International Monetary Fund

What are the Objectives of IMF?

 Foster global monetary cooperation

 Secure financial stability

 Facilitate international trade

 Promote high employment and sustainable economic growth

 And reduce poverty around the world

 Macro-economic growth

 Policy advise & financing for developing countries,

 Promotion of exchange rate stability, and an international payment system

What Does the IMF Do?

 It has three critical missions:

o Furthering international monetary cooperation, encouraging the

expansion of trade and economic growth,

o Discouraging policies that would harm prosperity.

o To fulfill these missions, IMF member countries work collaboratively

with each other and with other international bodies.

What is the History of IMF?

 The IMF, also known as the Fund, was conceived at a UN conference in Bretton
Woods, New Hampshire, United States, in July 1944.

 The 44 countries at that conference sought to build a framework for economic

cooperation to avoid a repetition of the competitive devaluations that had
contributed to the Great Depression of the 1930s.
 Countries were not eligible for membership in the International Bank for
Reconstruction and Development (IBRD) unless they were members of the IMF.

 IMF, as per Bretton Woods agreement to encourage international financial

cooperation, introduced a system of convertible currencies at fixed exchange rates,
and replaced gold with the U.S. dollar (gold at $35 per ounce) for official reserve.

o After the Bretton Woods system (system of fixed exchange

rates) collapsed in the 1971, the IMF has promoted the system of
floating exchange rates. Countries are free to choose their exchange
arrangement, meaning that market forces determine the value of
currencies relative to one another. This system continues to be in
place today.

 During 1973 oil crisis, IMF estimated that the foreign debts of 100 oil-importing
developing countries increased by 150% between 1973 and 1977, complicated
further by a worldwide shift to floating exchange rates. IMF administered a new
lending program during 1974–1976 called the Oil Facility. Funded by oil-exporting
nations and other lenders, it was available to nations suffering from acute problems
with their balance of trade due to the rise in oil prices.

 IMF was one of the key organisations of the international economic system; its
design allowed the system to balance the rebuilding of international
capitalism with the maximisation of national economic sovereignty and human
welfare, also known as embedded liberalism.

 The IMF played a central role in helping the countries of the former Soviet bloc
transition from central planning to market-driven economies.

 In 1997, a wave of financial crises swept over East Asia, from Thailand to
Indonesia to Korea and beyond.

o The International Monetary Fund created a series of bailouts (rescue

packages) for the most-affected economies to enable them to avoid
default, tying the packages to currency, banking and financial system
reforms.
  Global Economic Crisis (2008): IMF undertook major initiatives to strengthen
surveillance to respond to a more globalized and interconnected world.

o These initiatives included revamping the legal framework for

surveillance to cover spill-overs (when economic policies in one
country can affect others), deepening analysis of risks and financial
systems, stepping up assessments of members’ external positions, and
responding more promptly to concerns of the members.

What are the Functions of IMF?

 Provides Financial Assistance: To provide financial assistance to member

countries with balance of payments problems, the IMF lends money to replenish
international reserves, stabilize currencies and strengthen conditions for economic
growth. Countries must embark on structural adjustment policies monitored by the
IMF.

 IMF Surveillance: It oversees the international monetary system and monitors the
economic and financial policies of its 190 member countries.

o As part of this process, which takes place both at the global level and
in individual countries, the IMF highlights possible risks to
stability and advises on needed policy adjustments.

 Capacity Development: It provides technical assistance and training to central

banks, finance ministries, tax authorities, and other economic institutions.

o This helps countries raise public revenues, modernize banking systems,

develop strong legal frameworks, improve governance, and enhance
the reporting of macroeconomic and financial data. It also helps
countries to make progress towards the Sustainable Development
Goals (SDGs).
 Choice of Law

While determining which law should govern the international, it is therefore, imperative to
choose a particular law which would protect the rights and obligations of the parties concerned.
The parties entering into an international banking transaction will expect their rights and
obligation to be well defined and predictable as possible.
This goal of predictability is achieved by incorporation an express choice of law clause within
the terms of the contract documentation which, hopefully, will be recognized as the proper law.
 The typical clause which is used to identify the proper law is normally the shortest in the
entire contract and a common example is “this agreement shall be governed and
construed and interpreted in accordance with the laws of….(the name of the
country). this clause in shows that the parties have agreed to a particular law and in case
there is a dispute in future to protect their rights and obligations this explicit mention
would clarify the parties to the transaction as to which country’s law would be applicable
and what precautions that should take to protect their interest.
It consists of three main topics-
 The Jurisdiction of an English court
 The selection of the appropriate rules of a system of law, English or foreign, which it
should apply in deciding a case over which it has jurisdiction.
 The recognition and enforcement of judgments rendered by foreign court or awards of
foreign arbitration.
The conflicts of Laws, insofar as it is concerned with the choice of the applicable law, consists of
only a small number of rules.

Expressed choice

An expressed choice quite literally means that the parties clearly state in writing the law they
intend on following in case of any future dispute in the agreement or contract itself.

Implied choice

From the explanation of Lord Simonds in his judgment in the case of Bonython v.
Commonwealth of Australia (1951), an implied choice can be defined as ‘the system of law by
reference to which the contract was made or that with which the transaction has its closest and
most real connection’.

In certain instances, the implied choice of the parties can also be ascertained by the courts if the
contract contains an arbitration clause. This is also known as the Choice of Forum.

