chapter 13 Territorial and Constitutional Changes
- International Monetary Fund
- Published Date:
- October 1985
Notice of Territorial or Constitutional Change
It has been a normal procedure for members to inform the Fund when territorial or constitutional changes have taken place. In a letter of September 4, 1965, the Minister of Finance of Malaysia wrote to the Managing Director as follows:
I wish to notify you formally, on behalf of the Government of Malaysia, that Singapore ceased, on 9th August, 1965, to be a State of Malaysia. On that day she became a sovereign State separate from and independent of Malaysia and she was recognised as such by Malaysia. Accordingly, I am also to notify you that Malaysia is no longer responsible for the application in Singapore of the Articles of Agreement of the International Monetary Fund.
The Minister provided copies of the agreement between the two Governments on the separation and of the Constitution and Malaysia (Singapore Amendment) Act, 1965. Singapore applied for membership within a few days of the Fund’s receipt of the letter.
Problems of Change
With the announcement on June 3, 1947 by the Prime Minister of the United Kingdom that the establishment of one or two independent states on the territory of India was envisaged, the staff of the Fund undertook studies so as to ensure that there would be no interruption, or as little interruption as possible, in the membership of “India” whatever might happen. The studies contemplated the possibility that two states might emerge and therefore concentrated on the question whether both would inherit the membership of India, or both would have to apply for membership, or one would continue to be the member while the other would have to apply for membership.
Much has been written on the succession of states to rights and obligations under the treaties of a dismembered predecessor, but the theories remain controversial. Even if there were established doctrines of international law on this subject, it is doubtful that they would provide answers to all the issues that must be resolved by an international organization on the partition of the territory of a member. The principle that the law of the organization must govern these issues is not likely to provide ready answers because constitutive treaties do not deal expressly with such an event.1
The complexity of the issues that the Fund would have to face can be illustrated if it is assumed that the Fund has decided that two new countries have emerged from the partition of the territory of a former member and that the membership of that country has been vacated. Problems of settlement arise. In the General Account, the Fund will be holding the currency of the former member. If the Fund’s holdings are below the level of the former member’s quota and the analogy of withdrawal from the Fund is observed, the Fund is a debtor. It must return the currency it holds and pay in gold the difference between that amount and the former member’s quota, but to what entities are these payments to be made? If the Fund’s holdings exceed the quota of the former member, the Fund, on the same analogy, is a creditor. It must return the former member’s currency in an amount equivalent to quota, and is entitled to have the balance of its holdings redeemed, but what entities are entitled to the currency and bound to redeem the balance? Further problems arise if the former member had been a participant in the Special Drawing Account and its holdings of special drawing rights had not been equal to its net cumulative allocation of them. The difficulties of settlement in any of these circumstances might be resolved in connection with the admission to the Fund of the two new countries. The readmission of Indonesia involved different problems, but the membership resolution on readmission contained terms related to the settlement agreement made on the withdrawal of that country from the Fund.
India and Pakistan in United Nations
India participated in the San Francisco Conference and was an original member of the United Nations. In 1947 the British Parliament passed the Indian Independence Act,2 creating as from August 15, 1947 “two independent Dominions,” the “new Dominions” of India and Pakistan, on what had formerly been the territory of India. The Act provided that India was to consist of all the territories that had been included in British India except certain specific territories that were to be the territories of Pakistan. Each Dominion was to have its own Governor-General and its own legislature. The effect of the Act was not only to create separate Dominions but also to change the constitutional character of India and endow it with a new status in the British Commonwealth of Nations. On August 15, 1947, Pakistan sent a telegram to the Secretary-General of the United Nations which stated that “both the Dominions of India and Pakistan should become members of the United Nations automatically with effect from the 15th of August.” This telegram, it has been said, implied the view that both Dominions stood in the same relation to the United Nations as India had before the Act of 1947.3 The message indicated that if the Secretary-General was unwilling to accept the view that Pakistan advanced, he should understand that Pakistan was applying formally for admission to the United Nations.
The Secretary-General treated the telegram as an application and referred it to the Security Council for a recommendation in accordance with Article 4 of the Charter. In the debate in the Security Council, India’s continued membership was not challenged, but the Polish delegate said that the treatment of India and Pakistan could not be regarded as a precedent if in the future another state were to split into several states, and the Security Council would not be deprived of the privilege of “making recommendations with regard to new members.”
When the General Assembly considered the recommendation of the Security Council, the Argentine delegate, with some support from other delegations, argued that both Pakistan and India had succeeded to the original membership of India, but he also said that he would not object if both were regarded as new states that had to apply for membership. He regarded the Indian Independence Act and the views of the Government of the Dominion of India on the meaning of the Act as having no effect on other states or the United Nations. Some delegations felt that the membership of India was a fait accompli, and that it was more important to establish principles for future cases. Both the Security Council and the General Assembly decided that India continued to be a member of the United Nations and that Pakistan must apply for admission in the ordinary way.4
The devolution of international rights and obligations had been the subject of an agreement between India and Pakistan, reached on August 6, 1947, promulgated on August 14, and communicated to the United Nations on August 27. According to this treaty, the two states agreed that “[m]embership of all international organisations, together with the rights and obligations attaching to such membership, will devolve solely upon the Dominion of India. … The Dominion of Pakistan will take such steps as may be necessary to apply for membership of such international organisations as it chooses to join.” 5 It has been pointed out that this agreement could bind only the parties and not other states or international organizations. Each organization remained in a position to decide how it had been affected by events.6
Pakistan had not understood its agreement with India as precluding the contention that it had automatic membership in the United Nations, even though it was willing to apply for membership. When Pakistan adhered to the Charter after being admitted by the General Assembly, the representative of Pakistan stated that “in one sense” its admission was not the admission of a new member, and that it was “a co-successor to a Member State which was one of the founders of the Organization.” 7 The President of the Assembly, in inviting the representative of Pakistan to the platform to submit an instrument of adherence in accordance with rule 116 of the provisional rules of procedure, had said that Pakistan’s membership, “in accordance with rule 116, dates from this moment.”
