Chapter

chapter 23 Objective International Personality and Nonmembers

Author(s):
International Monetary Fund
Published Date:
October 1985
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Introduction

Article IX, Section 1, provides that in order to enable the Fund to fulfill its functions the status, privileges, and immunities set forth in Article IX “shall be accorded to the Fund in the territories of each member.” Section 2 provides that the Fund “shall possess full juridical personality” and, in particular, the capacity to contract, to acquire and dispose of property, and to institute legal proceedings. Notwithstanding the reference to the territories of members in Section 1, it has never been doubted that the Fund has juridical personality and the capacity that flows from it to enter into relations with nonmembers. There is explicit evidence in the Articles that the reference to the territories of members in Article IX, Section 1, does not circumscribe the personality and capacity of the Fund. Under Article X, the Fund may make arrangements with other international organizations, and under Article VII, Section 2, the Fund may borrow from sources “either within or outside the territories” of a member. Even these express provisions, however, do not exhaust the capacity of the Fund. It is established in international law that an international organization may have an objective personality that goes beyond the express provisions of its charter. In its Advisory Opinion of April 11, 1949,1 the International Court of Justice dealt, inter alia, with the question whether the United Nations had the capacity to bring international claims against a nonmember state for injuries suffered by agents of the United Nations in the performance of their duties in circumstances involving the responsibility of the state for those injuries. The Charter of the United Nations is silent on this subject, and it contains language similar to Article IX, Section 1, of the Fund’s Articles.2 The Court declared that “fifty States, representing the vast majority of the members of the international community, had the power, in conformity with international law, to bring into being an entity possessing objective international personality, and not merely personality recognized by them alone, together with capacity to bring international claims.” 3 The reference to the territories of members in Article IX, Section 1, must be taken to deal with the status of the Fund under the municipal law of members and not with its status under international law.4

Agreement Between Fund and Switzerland

The agreement of June 11, 1964 between the Fund and Switzerland is a major illustration of the Fund’s objective personality in action.5 On October 24, 1962 the Fund’s General Arrangements to Borrow took effect. Under them, eight members and the central banks of two other members expressed their willingness to lend their currencies to the Fund in accordance with the terms of the Arrangements. One purpose of the Arrangements, although not the only one, is to provide the Fund with supplementary resources of the currencies of those members to which capital is likely to flow from a member when its currency is under pressure.6 In this way, the Fund can replenish its resources of the currencies with which it can appropriately help the member in this difficulty. The ring was not complete, however, because capital might move to Switzerland, and Switzerland is not a member of the Fund.

Under Article VII, Section 2, the Fund may agree with a member that it will lend its currency to the Fund, and, with the approval of a member, the Fund may borrow that member’s currency from “some other source either within or outside the territories of the member.” These territories are not declared to be the territories of members, and there is no reason to assume any tacit limitation of this kind, so that it would be possible for the Fund to borrow from nonmembers or their residents. No matter who the lender may be, however, the Fund’s power to borrow is confined to the replenishment of its holdings of the currencies of members. In short, the Fund does not hold Swiss francs 7 and has no power to borrow them under Article VII, Section 2.8

The agreement of June 11, 1964 between the Swiss Federal Council and the Fund solves the problem by providing for a form of association of the Swiss Confederation with the General Arrangements to Borrow.9 The association takes the form of an agreement that complements the General Arrangements, and it must not be thought of as associate membership in the Fund. It will be recalled that there is no provision for any form of membership short of full membership.

Switzerland did not adhere to the General Arrangements, but undertakes, subject to the terms of the agreement with the Fund, to make a direct loan to a participant in the General Arrangements when the Fund borrows under them in order to finance an exchange transaction with the participant. For this purpose, there has to be an “implementing agreement” between the participant and Switzerland, and Switzerland undertakes that it will be prepared to consider the conclusion of an implementing agreement at the request of a participant. The Fund accepts no responsibility or liability, whether as guarantor or in any other capacity, in connection with the basic agreement of association or any implementing agreement. Switzerland is to advance to the participant in the General Arrangements the amount specified by the Managing Director, provided that this does not exceed the amount of the implementing agreement or a total of outstanding advances to all participants equivalent to $200 million, and provided further that Switzerland does not represent that its present and prospective balance of payments and reserve position does not justify the advance. Switzerland undertakes that the repayment terms in an implementing agreement will correspond to the maximum practicable extent with the repayment provisions of the General Arrangements. Special arrangements were made by Switzerland for this purpose because the repayment provisions of the General Arrangements permit a use of the resources advanced to the Fund that went beyond the customary period of loans by the Swiss National Bank under Swiss law.10 The form of the resources to be advanced is not prescribed in the agreement between Switzerland and the Fund, but the decree enacted by the Swiss Federal Council authorizing entry into the agreement refers to Swiss francs or gold.11

