¹ Hereinafter, the International Monetary Fund will be referred to as “Fund” or IMF, its constituent instrument as Fund Agreement. Numerical references are to articles and sections of the Fund Agreement. The following abbreviations will be used henceforth: “annual report” for annual reports of executive directors of the IMF, “summary proceedings” for summary proceedings of Board of Governors meetings of IMF, UNTS for United Nations Treaty Series.

² A Treatise on Money, Vol. II (London, 1950), p. 338.Google Scholar

³ Ibid., p. 388. The proposal of Keynes to establish a supranational agency was independent of the establishment of the Bank for International Settlements (discussed on pp. 402–405 of that volume).

⁴ “We have here a genuine organ of truly international government” was Lord Keynes' political characterization of the projected institution. (Article 40 of the Clearing Union Plan, reprinted in Proceedings and Documents of the United Nations Monetary and Financial [Bretton Woods] Conference [hereafter referred to as Proceedings], U.S. Department of State Publication No. 2866 [Washington, D.C., 1948], Vol. 2, p. 1571.)Google Scholar

⁵ The Fund's functional sphere is practically unlimited in relation to voluntary consultation and cooperation. The Fund's other functions (especially the range of its financial operations) are specified in the constituent instrument; so are the rights and obligations of member states vis-à-vis the Fund and vis-à-vis each other. A clear distinction is made in the constituent instrument between decisions of the executive organs in regard to interpretation of its text and decisions of the member states concerning modification of the text. During the discussion of the IMF Agreement in the United States Congress, questions on the possibility of expanding the enumerated powers of the Fund by interpretative practices were answered as follows by Luxford, Ansel F., a legal officer of the United States Treasury (03 15, 1945)Google Scholar: “The Fund is an instrumentality of delegated powers. It has only those powers that are given to it, the same as our own Constitution. You cannot read into it 25 other powers, that are not granted to it. It has only those powers conferred upon it ….” U.S. Congress, House of Representatives, Committee of Banking and Currency, Hearings, on H. R. 2211, Bretton Woods Agreement, Vol. 1, p. 153.Google Scholar

⁶ The Fund Agreement refers only to “executive directors” and does not use the term “Executive Board.” According to rule B-2 “Executive Board” refers to the executive directors presided over by the chairman. In other words, the executive directors in their collegiate capacity are referred to here as Executive Board.

⁷ Article XII, section 2 (a) and (b).

⁸ Article XII, section 3 (a).

⁹ Article XII, section 4 (b).

¹⁰ Sections 9, 15, 16, and 20 of Bylaws. The Authority of the UN General Assembly to examine the administrative budget of IMF has been interpreted in the relationship agreement of the IMF with the UN in such a manner that no limitations on the Fund's budget can result. See Article X, section 3 of the Agreement published in International Monetary Fund, Summary Proceedings, Annual Meeting, 1947, Appendix A, pp. 49–54.Google Scholar

¹¹ Article XVIII, section (b).

¹² The Board of Governors meets regularly once a year. The Fund Agreement also permits additional meetings but so far none have been held. A postal or telegraphic vote may be taken if formal action by the Board of Governors is required at a time other than that of the annual meeting.

¹³ The freedom of action of the Executive Board in budgetary matters is facilitated by the fact that the Fund's current income is much larger than its expenditure, and it does not depend on annual contributions from its member states. For the fiscal year ended April 30, 1963, the Fund's total expenditures amounted to $9,569,704, whereas its total income was $31,044,417. (International Monetary Fund, Annual Report, 1963, p. 210.)Google Scholar

¹⁴ Article XVIII, section (a). See also Ervin Hexner, P., “Interpretation by Public International Organizations of their Basic Instruments,” The American Journal of International Law, 04 1959 (Vol. 53, No. 2), P. 341.CrossRefGoogle Scholar

¹⁵ IMF Press Release of October 2, 1963, published in International Financial News Survey, 10 11, 1963, p. 351.Google Scholar See also Annual Report, 1963, p. 52. The statement of Robert V. Roosa, Undersecretary of the United States Treasury, made on July 9, 1963, in the Joint Economic Committee of Congress, reflects the United States position a few months before the Fund's annual meeting. According to Mr. Roosa the United States was in agreement with the development of plans for the long-run future:Google Scholar

But the prospect of having some fully agreed and well-conceived plan to introduce for approval now is virtually nil. There is enough difference of view so that it is going to take a long while to have this emerge into fully coherent thinking on which there is enough consensus to make sure others will agree.