The representative of Argentina continued to object, and the Assembly voted, therefore, to refer to the Sixth Committee the following question: “What are the legal rules to which, in the future, a State or States entering into international life through the division of a Member State of the United Nations should be subject?” 8 It was emphasized that the solution adopted in the case of India and Pakistan would not be affected by any answer that might be given to this question.
In the Sixth Committee, the view of the representative of the United Kingdom, which was shared by other representatives, was that the “question of whether a State, despite change of flag or boundaries, remained the same, or a new State arose, was a question of law and fact depending on international recognition at that time. A first canon of law and practice was not to lay down in advance rules for hypothetical cases.” 9 The final report of the First Committee stated:
- 1. That, as a general rule, it is in conformity with legal principles to presume that a State which is a Member of the Organization of the United Nations does not cease to be a Member simply because its Constitution or its frontier have been subjected to changes, and the extinction of the State as a legal personality recognized in the international order must be shown before its rights and obligations can be considered thereby to have ceased to exist.
- 2. That when a new State is created, whatever may be the territory and the populations which it comprises and whether or not they formed part of a State Member of the United Nations, it cannot under the system of the Charter claim the status of a Member of the United Nations unless it has been formally admitted as such in conformity with the provisions of the Charter.
- 3. Beyond that, each case must be judged according to its merits.10
All that need be said of these conclusions is that the first paragraph appears to establish a presumption against the extinction of a state.11
India and Pakistan in Fund
On August 15, 1947, the Fund’s holdings of Indian rupees were equivalent to 93 per cent of India’s quota of $400 million. India had the fifth largest quota in the Fund and therefore appointed an executive director. The Special Drawing Account did not exist.
The Indian Independence Act did not deal with membership in the Fund or other international organizations. It provided, however, that the Governments of the two Dominions would decide jointly on the division of the assets and liabilities of British India (“the powers, rights, property, duties, and liabilities of the Governor-General in Council”) and the regulation of “the monetary system and any matters pertaining to the Reserve Bank of India.” 12 The Indian Independence (International Arrangements) Order of August 6, 1947 provided in general terms that membership in international organizations, together with the rights and obligations of membership, should “devolve” on India, but in addition dealt specifically with the Fund and the World Bank:
“For the purposes of this paragraph any rights or obligations arising under the Final Act of the United Nations Monetary and Financial Conference will be deemed to be rights or obligations attached to membership of the International Monetary Fund and to membership of the International Bank for Reconstruction and Development.”13
It is not clear from the Order itself whether the parties took the view that the Dominion of India maintained the international personality of India or whether the Dominion was a new and successor state on which membership in international organizations should “devolve.” That word suggests the transmission or descent of benefits to an entity that formerly had not enjoyed them.
More is known now of the negotiations that led to the Order. Following acceptance of the principle of partition by the major political parties in India, a special committee of the Cabinet was set up by the Interim Government of India to examine the administrative consequences of partition and to take the necessary steps for the transfer of power to the two Dominions. From July 1, 1947 the committee was replaced by the Partition Council, consisting of representatives of the Indian National Congress and the Muslim League. The Council worked through a steering committee, and ten expert committees were appointed, one of which had terms of reference that included the position of the two states in relation to the Fund and the Bank.14 That issue was one on which the expert committee could not agree.
The non-Muslim members of the committee held that the Dominion of India would be “the international personality of present India” and therefore would continue to be a member of the Fund and the Bank. Consequently, Pakistan should apply for membership in the two organizations, and India would give every assistance in enabling Pakistan to become a member. The Muslim members held that “both India and Pakistan were successor Governments and both should jointly approach the institutions for membership and division of the existing quota.” The non-Muslim members argued that it was for the institutions to decide “whether India continued to retain the membership and whether its quota should be reduced and that it was not for India to take the initiative.” 15 It is of interest, in view of the ultimate decision of these two questions, that Indian officials considered a reduction in the quota of India.