Although Switzerland undertakes only that it “will be prepared to consider” the conclusion of implementing agreements with any of the participants in the General Arrangements, the general principle of good faith would require Switzerland to give serious consideration to any approach by a participant for an implementing agreement, and Switzerland might be expected to explain any refusal to enter into an agreement.12 Whatever the content of the undertaking, however, it appears to be a stipulation pour autrui, that is to say, a stipulation for the benefit of the participants in the General Arrangements to Borrow on which they are entitled to rely in direct relations with Switzerland. If a participant wished to enter into an implementing agreement, it could insist that Switzerland must consider the request. Participants are “third parties” because they are not parties to the agreement between Switzerland and the Fund. The Vienna Convention on the Law of Treaties applies only to treaties between states, but Article 36 might be of more general application:

  • 1. A right arises for a third State from a provision of a treaty if the parties to the treaty intend the provision to accord that right either to the third State, or to a group of States to which it belongs, or to all States, and the third State assents thereto. Its assent shall be presumed so long as the contrary is not indicated, unless the treaty otherwise provides.
  • 2. A State exercising a right in accordance with paragraph 1 shall comply with the conditions for its exercise provided for in the treaty or established in conformity with the treaty.

The Fund is a third party in relation to any implementing agreement that is entered into between Switzerland and a participant in the General Arrangements. The agreement between Switzerland and the Fund states that, at the request of a party to an implementing agreement, the Fund may make a determination or use its good offices for the purpose of facilitating the operation of the implementing agreement, but without prejudice to the Fund’s exemption from responsibility or liability.

The agreement between the Fund and Switzerland provided a legal basis for the attendance of representatives of Switzerland at meetings of the Group of Ten at which calls by the Managing Director for loans under the General Arrangements were on the agenda. The legal basis was probably one of the objectives of Switzerland and of some members of the Group of Ten in seeking or supporting the agreement. Some financial officials may have seen the agreement as the forerunner of membership in the Fund for Switzerland. In the course of time, the business of the Group of Ten became broader when the Ministers and Central Bank Governors of the Ten gave various mandates to their Deputies in other matters involving the Fund, such as issues related to special drawing rights and general increases in quotas. Representatives of Switzerland attended the meetings of the Group of Ten at which these matters also were discussed.

Committees of the Board of Governors or the Executive Directors need not be confined to governors, executive directors, or the officials of member countries,13 but representatives of nonmembers have never been invited to join a committee of the Fund. Switzerland was not invited to send representatives to attend the meetings of the Committee of the Board of Governors on Reform of the International Monetary System and Related Issues (the Committee of Twenty). The Group of Ten is a body external to the Fund, and it does not seek to be representative of the membership of the Fund. The Committee is a body of the Fund and its composition is intended to reflect the full membership. Nevertheless, not all members are able to have their own officials attend as members of the Committee, associates, deputies, or advisors, and it seemed inappropriate therefore to invite officials from nonmembers.

Other Agreements of Fund

The Fund has made a number of agreements with nonmembers for technical assistance to them. Most of the agreements have been with countries contemplating membership, but some have preceded applications for membership. The assistance that the Fund has given these nonmembers has not been confined to technical problems of membership, but for some countries has included advice on the exchange system or monetary policy of the country. The agreements have dealt with the nature of the assistance that the Fund would give and the sharing of the cost. They have been made with maximum informality, and have not dealt with the privileges and immunities of the personnel giving the assistance, on the assumption that privileges and immunities would be accorded when appropriate.

The Fund has been willing to provide certain nonmembers with another service. At one time, it established a service under which it sought to match intending buyers and sellers of gold with a greater economy than might have been available to them in the absence of this service. Each party paid 1/32 of 1 per cent to the Fund on a completed transaction. The service was originally available only to members but was extended to transactions between a member on one side and a member, a specified nonmember, or a specified international organization on the other side. It was extended further to transactions between a member or a specified international organization on one side and a member, a specified international organization, or a specified nonmember on the other side, but not to transactions between two nonmembers. The Fund did not become a party to any contract of purchase or sale and did not accept any liability or obligation in connection with any transaction.14 The specified nonmembers have been Argentina, Ireland, New Zealand, Portugal, Saudi Arabia, Spain, and Switzerland, all of which, with the exception of Switzerland, have become members.

