The Legitimacy of Capital Controls during a Retreat from Globalization

International & Comparative Law Quarterly (ICLQ) (forthcoming)

36 Pages Posted: 9 Mar 2021

See all articles by Bryan Mercurio

Bryan Mercurio

Chinese University of Hong Kong - Faculty of Law

Ross P. Buckley

University of New South Wales (UNSW) - UNSW Law & Justice

Jiangyuan Fu

National University of Ireland, Maynooth (NUI Maynooth) - Faculty of Law

Date Written: October 21, 2020

Abstract

Capital controls – measures taken to regulate the outflow or inflow of capital – are employed by governments to maintain financial stability and prevent or mitigate the effects of economic crises. For many decades capital controls were out of favour among economists and policymakers. Of late, however, they have become acceptable, if somewhat controversial, tools of financial policy, with the International Monetary Fund stating that ‘in certain circumstances, [capital controls] can be useful to support macroeconomic adjustment and safeguard financial stability’. Yet, little is known about the legality of capital controls under the various international treaties and rules of international organizations. This article introduces capital controls, traces their evolution over time, considers the success of short-term and long-term controls implemented in Chile, Malaysia, Iceland and China, and examines the consistency of selected controls with international rules and obligations. We suggest treaty language will be the critical factor in determining the legality of a particular capital control under a trade or investment agreement.

Keywords: public international law, international economic law, capital controls, Chile, Malaysia, China, Iceland

Suggested Citation

Mercurio, Bryan Christopher and Buckley, Ross P. and Fu, Jiangyuan, The Legitimacy of Capital Controls during a Retreat from Globalization (October 21, 2020). International & Comparative Law Quarterly (ICLQ) (forthcoming), Available at SSRN: https://ssrn.com/abstract=3763583

Bryan Christopher Mercurio (Contact Author)

Chinese University of Hong Kong - Faculty of Law ( email )

6/F Western Teaching Complex
Shatin, New Territories
Hong Kong
(852) 2696 1139 (Phone)

Ross P. Buckley

University of New South Wales (UNSW) - UNSW Law & Justice ( email )

Sydney, New South Wales 2052
Australia

Jiangyuan Fu

National University of Ireland, Maynooth (NUI Maynooth) - Faculty of Law ( email )

Maynooth, County Kildare
Ireland

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