In an opinion submitted by an official of the Reserve Bank to the expert committee, the problem was examined from the standpoint of cost. If Pakistan applied for membership, its gold subscription would be 10 per cent of its official holdings of gold and U. S. dollars in accordance with terms based on Article III, Section 3 (b) (ii), of the Articles. If, however, India applied for an increase in its quota and the increased amount was divided thereafter between the two countries, 25 per cent of the increase would have to be paid in gold, which would reduce the gold and dollars available for distribution between the two countries. The opinion suggested a quota of $100 million for Pakistan.16
Apparently, the steering committee merely decided to recommend that “when Pakistan becomes a member of [the] International Monetary Fund and the International Bank, the Dominion of India will make available to Pakistan its ascertained share of the gold and dollar assets or equivalent value thereof in the form of dollars or any other foreign exchange acceptable to the Fund and the Bank.” 17 The Partition Council clarified this recommendation. India would agree to transfer to Pakistan in gold and in U. S. dollars or other acceptable foreign exchange an amount equal to 17½ per cent of what undivided India had paid by way of subscriptions to the Fund and the Bank, subject to the proviso that the amount of the actual transfer in gold would not exceed the amount that Pakistan would have to pay to the Fund.18
The Secretary to the Government of India communicated to the Secretary of the Fund at the second annual meeting of the Board of Governors a copy of the Order of August 6, 1947 “for your information,” and the communication was transmitted to the Chairman of the Board of Governors and the Joint Committee of the Boards of Governors on Membership. In the committee, one governor felt that the issue raised by the communication should be studied by the Executive Directors and should be the subject of a report by them to the Board of Governors. The governor appointed by India felt that the matter could and should be settled forthwith because it was “a purely internal constitutional issue” for India. The General Counsel of the Fund explained that the Fund was entitled to make its own finding, and that the principle expressed in the Order of the continuity of India as an international entity had been accepted by the Secretary-General of the United Nations and by the Economic and Social Council of the United Nations.
The question was raised whether an application by Pakistan would affect the quota of India. The governor appointed by India insisted that the quota of his country would not be affected. The General Counsel explained the facts that could be taken into account in any adjustment of the quota of India, but pointed out that under Article III, Section 2, a member’s quota could not be changed without its consent. The alternate governor for the United States recalled that India had been dissatisfied with the quota allotted to it at Bretton Woods. In view of that dissatisfaction and the fact that “no substantial diminution in the total resources” of India had occurred as the result of partition, the delegation of the United States felt that there should be no reduction in India’s quota. The alternate governor for the United Kingdom supported this view, and the chairman concluded that the sense of the meeting was that no action need be taken on the communication from the Government of India and that the original quota should remain unaffected.
The committee reported to the Board of Governors that it had taken cognizance of the communication, and “is of the opinion that no action with respect thereto need be recommended to the Board of Governors. It is furthermore the sense of the Committee that the original quota of India in the Fund should continue to be the quota of the Dominion of India.” 19
The episode must not be understood to mean that the Fund is bound to adopt the conclusions of the countries involved in a partition of territory on the continuity or emergence of international entities. It does seem, however, that the Fund is bound by the determination of the member that loses territory to retain its existing quota. India gave up about one third of its territory, about one fifth of its population, and somewhat less than one fifth of its resources, but felt that its quota of $400 million should not be reduced. Under the Articles, the Fund has no power to insist on a reduction. It even lacks the power to make a formal proposal of a change in a member’s quota, except as the result of a general review of quotas, unless the member has requested an adjustment.20
The drafters obviously regarded the principle that a member’s quota cannot be changed without its consent as a fundamental safeguard for members. Evidence of this attitude can be found in the provisions on amendment of the Articles. Normally, a proposed amendment takes effect when it is accepted by majorities of three fifths of the members and four fifths of the total voting power.21 For the amendment of three provisions, however, the acceptance of all members is required, and one of the three is the provision that no change shall be made in a member’s quota without its consent.22 Nevertheless, one may wonder whether the drafters had in mind circumstances in which there are profound changes in the territory, population, and resources of a member.
If, as a result of these changes, the quota of a member becomes radically inappropriate but the member is unwilling to request an adjustment, the Fund would be able to reduce and eliminate the disparity over time by refusing to propose the adjustment of the member’s quota in the general reviews of quotas that the Fund must conduct at intervals of not more than five years. In practice, there has been no adjustment of the quota of a member, and no withholding of an increase in a general review that results in the proposal of general increases, because of a substantial loss of territory to a new country.23 The quota of the Netherlands was not affected by the independence of Indonesia or the quota of Malaysia by the separation of Singapore. Similarly, the quota of the United Kingdom was not reduced because of the independence of many of its former dependencies, even though there is some evidence that the original quota was calculated for the “United Kingdom and colonies.”24 In a draft of April 1942 of Mr. H. D. White’s plan for a Stabilization Fund, the quota of the United Kingdom and the colonies, on the basis of a formula that was discarded at a later date, was $1,055 million, of which the amount attributed to the United Kingdom itself was $635 million.
It should not be overlooked that accretions of territory may occur, although these have been less frequent and less dramatic. Oddly enough, India itself acquired new territory, but this gave rise to no comment in connection with quota. The India that joined the Fund was “British India,” and it did not include many “native” or “princely” Indian states that were under the suzerainty of the United Kingdom and therefore subject to Article XX, Section 2 (g). These states became part of India after it attained independence.
Pakistan applied for membership on June 10, 1948, but a membership resolution did not become effective until January 27, 1950. The main reason for the delay was a difference of opinion between the Fund and Pakistan on the size of the quota.
Pakistan argued that the Bretton Woods formula for the determination of quotas could not be applied literally to a new member. It also argued that Pakistan should be treated as if it were an “original” member, and therefore the political considerations that had been taken into account at Bretton Woods should be entertained once again. Eventually, agreement was reached on a quota of $100 million.
