Dispute Settlement Over Exchange Measures Affecting Trade and Investments: The Overlapping Jurisdictions of the IMF, WTO, and the ICSID

Abstract

One of the risks that international economic law is facing is the inability to give consistent answers to actual needs. Coherence, consistency and predictability of international law rules are particularly relevant in a global world and market, where private actors are increasingly gaining importance. All the fields of international economic law are so intertwined that reaching consistent interpretations is particularly difficult. The overlapping of areas of competence among the main organizations can lead to disruptive conflicts of norms, as well as to excessive fragmentation or sectoralisation. This is clearly observable in international monetary law, where litigations over monetary measures have been brought before other fora because the IMF does not provide for a mechanism to settle international disputes.

To ensure coherence and to avoid the coming into existence of conflicting rights and obligations for States which have ratified the same treaties, substantial and procedural linkages have been inserted in a number of provisions. The need for coordination among different treaties is particularly felt for exchange controls and restrictions which affect the functioning of the international monetary system and the world of trade and investment.

The purpose of this paper is to evaluate how exchange restrictions and controls are treated within the IMF, WTO and ICSID legal systems, and the degree of consistency of interpretation. After a brief overview of the international system as envisioned after World War II and of the various types of exchange measures, this paper will first analyze how the International Monetary Fund deals with exchange controls and restrictions. It will then examine the current legal aspects of the relationship between the monetary and trade systems, the GATT and GATS safeguard clauses on exchange restrictions consistent with IMF obligations, as well as the panels and Appellate Body decisions on monetary measures affecting trade. Lastly, it will consider how investment treaties take into account exchange restrictions on repatriation of profits and transfer of funds, and how the relative safeguard clauses are structured. An evaluation of the actual role of balance-of-payments clauses is eventually proposed.

Keywords: exchange controls, exchange restrictions, payments, movement of capitals, IMF, WTO,GATT, investment treaties, transfer of funds, safeguard clauses, balance-of-payments,coherence, consistency

JEL Classification: F02, F10, F13, F14, F15, F21