(U.S. Congress, Joint Economic Committee, Hearings, The United States Balance of Payments, 88th Cong., 1st Sess., 1963, Part 1, p. 131.Google Scholar) An excellent analysis of the objectives of the future monetary discussions may be found in Roosa's study “Reforming the International Monetary System,” Foreign Affairs, 10 1963 (Vol. 42, No. 1), pp. 107–122.Google Scholar The views of those who consider the present machinery of the world's payments system inadequate requiring immediate change is well summarized by Robert, Triffin, “The Latent Crisis of the World Currencies,” The Banker, 08 1963, pp. 527 ff.Google Scholar See also Altman, Oscar L., “The Changing Gold Exchange Standard and the Role of the IMF,” Banca Nazionale del Lavoro Quarterly Review, 06 1963 (No. 65), p. 151.Google Scholar

¹⁶ Important organizational details are contained in Article XII and Schedule C of the Fund Agreement and various provisions of the Bylaws and Rules and Regulations.

¹⁷ Informal meetings of the Executive Board of an exploratory nature are called for in the preparation of formal discussions on major problems involving Fund policy. No decisions are taken at such meetings and the statements of members are not recorded. According to Fund practice, the Managing Director may submit to the executive directors proposals for decisions (mostly approval of restrictive practices) which in his judgment do not require discussion in the Board. If no executive director objects to the draft and to the simplified procedure, the decision is incorporated in the minutes of the next formal meeting.

¹⁸ An executive director (additional to the five) can be appointed by those two members whose currency is relatively most used in the Fund's operations over the preceding two years. Such appointment occurs rather rarely because those members whose currency is most used appoint directors by virtue of their high subscription quotas. At present the Fund does not have an “additional” appointed director. See Article XII, section 3(c) of Fund Agreement, section 18 of Bylaws.

¹⁹ In the event that both an executive director and his alternate are not available in Washington, D.C., the executive director may designate a temporary alternate (section 14[d] of Bylaws).

²⁰ Article XII, section 3(j) and section 19 of Bylaws.

²¹ Particular restrictions apply to executive sessions of the Executive Board (rule C-3) and to certain documents designated as “secret” or “special.”

²² For excerpts from important IMF press releases and a review of important IMF publications, see pp. 193–196.Google Scholar

²³ The monetary authorities of the European Economic Community frequently consult on IMF matters. Such cooperation is reflected in the position taken by their individual executive directors on the Executive Board.

²⁴ The Fund's “treaty-making capacity” and connected functions are expressly assigned to the Board of Governors (Articles X and XII, section 2 [b]).

²⁵ Aron Broches has discussed the law-creating functions of the World Bank. In his judgment the interpretative function of the World Bank (which does not deviate much from that of the IMF) contains both judicial and legislative elements. In his opinion the law-making capacity of public international organizations has been recognized by the world courts by attributing normative relevance to the “practice” of international organizations. (Aron, Broches, “International Legal Aspects of the Operations of the World Bank,” Recueil des Cours of the Hague Academy of International Law, 1959 [Vol. 98], pp. 302, 313, and 320.)Google Scholar

²⁶ All interpretative decisions issued up to 1959 are reproduced in Hexner, , op. cit., p. 356. The Annual Reports for 1959–1963 contain in their annexes additional material.Google Scholar

²⁷ Article XVIII of the Fund Agreement does not prescribe any particular (solemn) form for interpretative decisions of the Executive Board. There is no reason to indicate specifically that an interpretative decision had been issued on the authority of Article XVIII. However, it is worth mentioning that in the first twelve years of Fund operation formal interpretations were formulated in a solemn form.

