Unido, Francia, La República Federal de Alemania y el estado de Nueva York, en que los puntos disputados se relacionaban con disposiciones de control de cambios adoptadas por un país miembro del Fondo distinto de aquél en que se sigue la causa. El caso de Nueva York también trata de la ejecución de un contrato de préstamo en eurodólares.

Los principales puntos litigiosos se relacionan con el Artículo VIII, Sección 2 b). Algunos de los problemas planteados por la disposición y los casos son si el tribunal debe tener en cuenta el efecto de la disposición incluso si las partes no la citan, el significado de “contrato de cambio”, el significado de “contrario” a las disposiciones de control de cambios, la moneda “comprendida”, et efecto del lugar en que estén situados los activos que pueden usarse para cumplir obligaciones contractuales, si las disposiciones de control de cambios deben formularse para proteger las reservas monetarias del legislador, a qué fecha debe remontarse la consideración de los hechos, la función de los controles de capital y el efecto de las garantías de cumplimiento. Estas y otras cuestiones se examinan analíticamente y en relación con casos anteriores en la misma jurisdicción y en otras. Sigue habiendo una lamentable falta de uniformidad en la interpretación del Artículo VIII, Sección 2 b) en los tribunales de los países miembros. Se tiende a restringir el alcance de la disposición, de modo que no resulta ajustada a la realidad, e incluso prescindir de ella.

Un aspecto original de este último capítulo es un examen del efecto de las disposiciones discriminatorias de control de cambios conforme al Artículo VIII, Sección 2 b). La cuestión se plantea porque el Convenio Constitutivo permite ciertas disposiciones de esta clase. Rara vez la reacción judicial ante las disposiciones discriminatorias, sobre todo si son perjudiciales a intereses del país donde se ventila la causa, se limita a un análisis preciso de la disposición.

In statistical matter (except in the ré sumé s and resúmenes) throughout this issue,

Dots (…) indicate that data are not available;

A dash (—) indicates that the figure is zero or less than half the final digit shown, or that the item does not exist;

A single dot (.) indicates decimals;

A comma (,) separates thousands and millions;

“Billion” means a thousand million;

A short dash (–) is used between years or months (e.g., 1975–78 or January-October) to indicate a total of the years or months inclusive of the beginning and ending years or months;

A stroke (/) is used between years (e.g., 1977/78) to indicate a fiscal year or a crop year;

Components of tables may not add to totals shown because of rounding.

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Yearbooks of the International Monetary Fund

The Balance of Payments Yearbook brings together balance of payments statistics for over 110 countries that report their data to the Fund. The subscription consists of 11 monthly booklets, an annual issue, and a Supplement. Volume 30 will be completed in December 1979 by publication of the annual issue, which contains definitive tables and notes for the 110 countries for the nine years ended 1978. $20.00

Direction of Trade provides, in monthly issues, the latest available data on exports and imports, by country, with comparative data for the preceding year, and, in an annual issue, full-year data for several years and summary area and world tables. The 1979 Direction of Trade Yearbook contains trade-by-country data for 151 countries for the period 1972 through 1978. $16.00

The Government Finance Statistics Yearbook brings together detailed data on revenue, grants, expenditure, lending, financing, and debt of central governments, and indicates the amounts represented by social security funds and extrabudgetary operations. Volume III includes information for 118 countries, with data through 1977 or 1978 for about 85 countries. Summary data are given for state and local governments. $10.00 a volume.

The 1979 International Financial Statistics Yearbook reports 30 years of annual data (1949–78). Content and format are consistent with the monthly issues of International Financial Statistics. It reports data for some 120 countries relevant to analyses of the problems of inflation and deflation and the related balance of payments problems. Yearbook $10.00. Twelve monthly issues plus Yearbook $35.00.

Special rates for these publications are available to university libraries, faculty, and students.

For information and to place orders, write to

The Secretary

International Monetary Fund

Washington, D.C. 20431 U. S. A.


Mr. Gold, Senior Consultant and formerly 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 in the series, 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). The twelfth and thirteenth articles were published in Staff Papers, Vol. 24 (March 1977), pp. 193–231, and Vol. 25 (June 1978), pp. 343–67, respectively.


See Andreas F. Lowenfeld, The International Monetary System (New York, 1977), §9.26, p. 275; Brian D. Beglin, “United States Enforcement of Foreign Exchange Control Laws—A Rule in Transition?” New York University Journal of International Law and Politics, Vol. 10 (Winter 1978), p. 560.


Decision No. 446–4, June 10, 1949, Selected Decisions of the International Monetary Fund and Selected Documents (Washington, Eighth Issue, 1976; hereinafter referred to as Selected Decisions), pp. 131–32.