When parties themselves have not decided on the choice of law

When the courts of law conclude that there is an absence of an expressed or implied choice from
the parties themselves in a contract, the onus of responsibility in deciding which law to apply
rests in their hands. In these circumstances, the courts adopt two approaches, the objective and
the subjective approach.

 The objective approach is where the courts reach a concrete conclusion, after a
thorough analysis of the contract that there has been no choice expressed or implied.

 The subjective approach is when the courts take into account the hypothetical will of
the parties and through this lens try and arrive at a law which they have reason to
believe the parties would have chosen as their choice of law.

Law of the country with which the contract is most closely connected

In the case of disputes arising in the field of contracts, the courts of law were of the opinion that
the solution to the question of the choice of law would be to apply the law of the country with
which the contract is most closely connected. This is decided by the courts based on the
following parameters-

1. The place or places of making the contract

2. The place or places of performance of the contract

3. The connection of the parties with the countries

4. The situs of any immovable property which is the subject matter of the contract
 5. The country where the ship is registered, on which the goods are to be carried

6. The currency in which money due under the contract, has been paid
Despite these points of consideration, further questions can arise due to a conflict between the
interests of the parties and the interests of the country whose law is being applied (the governing
law). The final law that is to be applied to settle the dispute must be in the best interests of the
parties to the contract as well as the best interests of the country whose law is to be applied.

Erie doctrine

The Erie doctrine is another factor that encouraged the process of forum shopping. Derived from
its namesake in the case of Erie Railroad Co. v. Tompkins (1938), this became a binding
principle by which federal courts which exercised diversity jurisdiction (wherein the plaintiff and
defendant belonged to different states) had the power to apply both federal procedural law as
well as the state substantive law. This gave the courts unfettered power to exercise whichever
law they chose whenever they saw it convenient which gave rise to arbitrary and unfavourable
judgments.

Choice of law

As discussed in detail above, after the court has proved that it exercises appropriate jurisdiction
to handle the case at hand, the next question that arises is which law is most suited to be applied
to settle the dispute. The two main components that govern the choice of law in a situation are as
follows-

1. Lex fori- This refers to all the procedural matters governing the choice of law,
including the rules to be used to settle a particular issue.

2. Lex patriae- This refers to the nationality or habitual residence of the plaintiff
according to which the court will decide which law of which state is to be applied to
settle the dispute at hand.
For example, suppose a dispute has arisen between two individuals A and B, both belonging to
different countries. If A is the plaintiff and brings the case to a court in his own country, B can
challenge this action because B lives outside the jurisdiction of the court in A’s country. Once
the court of A’s country proves that it is competent to exercise jurisdiction over the matter, it
needs to decide whether it should follow the law governing A’s country or B’s country to solve
the dispute. These two options which the court needs to choose between is known as the choice
of law. According to lex fori, the court can apply either A’s country law or B’s country law.
According to lex patriae however, the court would have to apply the law of A’s country as A is
the plaintiff in this case.

The Basel III norms and resolution of G-20

The Basel Committee’s mandate is to strengthen the regulation, supervision and practices of
banks worldwide with the purpose of enhancing financial stability. Its current work programme
is focused on the following key themes:
(i) continuing to monitor Covid-19 risks to the global banking system and related
vulnerabilities, and pursuing any additional measures if needed;
(ii) taking forward the evaluation of its post-crisis reforms, including lessons learned
from the Covid-19 crisis;
(iii) continuing to coordinate work on cross-sectoral financial issues with the FSB and
global standard-setting bodies (SSBs); and
(iv) ensuring the full, timely and consistent implementation of Basel III post-crisis
reforms.
This report focuses on the Committee’s work on:
(i) monitoring the adoption of Basel III standards;
(ii) Assessing the completeness and consistency of members’ regulations vis-à-vis these
standards;
(iii) analysing the prudential outcomes of those regulations; and
monitoring the jurisdictional Covid-19 measures related to the Basel Framework

 Basel Committee observes that further progress has been made in implementing Basel III
standards.
  However, some standards have not yet come into force in some jurisdictions.
 Provides an update on Basel Framework related measures taken by members in response
to Covid-19.

The Basel Committee on Banking Supervision has today published a report for the G20
Leaders at their Summit in Riyadh on 21-22 November. The report is an update on the
implementation of Basel III regulatory reforms and the Basel Framework-related measures taken
by Basel Committee members in response to Covid-19.

The Committee observes that further progress has been made since last year towards the
implementation of Basel III standards in a full, timely and consistent manner. Most member
jurisdictions have final rules in place for Basel III standards, including those relating to the Net
Stable Funding Ratio (NSFR), the leverage ratio, the standardised approach for measuring
counterparty credit risk (SA-CCR) and the supervisory framework for measuring and controlling
large exposures (LEX). However, final rules for some standards have not yet come into force in
some jurisdictions.

The Committee further notes that most Basel Framework-related measures taken by its members
in response to Covid-19 have been capital or liquidity-related, with the primary objective to
support banks' ability to continue lending and providing liquidity to the real economy. Most
measures make use of the flexibility embedded in the Basel Framework, while most other
measures taken over and above this flexibility are temporary in nature.

The Committee reiterates its expectation of full, timely and consistent implementation of all
Basel III standards based on the revised timeline endorsed by the Basel Committee's oversight
body, the Group of Governors and Heads of Supervision (GHOS), in March 2020.

The Committee will continue to monitor the implementation and evaluate the impact of its
standards and regularly report to the G20 on progress. It will also continue to monitor the
regulatory and supervisory measures taken by its members in response to Covid-19, including
the use of flexibility and consistency of these measures with the Basel Framework.