The Gazette 1986

GAZETTE

APRIL 1986

cheque, as was the case in

Sharif

-v-

Azadf%ut

letters

of credit do not have quite such autonomy from the

underlying transactions as cheques.

3. Exchange Control in the E.E.C.

One of the basic principles of the E.E.C. Treaty is the

free movement of capital within the Community.

According to Article 67 (1) of the Treaty;

"During the transitional period and to the extent nec-

essary to ensure the proper functioning of the Common

Market, Member States shall progressively abolish

between themselves all restrictions on the movement

of capital belonging to persons resident in Member

States and any discrimination based on the nationality

or on the place of residence of the party or on the

place where such capital is invested."

It has been held that, because of its conditional char-

acter, this Article does not have direct effect.

However,

Directives have been issued seeking to render Article 67 (1)

effective — one in 1960

and the other in 1962,

both

being modelled on the O.E.C.D.'s Code of Liberal-

isation of Capital Movements. These Directives call for

the dismantling of exchange control within the

Community. Their requirements are complex, and space

does not permit to explain them here. These measures,

however, are not contained in a Regulation but are

embodied in Directives; and according to Article 189 of

the Treaty, Directives are instruments with which the

Council and the Commission "carry out their task" and

which are "binding, as to the result to be achieved,

upon each Member State . . . but shall leave the national

authorities the choice of form and methods." In conse-

quence, Directives are not an integral part of Irish Law,

and as a rule cannot be relied on in the courts as confer-

ring rights on individuals or affording them defences.

Nevertheless, there are special circumstances in which

provisions of some Directives have "direct effect" in

Community and National Law, and those provisions

can be used in the Courts. Space does not permit can-

vassing what these circumstances are,

or examining the

extent to which they apply to the 1960 and 1962 Direct-

ives on the movement of capital by cutting back exchange

control.

Those instances where Directives have so far

been held to have direct effect have all involved individ-

uals invoking Directives against ojgans and instrument-

alities of States, which should have implemented the

Directives but had not done so. It has not yet been

decided whether E.E.C. Directives can have "horizontal

effect", by which it is meant whether Directives can

place legal obligations on individuals and private

organisations. It therefore is anything but clear whether

or to what extent exchange control still applies to intra-

E.E.C. capital transfers, and whether contracts that

contravene E.E.C. Member States' exchange controls

remain unenforceable by virtue of Article 8 (2)(b) of the

Bretton Woods Agreement.

In what may prove to be one of the most significant

judicial decisions in European Law, this entire matter

may be resolved by the European Court before the end

of the year.

East

-v-

Cuddy,

the defendants, Irish residents,

bought securities through the London Stock Exchange

from the plaintiffs, who are a London firm of stock-

brokers. In an action for payment for the securities, one

defence was that they were required in breach of the

Exchange Control Acts, and therefore there is no

liability to pay. One answer to that defence was that the

relevant exchange control regulations contravene the

E.E.C. Treaty and Directives on the matter. The case

came before Justice Sheehy, who, under the Article 177

procedure, referred the following questions to the Court

in Luxembourg, viz.

1. "Does Article 2(1) of the Council Directive of the

11th May 1960 confer on individuals rights which are

enforceable by them in the National Courts of a

Member State?

2. If so, is the said Article 2(1) of the said Directive to be

interpreted as giving individuals residing in one Member

State the right to buy securities on a stock exchange in

another Member State?

3. Is the decision of the Commission of the 3rd Decem-

ber 1980 authorising Ireland to continue to apply certain

protective measures pursuant to Article 108 (3) of the

EEC Treaty a valid decision?

4. If the said decision is a valid decision, does it entitle

Ireland to impose restrictions on its residents in regard

to dealings in shares in companies registered in and

having their principal place of business, in Ireland on

the stock exchange of another Member State?"

• Barrister at law.

Footnotes

1. S.31 of the 1964 Act and Exchange Control Notice Ex 2.

2. S.4(i).

3. S.30.

4. S.28.

5. Letter of April 26, 1965, from the Minister to the Governor of the

Central Bank.

6. [1957]1Q.B. 267.

7. See, e.g.,

Namlooze Venootschap de Faam

-v-

Dorset Mfg. Co.

[1949] I.R. 205.

8. [1980] 3 W.L.R. 457.

9. Id. at pp. 473-474.

10. [1950] A.C. 327.

11. 11949] I.R. 205.

12. Id. at p. 207. See

Fibretex

-v-

Belair Ltd.

89 I.L.T.R. 142 [1955],

13. [1981] Q.B. 348.

14. Id. at pp. 356-357.

15. See generally 1. Brownlie,

Principles of Public International Law,

ch. 14(3 ed. 1979).

16. Ibid.,

17. Contained in schedule to the Bretton Woods Agreement Act, 1957.

18.

United City Merchants (Investments) Ltd.

-v-

Royal Bank of

Canada

[1982] 1 Q.B. 208 at p. 242.

19. Ibid., and

Batra

-v-

Ebrahim

(unreported: Browne J., Oct. 3, 1972).

20. See generally, F. A. Mann,

The Legal Aspects of Money

(4 ed.

1982); J. Gold,

The Fund Agreement and the Courts,

2 Vols. 1962

and 1982); Krispis, "Money in Private International Law", in

120

Hague Recueil

(1967) I. 285-306; Williams, "Extra-territorial

Enforcement of Exchange Control Regulations under the I.M.F.

Agreement", 15

Virginia Journal of International Law

319 (1975);

and Gianvitti "Le Controle des Changes Etranger Devant le Juge

National", 69

Revue Critique De Doit International

Privé 663-683

(1982).

21. Art. xviii.

22. Cf.

Fothergill

-v-

Monarch Airlines Ltd.

[1980] 2 All E.R. 706,

and F. A. Mann, "Uniform Statutes in English Law", 99 L.Q.R

376(1983).

23. [1969] 1 Q.B. 605.

24. Id. at pp. 613-614.

25. See

United City Merchants

case [1982] 1 Q.B. 208, at pp 225-227

243-244, and 251.