The Times (London) (May 3, 1977), p. 11; Halsbury’s Laws of England: Annual Abridgment, 1977 (London, 1978), p. 453, paragraph 1906.


U.K., S.R.&O. 1946, No. 36.


The Times(London) (May 3, 1977), p. 11.


Halsbury’s Laws of England, Vol. 9 (London, Fourth Edition, 1974), pp. 85, 261; Arthur Linton Corbin, Corbin on Contracts: A Comprehensive Treatise on the Rules of Contract Law, Vol. 2 (St. Paul, 1950), pp. 152–54.


See Joseph Gold, The Fund Agreement in the Courts (Washington, 1962) (hereinafter referred to as Gold, Fund Agreement in the Courts (1962)), pp. 61–62.


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), p. 77.


[1966] 3 W. L. R. 1285, at pp. 1289–90, 1293–94; [1966] 3 All E. R. 785, at pp. 789–90. See also Gold, Fund Agreement in the Courts: Parts VIII-XI (cited in footnote 9), p. 46.


[1976] 1 Q. B. 683; [1976] 1 Q. B. 703 (C. A.). See also Joseph Gold, “The Fund Agreement in the Courts—XII,” Staff Papers, Vol. 24 (March 1977) (hereinafter referred to as Gold, “Fund Agreement in the Courts—XII”), pp. 205–21.


See Gold, Fund Agreement in the Courts: Parts VIII-XI (cited in footnote 9), p. 73.


Ibid., pp. 50–54.


Ibid., p. 53.


Ibid., p. 77.


See the section entitled ”Makingv. Performance of Exchange Contracts” in Gold, Fund Agreement in the Courts (1962) (cited in footnote 8), pp. 62–64; see also the section entitled ”The Federal Supreme Court Judgment of April 27, 1970” (Federal Republic of Germany) in Gold, Fund Agreement in the Courts: Parts VIII-XI (cited in footnote 9>, pp. 74–76; 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. 27–35.


In re United Railways of Havana and Regla Warehouses Ltd.[19611 A. C. 1007, at p. 1059.


Miliangos v. George Frank (Textiles) Ltd. [1975] 3 All E. R. 801. The correctness of the dictum was not considered in this case.


James Buchanan & Co. Ltd. v. Babco Forwarding and Shipping (U. K.) Ltd.[1977], 3 All E. R. 1048, at p. 1052.


See Gold, “Fund Agreement in the Courts—XII” (cited in footnote 11), pp. 205–221.


Gold, Fund Agreement in the Courts: Parts VIII-XI (cited in footnote 9), pp. 78–82. See also Eloy Ruiloba Santana, “Aspectos Teoricos del Control de Cambios en Derecho Internacional Privado,” Anuario de Derecho Internacional (Pamplona), 1975–11, pp. 112–14.


Cf. the following answer by Dr. Fritz Leutwiler, President of the Swiss National Bank, in discussing a new code of conduct for Swiss banks:

Q. Does the agreement ask banks to avoid handling money that came from tax evasion or other illegal activities?

A. No, sir! Our banks cannot take over the tasks of foreign-exchange controls in other countries. They are here, they are open, and they can accept all funds except those that the bank knows came from criminal acts. I refuse to put countries on a black list, to tell banks you can take funds from some countries but not from others…. These are judgments that are not within the competence of Swiss banks. What we want is that Swiss banks not send their managers to countries where there are restrictions and organize illegal capital outflows. (Time (European edition), Vol. 110 (July 11, 1977), p. 13).


Journal du Droit International, 105 Année (1978), pp. 99–106.


Ibid., p. 100 (translation from the French original).


Ibid., p. 101 (Note by Pierre Mayer).


Revue critique de droit international privé, Vol. 59, No. 3 (1970), pp. 464_74. See, for the discussion of this case, Gold, Fund Agreement in the Courts: Parts VIII-XI (cited in footnote 9), pp. 89–94.


Ibid., p. 94.


See Southwestern Shipping Corporation v. National City Bank of New York, 173 N. Y. S. 2d 509 (1958), 178 N. Y. S. 2d 1019 (1958), 190 N. Y. S. 2d 352 (1959), 361 U. S. 895 (1959); Gold, Fund Agreement in the Courts (1962) (cited in footnote 8), pp. 97–100,102–108; Gold, Fund Agreement in the Courts: Parts VIII-XI (cited in footnote 9), pp. 50, 91–94. See also Varas v. Crown Life Insurance Co., 83 Montg. Co. L. R. 71 (1963); 204 Pa. Super. 176; 203 A. 2d 505 (1964); 382 U. S. 827 (1965); Gold, Cuban Insurance Cases (cited in footnote 16), pp. 16–18, 49; J. Zeevi and Sons, Ltd. et al v. Grindlays Bank (Uganda), Limited, 37 N. Y. 2d 220, 333 N. E. 2d 168, 371 N. Y. S. 2d 892 (1975); Gold, “Fund Agreement in the Courts—XII” (cited in footnote 11), pp. 221–23.