The result was that the two quotas for the subcontinent became $500 million in place of the single quota of $400 million. It must be noted, however, that on a partition logic does not require that the two quotas should be equal to the former single quota. Trade between the two territories becomes international instead of domestic, and this is a factor that properly enters into the calculation of quotas.
United Arab Republic
Egypt accepted the Articles as a Schedule A member on December 26, 1945. Syria joined the Fund on April 10, 1947 under a membership resolution. The Minister of Foreign Affairs of the United Arab Republic informed the Secretary-General of the United Nations, in a note dated February 24, 1958, of the establishment of the United Arab Republic. In a note dated March 1, 1958, the Minister declared that “the Union henceforth is a single member of the United Nations, bound by the provisions of the Charter,” and he further declared that “all international treaties and agreements concluded by Egypt or Syria with other countries will remain valid within the regional limits prescribed on their conclusion and in accordance with the principles of international law.” In a letter dated April 11, 1958, the Minister of Foreign Affairs of the United Arab Republic informed the Managing Director of the “merger” of the two countries “in a single state.” The Managing Director received another letter, dated June 14, 1958, in which the Minister said: “By virtue of the merger of Egypt and Syria in a single state, the U. A. R., on February 21, 1958 the United Arab Republic is a single member of the International Monetary Fund with a single quota and subject to the provisions of its Articles of Agreement.” Similar communications were sent to the executive heads of other specialized agencies.
The merger of Egypt and Syria into a single state had been recognized by the great majority of states before the Fund acted on the letter of June 14, 1958. The Secretary-General of the United Nations, the principal organs of the United Nations that had been concerned with the effect of the merger, and several specialized agencies had already accepted the declaration of the United Arab Republic and acted on it.25 The Executive Directors decided on July 16, 1958 that the following statement should be communicated to members, governors, the United Nations, and specialized agencies:
The Executive Directors of the International Monetary Fund have concluded that, following the merger of Egypt and Syria into a single state, the United Arab Republic is a single member of the International Monetary Fund with a single quota and subject to the provisions of the Articles of Agreement.
The decision did not rest on the thesis that either state had absorbed the other and that the United Arab Republic was the same international person as one of the states because it had absorbed the other. The basis of the decision was that there had been an amalgamation, but one that did not produce a new international person, or at least a new international person that needed to apply for membership in the Fund. The United Arab Republic continued to have the membership in the Fund that had been enjoyed by both Egypt and Syria. On the theory that new membership was not involved, the action taken by the Fund in connection with the status of the United Arab Republic was taken by the Executive Directors, with notice to all governors. If it had been necessary for the United Arab Republic to apply for membership, the decision to admit it could have been taken only by the Board of Governors.
The action of the Executive Directors was not inspired by a desire to give a restrictive interpretation to the reserved power of the Board of Governors to “admit new members and determine the conditions of their admission” or the power to “approve a revision of quotas.” The principle of continued membership followed by the Executive Directors was a pragmatic one. They considered it unnecessary for the Board of Governors to adopt a membership resolution establishing terms that had been laid down already and requiring actions, such as the payment of subscription and the agreement on par value, that had been taken already.
In a second letter of June 14, 1958 the Minister wrote that
the Egyptian and Syrian regions of the United Arab Republic for an interim period maintain separate currencies, and monetary reserves. Therefore it is hoped that during such interim period Fund operations and related matters affecting the United Arab Republic could continue to be conducted on a regional basis according to the respective quotas which existed for each region prior to the merger. This practical basis would apply to such matters as the Fund’s holdings of Egyptian and Syrian currencies and the designation of depositories, drawings, repurchases, and the calculation of monetary reserves and other calculations for the purposes of the Articles of Agreement. It is also hoped that it would be possible, at the same time, to treat the exchange systems on a regional basis for the various relevant provisions in the Articles of Agreement.
The letter went on to recognize that the proposal would not affect the fact that the United Arab Republic was “the member of the Fund with a single quota equal to the former quotas of Egypt and Syria and that all legal rights and obligations under the Articles of Agreement of the Fund” were those of the United Arab Republic. The Fund accepted the proposal of the United Arab Republic as an arrangement for the period during which separate currencies and separate monetary reserves were to be maintained in the two regions.
As a single member, the voting power of the United Arab Republic was based on but not equal to the voting power of Egypt and Syria. Each member has 250 basic votes plus 1 additional vote for each part of its quota equivalent to $100,000.26 The votes of the United Arab Republic were based on the combined quotas but included only 250 basic votes instead of 500 basic votes.
In practice, what happened was that the Fund conducted most of its relations with the United Arab Republic as if the two regions were separate members. The Fund continued to hold the currencies of the two regions, have separate depositories in Cairo and Damascus for the currencies, deal through two fiscal agencies, make separate calculations of monetary reserves for the two regions for the purpose of repurchase obligations, and conduct separate consultations under Article XIV. In a letter dated March 22, 1960 the Fund was informed of the consent of the United Arab Republic to an increase in its quota from $66.5 million to $105 million, consisting of an increase in the quota of the Egyptian region from $60 million to $90 million and in the quota of the Syrian region from $6.5 million to $15 million under the resolutions of the Board of Governors relating to the third general review of quotas.27 These increases took effect for the Egyptian and Syrian regions on April 12 and April 20, 1960, respectively.