²⁸ Broches, Aron discusses this aspect in op. cit., p. 337. He (rightly) differentiates between formal and implicit interpretations of the Executive Board.Google Scholar

²⁹ Excerpt from a letter of May 29, 1945, to DrBernstein, E. M.,. published, in part, in Gardner, R. N., Sterling-Dollar Diplomacy (Oxford, 1956), p. 266.Google Scholar A somewhat different opinion of Keynes, advanced at the Savannah meeting of the Board of Governors, is discussed in Harrod, R. F., The Life of John Maynard Keynes (Oxford, 1951), pp. 635–636.Google Scholar

³⁰ The provisions of the Fund Agreement declaring governors, executive directors, alternates, officers, and employees “immune from legal process with respect to acts performed by them in their official capacity” (but which do not constitute full diplomatic immunity) apply also vis-à-vis the governments of their home states (Article IX, section 8). One may therefore conclude that a certain minimum degree of independence applies to the actions of all these persons performed in the course of their duties to the Fund. However, the enjoiner of the Fund Agreement that certain persons “shall owe their duty entirely to the Fund and to no other authority” (Article XII, section 4[c]) applies only to the Managing Director and to staff members.

³¹ See Fawcett, J. E. S., “The Place of Law in an International Organization,” The British Yearbook of International Law, 1960 (Vol. 36), p. 324Google Scholar; and Harold, Guetzkow, Multiple Loyalties: Theoretical Approach to a Problem in International Organization (Princeton, 1955), passim. Gunnar Myrdal wrote the following about the psychological attitudes of national representatives in international organizations:Google Scholar

Whenever something, even if little, is accomplished in international cooperation … their accomplishments give participating national delegates feelings of belonging and of satisfaction in serving the larger community which are not dissimilar from those experienced by international civil servants.

(“Psychological Impediments to Effective International Cooperation,” Journal of Social Issues, 1952 [Supplement Series No. 6 ], p. 30.)Google Scholar

³² In the International Bank for Reconstruction and Development, the Latin American republics elected a Cuban citizen as executive director although Cuba does not hold membership in that institution. This situation appears noteworthy since the provisions of the charters of the Bank and Fund concerning their executive boards are rather similar.

³³ Section 14(d) of the Bylaws provides that an executive director and his alternate shall devote “all the time and attention to the business of the Fund that its interest require.” However, the provision of Bylaws, section 14(g), envisages directors who devote only part of their time to the Fund—their functions being exercised at other times by their alternates. In such cases their remuneration is prorated on the basis of the proportion of time devoted to the interests of the Fund. At one time or another the executive directors of the United Kingdom, Canada, France, and Germany have not resided in Washington, D.C. They limited their participation to very important meetings of the Board. However, they presumably participated in drafting instructions for their alternates in Washington.

³⁴ The present executive director of the United States, William B. Dale, is an official of the United States Treasury Deparment as have been his predecessors in that function, Frank A. Southard, Jr., Andrew Overby, and Harry D. White. The British executive director is frequently the representative of the United Kingdom Treasury attached to the British embassy in Washington, D.C. Persons connected with the British Treasury, the Bank of England, or private bankers perform that function.

³⁵ E.g., Dr. Ahmed Zaki Saad (United Arab Republic) has continuously been elected since 1946, Jean de Largentaye has been the executive director appointed by France since 1946, and Louis Rasminsky served as elected (and appointed) executive director of Canada between 1946 and 1962.

³⁶ Alternates receive $20,000 per annum. See section 14, Bylaws. Lord Keynes was strongly opposed to the compensation scheme of executive directors suggested by the United States in Savannah. Harrod, R. F. quotes his bitter observation: “Here were these persons voting themselves into cushy jobs at large salaries free of income tax.” (Op. cit., p. 635.)Google Scholar

³⁷ It may happen, and it does frequently happen, that an executive director has so great an influence on the external financial policies of his country that he is actually drafting the instructions which he is to receive from his government.