The purpose of the service was, of course, to create a facility that would benefit members, although this purpose was broadened in the interest of cooperation with international organizations that had responsibilities in fields related to the Fund’s. The inclusion of nonmembers in the service was intended to increase its usefulness to members (or the specified international organizations) by extending the range of possible partners for them when they wished to enter into gold transactions. The criterion of benefit to members explains a number of the actions of the Fund in relation to nonmembers. For example, the attention given to the role of nonmembers in the Fund’s statement on premium gold transactions was intended to contribute to the stability of the currencies of members.15 The agreement between the Fund and Switzerland for association with the General Arrangements to Borrow was for the benefit of the participants in the Arrangements. Benefit to members does not preclude, and indeed may necessarily include, some benefit to nonmembers, but it is the former that justifies the latter.

The enjoyment of privileges and immunities is one feature of the recognition of the objective international personality of international organizations. The question of privileges and immunities for the Fund in the territory of a nonmember has arisen in connection with the presence of personnel of the Fund in Geneva in the course of their official duties. It has been agreed that a special understanding between the Fund and the Swiss authorities could be dispensed with and that the decree of the Swiss Federal Council of July 11, 1947 would apply to personnel of the Fund. Under that decree, officials of the specialized agencies of the United Nations on official missions in Switzerland enjoy the same privileges and immunities that officials of the European Office of the United Nations enjoy under the agreement of April 19, 1946 between the United Nations and the Swiss Federal Council.16

1

Reparation for Injuries Suffered in the Service of the United Nations, Advisory Opinion: I. C. J. Reports 1949, pp. 174–219.

2

“The Organization shall enjoy in the territory of each of its Members such privileges and immunities as are necessary for the fulfillment of its purposes.”—Article 105 (1) of the Charter of the United Nations.

3

I. C. J. Reports 1949, p. 185. See also Seyersted, “International Personality,” pp. 233–65.

4

Cf. Article IX, Section 10: “Each member shall take such action as is necessary in its own territories for the purpose of making effective in terms of its own law the principles set forth in this Article and shall inform the Fund of the detailed action which it has taken.”

5

Decision No. 1712-(64/29), June 8, 1964, Selected Decisions, pp. 84–90. The letters exchanged between the Ambassador of Switzerland to the United States and the Managing Director of the Fund that constitute the agreement are reproduced in Appendix VII.

6

“In order to enable the International Monetary Fund to fulfill more effectively its role in the international monetary system in the new conditions of widespread convertibility, including greater freedom for short-term capital movements. …”—Preamble of the General Arrangements to Borrow, Decision No. 1289-(62/1), January 5, 1962, Selected Decisions, p. 70.

7

Except for certain administrative purposes, e.g., in connection with the Fund’s office in Switzerland.

8

See Joseph Gold, The Fund and Non-Member States: Some Legal Aspects, IMF Pamphlet Series, No. 7 (Washington, 1966), pp. 33–37.

9

“The discussions also benefited from the presence of representatives of the Swiss National Bank, as decided by Ministers following completion of the legislation looking to Swiss cooperation with the General Arrangements to Borrow.”—Annex Prepared by Deputies to Ministerial Statement of the Group of Ten, August 1964, par. 2.

10

See in general Message du Conseil fédéral à l’Assemblée fédérale concernant la collaboration de la Suisse aux mesures monétaires internationales (No. 8698, March 1, 1963), Feuille Fédérate, 115e année, Vol. I (1963), pp. 353–67.

11

Feuille Fédérale, 115e année, Vol. II (1963), p. 796.

12

See Joseph Gold, “On the Difficulties of Defining International Agreements: Some Illustrations from the Experience of the International Monetary Fund,” in Economic and Social Development: Essays in Honour of Dr. C. D. Deshmukh, S. L. N. Simha, ed. (Bombay, 1972), pp. 38–39.

13

Article XII, Section 3 (k). See also Gold, Voting and Decisions, pp. 203–209.

14

Decision No. 103-(52/12), February 21, 1952, and Decision No. 316-(54/27), May 27, 1954, Selected Decisions, pp. 143–44.

15

See Chap. 20, pp. 423–25 above.

16

The agreement entered into force on July 1, 1946.—1 U. N. T. S. 163.

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