In a cable of October 8, 1961 to the President of the General Assembly of the United Nations, the Prime Minister and Minister of Foreign Affairs of the Syrian Arab Republic stated that the Republic was an original member of the United Nations and had “continued its membership in the form of joint association with Egypt under the name of the United Arab Republic. In resuming her formal status as an independent state the Government of the Syrian Arab Republic has the honour to request that the United Nations take note of the resumed membership in the United Nations of the Syrian Arab Republic.” At a meeting of the General Assembly on the morning of October 13, 1961, the President announced that he had consulted many delegations and that the consensus seemed to be that in view of the special circumstances of the matter, “Syria, as an original Member of the United Nations, may be authorized to be represented in the General Assembly. …” He felt that no delegation objected to this course, and if no objection was raised before the opening of the session in the afternoon, he would request the Secretariat to take the necessary measures so that the delegation of the Syrian Arab Republic could take its seat as a member. At the session in the afternoon, the President informed the General Assembly that he had received no objection, and that the Syrian delegation had taken its seat as a member with all the obligations and rights that go with that status.28
The Syrian Minister of Economy sent a cable dated October 15, 1961 to the Secretary of the Fund requesting that the Fund “reinstate our full membership and quota in the Fund under the name of the Syrian Arab Republic” and asking if any documents had to be submitted. At the request of the Fund, the Prime Minister and Minister of Foreign Affairs of the Syrian Arab Republic sent a cable dated October 22, 1961, in which he said:
I have been instructed, on behalf of the Arab Syrian Republic [sic], to confirm, and to request that the International Monetary Fund recognize: (1) the continued application of the Articles of Agreement of the Fund to the Arab Syrian Republic, and (2) the continuation of all of the rights and obligations which have arisen in the Fund in respect of Syria since Syria’s acceptance of membership in the Fund on April 10, 1947, including the increase in Syria’s quota to dollars 15 million.
The Government of the Arab Syrian Republic confirms that the laws, regulations and decrees authorizing the Republic of Syria to comply with all the obligations of membership in the Fund are still in force with respect to the Arab Syrian Republic.
A cable was received from the United Arab Republic noting that the reinstatement of Syria as a separate member was being proposed and agreeing to a “change” in the quota of the United Arab Republic “to become” $90 million. It was understood that the legal position with respect to domestic legislation as described by the Syrian Arab Republic prevailed in the United Arab Republic (Egypt) as well.
It was proposed that the Executive Directors recognize the continued but separate application of the Articles in the territories of the two countries that had been individual members before they amalgamated. The Executive Directors decided on October 27, 1961 that the following statement should be communicated to members, governors, the United Nations, and the specialized agencies:
The Executive Directors of the International Monetary Fund have concluded that the Syrian Arab Republic and the United Arab Republic are separate members of the Fund, with quotas of $15 million and $90 million for the Syrian Arab Republic and the United Arab Republic, respectively.
Once again the decision to recognize the continued but separate membership of the two countries with separate quotas was not considered to be within the reserved power of the Board of Governors to admit new members and was taken, therefore, by the Executive Directors.
Commentators on the actions taken by international organizations in connection with the amalgamation of Egypt and Syria 29 and the dissolution of the arrangement30 have tended to regard these actions as a development in international law and practice for which there was little precedent. Some have suggested that the amalgamation is the only instance of fusion without extinction, and that it can be described most revealingly as “unity” without “union.” 31 Some have been less charitable in discussing the consistency of these actions with international law.32 The international community approved of the actions and perhaps it is best to regard them as a novel departure that contributes to a more flexible practice for international organizations.
On April 22, 1964, Tanganyika, which had become a member on September 10, 1962, and Zanzibar entered into Articles of Union under which, subject to ratification in the two countries, the two independent republics would be united and form one republic with a parliament and an executive having certain reserved and exclusive powers. The parliament and the executive would have exclusive authority in respect of all other matters in and for Tanganyika. There would be one constitution, but until it was adopted the constitution of the United Republic would be the existing constitution of Tanganyika, modified so as to provide for a separate legislature and executive in and for Zanzibar from time to time, constituted in accordance with the existing law of Zanzibar and having exclusive authority within Zanzibar for matters other than those reserved to the parliament and the executive of the United Republic. The constitution of Tanganyika was to be modified in the interim period so as to provide for the representation of Zanzibar in the parliament of the United Republic. With the commencement of the interim constitution for the United Republic, the constitution of Tanganyika was to cease to have effect for the Government of Tanganyika as a separate part of the United Republic. Among the reserved powers were “external affairs” and “external trade and borrowing.” The existing laws of Tanganyika and Zanzibar were to remain in force in their respective territories, subject to any subsequent provision made by a competent legislature or made by order of the President of the United Republic for the extension to Zanzibar of any law relating to any of the reserved powers and for the revocation of any corresponding law of Zanzibar. The first President would be the President of Tanganyika, and he would be assisted by two Vice-Presidents, one of whom would be a person normally resident in Zanzibar and would be the head of the executive to be established for Zanzibar and the principal assistant of the President in the discharge of his executive functions in relation to Zanzibar.