³⁸ Roy F. Harrod describes the points at issue and comments on them in detail on the basis of information obtained from Lord Keynes and on the basis of British documentation. Although Keynes took a more favorable view of these matters after his return to England from the Savannah meeting, his impression remained that “he fought [against United States prejudices] hard and bitterly, but it was in vain.” (Op. cit., pp. 635 and 636.)Google Scholar

³⁹ Roy F. Harrod described Keynes' position as follows:

Only so could the objectives and decisions of the Fund and Bank be integrated with those of the principal nations. The main work of these directors would lie at home; the British one might be the head of the Finance Division of the Treasury. They would bring to the counsels of the international institutions intimate knowledge of the current problems confronting their own governments and of the real, and sometimes secret, motives and objectives of their current policies.

(Op. cit., pp. 633–634.) Concerning Keynes' position in 1945, see footnote 33.Google Scholar

⁴⁰ The Economist (09 21, 1963 [Vol. 208, No. 6265] p. 1029) suggests the appointment of junior treasury ministers as executive directors.Google Scholar

⁴¹ The United States advocated in Savannah full-time directors deciding (after consultation with the respective governments) on policy questions and directing the conduct of current business.

⁴² See United States Bretton Woods Agreements Act (22 U.S.C. 286b, 286k, 286K-1).

⁴³ See Herbert, Furth, “International Relations and the Federal Reserve System,” in Prochnow, Herbert V. (ed.), The Federal Reserve System (New York, 1960), pp. 287 ff.Google Scholar

⁴⁴ See U.S. Congressional Directory, 88th Cong., 1st Sess., 1963, p. 428.Google Scholar

⁴⁵ Canada informed the Fund at the end of September 1950 that because of great pressure on its capital market it intended to abandon its agreed par value and to embark on a regime of fluctuating exchange rates. No Fund provision permits a member state such deviation from the Fund's par value scheme and no provision of the Fund Agreeement gives authority to the Executive Board to approve such deviation. The Board in a much quoted and commented-on decision of September 30, 1950, “took note” of the Canadian action as a temporary emergency measure. It explained its position in its 1951 Annual Report, P. 45.Google Scholar

⁴⁶ In terms of the total voting power, the relative voting power of the countries appointing executive directors was the following as of September 3, 1963: United States, 24.50 percent; United Kingdom, 11.66 percent; France, 4.80 percent; Germany, 4.80 percent; India, 3.69 percent; together, 49.45 percent. The cumulative voting power of the 34 smallest member states amounted to 7.02 percent of the total voting power.

⁴⁷ Article IV, section 5(b).

⁴⁸ The propensity of national monetary authorities to submit under present conditions their contemplated exchange measures to IMF scrutiny (even outside of emergencies) has been judged rather pessimistically by some experienced experts. Herbert Furth recently wrote the following:

Many countries seem to break international financial commitments whenever it suits their purposes. In recent months we have seen one leading commercial and financial country, a model of international rectitude (and indeed the home of the International Court of Justice) change the par value of its currency without bothering to consult with the International Monetary Fund in advance, as required by Article IV, Section 5(b) of the Fund Agreement. Several other countries that had solemnly accepted the obligations of currency convertibility have instituted exchange restrictions without bothering to request Fund approval, contrary to Article VIII, Section 2(a). These actions were taken not to meet emergencies, which might leave no room for legal niceties, but merely because the authorities believed on rather doubtful grounds, that the illegal actions were more convenient than legal conduct would have been.

(“Professor Triffin and the Problem of International Monetary Reform,” Zeitschrift für Nationalökonomie, 1962 [Vol. 21], p. 417.Google Scholar) According to The Economist, it was of the essence of a plan, which was under consideration in the United Kingdom (but which was finally rejected by the Government), to institute in 1952 a flexible exchange regime “that it should be sprung on the world suddenly, after only a minimum of consultation with the Commonwealth and the United States.” (“How Sterling Nearly Floated,” 11 11, 1961 [Vol. 201, No. 6168].)Google Scholar

⁴⁹ See Rule C-10.