See a decision of the German Federal Supreme Court of May 21, 1964 (VII ZR 23/64) in Gold, Fund Agreement in the Courts: Parts VIII-XI (cited in footnote 9), p. 92, footnote 48.


Journal du Droit International, 105 Année (1978), p. 102.


Decision No. 541-(56/39), July 25, 1956, Selected Decisions (cited in footnote 3), p. 97.


Decision No. 1034-(60/27), June 1, 1960, ibid., pp. 139–40.


Journal du Droit International, 105 Année (1978), p. 100 (translation from the French original).


Ibid., pp. 105–106.


Ibid., p. 106.


Jurisprudence commerciale de Belgique, 1968, footnotes 11–12, Pt. IV, pp. 765–85; Pasicrisie Beige, 1969, Pt. Ill, pp. 22–28; Gold, “Fund Agreement in the Courts—XII” (cited in footnote 11), pp. 228–29.


WM: Zeitschrift für Wirtschafts-und Bankrecht, Jahrg. 31, No. 12 (March 19, 1977), pp. 332–34.


International Monetary Fund, Balance of Payments Manual (Washington, Fourth Edition, 1977), p. 10.


Ibid., p. 12.


International Law Reports, ed. by E. Lauterpacht, Vol. 47 (London, 1974), pp. 157–63; Gold, “Fund Agreement in the Courts—XII” (cited in footnote 11), pp. 225–28.


BGH, Urt. v. 17.2.1971–VIII ZR 84/69 (Frankfurt), Neue Juristische Wochenschrift, Vol. 24 (June 1, 1971), pp. 983–85; Wertpapier-Mitteilungen, No. 14 of April 3, 1971, pp. 411–12; Gold, Fund Agreement in the Courts: Parts VIII–XI (cited in footnote 9), pp. 82–84.


78 Civ. 0265-CLB, October 18, 1978, U. S. District Court, Southern District of New York (unreported as of April 1, 1979).


37 N. Y. 2d 220, 333 N. E. 2d 168, 371 N. Y. S. 2d 892 (1975); Gold, “Fund Agreement in the Courts—XII” (cited in footnote 11), pp. 221–23.


See Keith L. Baker, “Enforcement of Contracts Violating Foreign Exchange Control Laws,” International Trade Law Journal, Vol. 3 (Fall 1977), pp. 281–83.


Decision No. 446–4, June 10, 1949, Selected Decisions (cited in footnote 3), pp. 131–32.

Limitations on Exercise of Enforcement Jurisdiction:

Where two states have jurisdiction to prescribe and enforce rules of law and the rules they may prescribe require inconsistent conduct upon the part of a person, each state is required by international law to consider, in good faith, moderating the exercise of its enforcement jurisdiction, in the light of such factors as

  • (a) vital national interests of each of the states,

  • (b) the extent and the nature of the hardship that inconsistent enforcement actions would impose upon the person,

  • (c) the extent to which the required conduct is to take place in the territory of the other state,

  • (d) the nationality of the person, and

  • (e) the extent to which enforcement by action of either state can reasonably be expected to achieve compliance with the rule prescribed by that state.

  • (§40, adopted and promulgated by the American Law Institute at Washington, D. C, May 26, 1962; revisions adopted and promulgated on May 20, 1964, and May 20, 1965.)


See Gold, “Fund Agreement in the Courts—XII” (cited in footnote 11), p. 222.


Banco do Brasil, S. A. v. A. C. Israel Commodity Co., Inc., et al, 12 N. Y. 2d 371, 190 N. E. 2d 235, 239 N. Y. S. 2d 872 (1963); Gold, Fund Agreement in the Courts: Parts VIII-XI (cited in footnote 9), pp. 12–17.


See Daiei Motion Picture Co. Ltd. v. Zavicha discussed in Gold, “Fund Agreement in the Courts—XII” (cited in footnote 11), pp. 194–97. For a discussion of the liability of exchange control authorities for refusal of a license and sovereign immunity, see Zavicha Blagojevic c. Banque du Japon and Note by Henri Batiffol in Revue critique de droit international privé, Tome 66, No. 2 (April/June 1977), pp. 359–62.