In a note dated May 6, 1964, the Ministry of External Affairs of the United Republic of Tanganyika and Zanzibar informed the Secretary-General of the United Nations that the two republics “were united as one Sovereign State” on April 26, 1964. The note continued:
The Secretary-General is asked to note that the United Republic of Tanganyika and Zanzibar declares that it is now a single Member of the United Nations bound by the provisions of the Charter, and that all international treaties and agreements in force between the Republic of Tanganyika or the People’s Republic of Zanzibar and other States or international organizations will, to the extent that their implementation is consistent with the constitutional position established by the Articles of Union, remain in force within the regional limits prescribed on their conclusion and in accordance with the principles of international law.
The Secretary-General was asked to communicate the contents of the note to all members, organs, and specialized agencies of the United Nations. In complying with this request, the Secretary-General declared that he was “taking action, within the limits of his Administrative responsibilities, to give effect to the declaration in the attached note that the United Republic of Tanganyika and Zanzibar is now a single Member of the United Nations bound by the provisions of the Charter. This action is undertaken without prejudice to and pending such action as other organs of the United Nations may take on the basis of the notification of the establishment of the United Republic of Tanganyika and Zanzibar.” 33
The Ministry of External Affairs sent a note to the Managing Director on June 4, 1964 in which he was asked
to note that with effect from the 26th April, 1964 the Republic of Tanganyika has been succeeded in respect of its membership in the International Monetary Fund by the United Republic of Tanganyika and Zanzibar.
This communication spoke of succession and differed, therefore, from the note to the Secretary-General of the United Nations. The language of succession had been avoided in the communications of the United Arab Republic on the amalgamation of Egypt and Syria.
If the view, suggested by the word “succeeded,” had been adopted that the Union was a new international person and that the international personality of the two republics had disappeared,34 a new application for membership would have been necessary. A possible second view would have been that Zanzibar had been absorbed by an existing member, which continued its membership with an enlarged territory. A third possibility was the analysis that had been applied in connection with the United Arab Republic, according to which the two republics had amalgamated to form a new international person without the disappearance of their individual international personalities. This third view would not have resembled the situation of the United Arab Republic in all respects. On the earlier occasion, both Egypt and Syria had been members of the Fund, but on the later occasion Tanganyika had been a member but not Zanzibar.
The legal situation was complicated not only by this difference between the two situations but also by language in the United Republic’s communication to the Secretary-General that seemed to limit the observance of treaties to the regional limits prescribed when the treaties were concluded. It was unclear, therefore, whether the obligations of the Fund’s Articles would be observed in Zanzibar.
The Managing Director addressed a letter on July 31, 1964 to the Ministry of External Affairs of the United Republic of Tanganyika and Zanzibar in which he wrote:
We assume that as the result of the creation of the Union between the Republic of Tanganyika and the People’s Republic of Zanzibar the obligations under the Articles of Agreement of the Fund are without limitation binding legally on the United Republic of Tankanyika and Zanzibar.
The ambiguous language of the communication from the United Republic explains why clarification was sought on this occasion but not when Eritrea was transferred to Ethiopia. Eritrea had been an Italian colony but was under British military administration from 1941 until the transfer to Ethiopia on September 15, 1952 in accordance with a resolution of December 2, 1950 of the General Assembly of the United Nations. Eritrea became an autonomous unit within the Federation of Ethiopia and Eritrea under the Ethiopian Crown and retained that status until Ethiopia became a unitary state on November 14, 1962. The changes of 1952 and 1962 provoked no inquiry in the Fund about the effects on membership.
The Ministry of External Affairs of the United Republic of Tanganyika and Zanzibar replied to the Managing Director in a letter of August 20, 1964, in which it wrote:
For the sake of clarification, the Managing Director is asked to note that the Articles of Agreement of the Fund are, without limitation, binding legally on the United Republic of Tanganyika and Zanzibar.
The Executive Directors adopted a decision on August 27, 1964, as follows:
- 1. In view of the exchange of letters …, the United Republic of Tanganyika and Zanzibar is a member of the Fund and the records of the Fund shall be amended accordingly.
- 2. This decision and the said letters shall be communicated to members, Governors, the United Nations, and Specialized Agencies.
The legal basis for this decision was not made explicit. The one theory that seems to be precluded is that a new international person had been created together with the extinction of the international personalities of the two republics that had preceded the United Republic. The decision of the Executive Directors was taken in time to avoid difficulties connected with the credentials of a governor appointed by the United Republic from arising at the impending annual meeting of the Board of Governors at which governors would be voting on the election of executive directors. The basis for the decision was made no clearer when, in December of that same year, the Fund received notice that the name of the member had been changed to the Republic of Tanzania. The Secretary of the Fund informed the Executive Directors that the Fund’s records were being adjusted in accordance with the notice.
No change was made in the quota of the United Republic as a result of the union. Zanzibar had applied for membership on December 18, 1963, but consideration of the application ceased. If Zanzibar had become a member before the union it would probably have qualified for a minimum quota of $7.5 million or $11.25 million, and if the precedent of the United Arab Republic had been followed the quota of the United Republic would have been equal to the combined quotas of Tanganyika and Zanzibar.