⁵⁰ When entering the IMF each government must formally declare that it has taken all steps necessary to enable it to carry out all its obligations under the Agreement. (Article XX, section 2[a].)

⁵¹ See “Monetary Discipline: A Reappraisal,” editorial article in Business Review of the Federal Reserve Bank of Philadelphia, 01 1963, p. 1.Google Scholar

⁵² E.g., Article IV, section 6; Article XII, section 8; Article XV, section 2.

⁵³ Czechoslovakia was denied use of IMF financial resources and ultimately was required to withdraw from the Fund because of its noncompliance with IMF regulations and policies. (Summary Proceedings, Annual Meeting, 1954, pp. 112–113.)Google Scholar

⁵⁴ Both France and Canada maintained for many years exchange systems which were inconsistent with the par value scheme of the IMF. Both countries adjusted their exchange systems in the end in accordance with the IMF scheme.

⁵⁵ The United Kingdom at one time seriously considered the institution of fluctuating exchange rates which are inconsistent with the Fund Agreement. See the scheme “Operation Robot” discussed in The Earl of Birkenhead, The Professor and the Prime Minister (Boston, 1962), p. 300Google Scholar, and Hexner, Ervin P., “Administration of the Exchange Value of British Currency,” The Georgetown Law Journal, Fall 1959 (Vol. 48, No. 1), pp. 91 ff.Google Scholar

⁵⁶ E.g., Article V, section 2, strictly limits the range of financial operations on the account of the Fund to those provided in the Fund Agreement.

⁵⁷ Fitzmaurice, G. G.. “The Law and Procedure of the International Court of Justice.” The British Yearsbook of International Law, 1951 (Vol. 28), p. 8.Google Scholar

⁵⁸ Le Droit International Nouveau—Son Acceptation—Son Etude (Paris, 1960), p. 106.Google Scholar

⁵⁹ See, e.g., Certain Expenses of the U.N.: I.C.I. Reports 1962, p. 162, especially the separate opinions of Judges Sir Percy Spender and Sir Gerald Fitzmaurice.Google Scholar

⁶⁰ Robert Triffin in critically commenting on Keynes' clearing union called attention to the fundamental necessity of “distinguishing what may be accomplished through world-wide agreements and what may prove achievable only on the regional scale within smaller and more homogeneous groups of highly independent countries ….” (Gold and the Dollar Crisis [New Haven, 1960], p. 95.)Google Scholar

James Meade commented that “such proposals raise, of course, the most far-reaching questions of the proper nature of the management and governing body of the IMF that was transformed into so powerful a supranational instrument.” (Joint Economic Committee of U.S. Congress, Factors Affecting the U.S. Balance of Payments [Washington, D.C., 1962], p. 252.)Google Scholar

⁶¹ The United States Balance of Payments, hearings before the Joint Economic Committee of U.S. Congress, July 29, 1963, Part 2 (Washington, D.C., 1963), p. 254.Google Scholar

⁶² The Economist requested the opinion of the recently appointed IMF Managing Director, Mr. Pierre-Paul Schweitzer, concerning the likelihood of an early expansion of the IMF machinery and functions. The Economist submitted to Mr. Schweitzer two sharply juxtaposed conceptions in regard to the IMF's future role, (1) Should the financial operations of the IMF be essentially limited to providing occasional credits to help member states over emergencies (the narrow concept) or (2) should the IMF start to develop into a world central bank (the wider concept initiated by Keynes)? In view of the problems which may arise in the foreseeable future, Mr. Schweitzer expressed preference for the first concept which centers on remedying emergency (temporary) problems. However, he wished to maintain an open mind for arrangements needed for meeting new problems in die future. Mr. Schweitzer based his conservative position, inter alia, on the argument that “at the present time countries are just not willing to surrender the degree of sovereignty that would be needed if the Fund were to be given central banking powers.” (The Economist, 07 6, 1963 [Vol. 208, No. 6254], pp. 55–56.)Google Scholar