Amalgamation and Joint Territories
If territories jointly constitute a single country as a member of the Fund, no one of the territories is eligible for separate membership. This principle applies even if each of the territories has its own economic organization, including its own currency. Furthermore, no part of the member’s quota can be attributed to any one of the territories so as to enable it to have its own financial relationship with the Fund or to receive its own allocations of special drawing rights. These results do not follow from Article XX, Section 2 (g), because that provision refers only to dependencies and not to provinces or other units of the member country itself. The individual territories constituting a single state resemble the territories covered by Article XX, Section 2 (g), however, in that they conduct no foreign relations of their own, or no more than limited foreign relations.
The Netherlands, Surinam, and the Netherlands Antilles together constitute a single international person called the Kingdom of the Netherlands. When the Netherlands joined the Fund as an original member, the Netherlands Antilles and Surinam were territories that came within the scope of Article XX, Section 2 (g). In 1954 a charter was adopted that made all three territories full and equal partners in a tripartite kingdom. The practice has been to refer to the Netherlands Antilles and Surinam as Overseas Parts of the Kingdom of the Netherlands. Each partner has its own constitution, which it can amend, and its own currency and monetary system. Par values were established by the Netherlands for its own currency and for the separate currencies of the Netherlands Antilles and Surinam as territories under Article XX, Section 2 (g), when initial par values were established on December 18, 1946. The par value for the Netherlands guilder was changed with the concurrence of the Fund with effect from September 21, 1949 and March 7, 1961, and a “central rate” 35 was established with effect from December 21, 1971. The Netherlands informed the Fund that the changes of 1961 and 1971 did not apply to the currencies of the Netherlands Antilles and Surinam, but did not refer to Article XX, Section 2 (g), or to Article IV, Section 9, which deals with the currencies of dependencies. In its decisions on the changes, however, the Fund said that the Netherlands had declared under Article IV, Section 9, that the values of the currencies of the Netherlands Antilles and Surinam were not being changed.
The kingdom is the member of the Fund and it alone enjoys the rights and bears the obligations of membership. Although each of the three territories has its own currency, the Fund continues to hold only the currency of the Netherlands, the currency that the Fund received originally in payment of the Netherlands’ subscription before the tripartite kingdom was formed. The Fund has found it possible, on the request of the member, to have separate consultations under Article VIII with each of the three territories and to provide technical assistance to the overseas territories. The first consultations with the Netherlands Antilles and Surinam were held in 1970–71.36
There remains the question of reconciling what has been said about the formation of the Kingdom of the Netherlands with the amalgamation of Egypt and Syria to form the United Arab Republic. The explanation of the apparent difference is that the Fund’s treatment, in effect, of the two regions of the United Arab Republic as separate entities and its willingness to continue to hold both currencies was expressly a transitional arrangement that would prevail only until it was possible to unify the two monetary systems. The Kingdom of the Netherlands was not intended to be a temporary arrangement, and if the Fund had been willing to hold more than one currency in respect of the member, that willingness could not have been limited in time with any logical justification.
It cannot be foreseen whether the Fund’s reaction to any new constitutional arrangements among countries in the future will be closer to its treatment of the United Arab Republic or to the analysis of the Kingdom of the Netherlands. Much would depend on the character of the arrangements, but it can be said that the Fund’s practice in connection with membership has not ignored pragmatic considerations.
Intricate problems may arise under the policies as well as the charter of the organization. For example, Bangladesh declared its independence in December 1971 and became a member of the Fund on August 17, 1972. On December 12, 1972 it requested a purchase under the decision on the compensatory financing of shortfalls in the proceeds of the export of primary commodities.—Decision No. 1477-(63/8), February 27, 1963, as amended by Decision No. 2192-(66/81), September 20, 1966, Selected Decisions, pp. 42–47. Under the decision, a shortfall is calculated for the latest twelve months before a request for which the Fund has statistical data and on the basis of the medium-term trend, which is taken to be a moving average for five years centered on the year in which the shortfall is suffered. The latest twelve months for which the Fund had data for Bangladesh were the twelve months that ended on June 30, 1972. The request was taken to be within the scope of the decision, even though it was based on the year of a shortfall and two earlier years that antedated membership and to a large extent the declaration of independence. The exports in which the shortfall had occurred had been the exports of another member, Pakistan, and it was necessary to determine which of those exports were attributable to the former Eastern wing, but the calculation took into account any shipments that had been made from that wing to the former Western wing.
Another problem might have arisen if two requests had been made on the basis of the same statistical data. For example, Patria makes a purchase under the decision for a shortfall year and soon thereafter Tractus, which was formerly part of the territory of Patria, becomes a member while Patria remains a member. If Tractus were to request a purchase on the basis of part of the data that had been relied on by Patria, there would be a question of overlapping compensation. This problem did not arise in relation to Bangladesh’s request because Pakistan had not made a purchase under the decision that would have posed the problem.
Indian Independence Act, 1947, 10 & 11 Geo. 6, c. 30. See also L. C. Green, ‘The Dissolution of States and Membership of the United Nations,” in Law, Justice and Equity: Essays in Tribute to G. W. Keeton, R. H. Code Holland and G. Schvvarzenberger, eds. (London, 1967), p. 159. (Hereinafter referred to as Green, “Dissolution of States,”)
Green, “Dissolution of States,” pp. 159–60.
For the view that India and Pakistan were new entities, see Verzijl, International Law, Vol. II, pp. 126–27.
Indian Independence (International Arrangements) Order, 1947, Schedule, Art. 2, published in Reserve Bank of India Bulletin, November 1947, p. 694, and in Constitutional Laws of India and Pakistan, Part I, A. N. Aiyar, ed. (Madras, 1947), p. 129.
Green, “Dissolution of States,” p. 161.
UN General Assembly, 92nd Plenary Meeting, 2nd. Sess., Verbatim Record, UN Doc. A/P.V.92, September 30, 1947.
UN Doc. A/C.1/212, October 11, 1974.
UN Doc. A/C.6/SR. 43, October 8, 1947.
UN Doc. A/C.1/212, October 11, 1947.
Yuen-Li Liang, “Notes on Legal Questions Concerning the United Nations,” American Journal of International Law, Vol. 43 (1949), pp. 144–49.
Indian Independence Act, 1947, sec. 9 (1) (b) and (h), 10 & 11 Geo. 6, c. 30. See Simha, Reserve Bank of India, pp. 537 ff.
Indian Independence (International Arrangements) Order, 1947, Schedule, Art. 2 (1), cited above in n. 5.
See Simha, Reserve Bank of India, p. 538.
Ibid., p. 547.
Ibid., pp. 547–48.
Ibid., p. 554n.
Ibid., pp. 554–55.
Summary Proceedings, 1947, p. 20.
Article XVII (a).
Article XVII (b) (ii).
The original quota of China remained unchanged, not because of the conclusion that the People’s Republic was a new country but because the Fund recognized the Government of the Republic of China as the government representing China, and the territory and resources under its control did not justify an increase in quota.
History, Vol. I, p. 96.
Yearbook of UN, 1958, p. 106.
Article XII, Section 5 (a).
Resolutions Nos. 14-1 and 14-2, adopted by the Board of Governors effective February 2, 1959, Summary Proceedings, 1959, pp. 158–61, and History, Vol. III, pp. 433–34.
UN Docs. A/PV. 1035 and 1036, October 13, 1961.
“It is difficult to place the United Arab Republic within any of the traditional categories of composite States. It was not a real union because the Republic was a State; nor was it a personal union, because whatever international personality of the constituent States survived was of very limited character. At the same time it was not a federation since there was no classical distribution of legislative powers. In short, the arrangement was sui generis. This, however, does not necessarily invalidate analogies with other types of association. The principal requirement for continuity at the international level is continuity at the constitutional level, and a comparison with both unions and federations may be more or less apt.”—O’Connell, State Succession, Vol. II, p. 74.
“The case of the U. A. R. has its puzzling and inconsistent features… the assumption has been that because the U. A. R. claims continuity of treaty relationships it is entitled to claim automatic membership in the organization, although it is an assumption practically valid only because of the accidental circumstance that both Syria and Egypt were members in their own right. The instance is to be regarded as exceptional, and explained in terms of convenience rather than of law. The ephemeral character of the fusion, and the extent to which the regions retained control of most of the functions of government, make it evident that too nice an insistence upon the successor character of the U. A. R. was unnecessary and would, perhaps, have been diplomatically unwise.”—Ibid., p. 196.
“There is no doubt that Syria remained bound by treaties made before her union with Egypt. But was this because she continued bound by them during the period of the union, or because they had revived with her personality? Article 69 of the Provisional Constitution of the United Arab Republic had provided for continued validity of both Syrian and Egyptian treaties, so that Syria herself was estopped from denying continuity of her treaties during the period of the union. It did not follow, however, that the other parties to such treaties were required to acknowledge this continuity unless it was sanctioned by customary international law; and likewise, Syria, unless for the like reason, was not required to admit continuity after separation from the United Arab Republic. These difficulties are formal only, for it would be unrealistic to suppose that either Syria or her contracting partners would repudiate Syria’s own treaties; but this only serves to demonstrate that formal analysis which does violence to political fact is apt to prompt unreal conclusions.”—Ibid., pp. 169–70.
“The action taken in the United Nations has the merit of being simple and practical, but it does have perplexing implications. …
“On this basis the practice adopted by the United Nations has been criticized. Syria is regarded by some writers as a new State, and it is argued that there was no basis for a departure from the practice with respect to India; indeed, Rousseau describes the United Nations practice as a ‘flagrant contradiction’ of the principles concerning identity and succession of States. The French Government appears to have recognized the difficulty inherent in the thesis that the old Syria was merely resurrected, for in its note of recognition it avoided saying whether it was recognizing a new State or a new government, and confined itself to recognition of the ‘situation’.”—Ibid., p. 198.
Eugene Cotran, “Some Legal Aspects of the Formation of the United Arab Republic and the United Arab States,” International and Comparative Law Quarterly, Vol. 8 (1959), pp. 349–50.
Charles Rousseau, “Syrie: Sécession de la Syrie et de la R. A. U.—Consequences juridiques.—Problèmes de la reconnaissance du nouvel Etat par les Etats tiers et de sa réadmission dans l’O.N.U.,” Revue Générale de Droit International Public, Vol. LXVI (1962), pp. 413–17.
Communication, dated May 14, 1964, received by the Fund from the Secretary-General of the United Nations.
For this view, see Verzijl, International Law, Vol. II, pp. 93–94.
Decision No. 3463-(71/126), December 18, 1971, Selected Decisions, pp. 12–15.