Bills Digest no. 131 2008–09
International Monetary Agreements Amendment Bill
2009
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Date
introduced: 19 March
2009
House: House of Representatives
Portfolio: Treasury
Commencement:
On Royal
Assent
Links: The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
The Bill proposes to amend the
International Monetary Agreements Act 1947 (IMA Act) to
simplify the way Australia accepts agreed amendments to the
Articles of Agreement of the International Monetary Fund (the IMF)
and the International Bank for Reconstruction and Development (the
IBRD, which is also commonly known as the World Bank).[1] For the purposes of the
IMA Act, the IMF Agreement is known as the Fund Agreement and the
IBRD Agreement is known as the Bank Agreement . The Bill alters the
definition of both of these Agreements in the IMA Act to include
any amendments of the relevant Articles of Agreement that enter
into force for Australia without the need for further changes to
the IMA Act.
The IMF and the IBRD are the two organisations that were
conceived during the United Nations Monetary and Financial
Conference (also known as the Bretton Woods Conference) held in
Bretton Woods, New Hampshire, USA during July 1944. The Fund
Agreement and the Bank Agreement came into force in December 1945
and govern the operation of the two organisations. Both
organisations continue to exist today, albeit with modified roles
to those initially envisaged at the Bretton Woods
conference.[2]
Originally the IMF was set up to manage a system of fixed exchange
rates (that prevailed until the early 1970s) which was seen to be
necessary to facilitate world trade in the aftermath of the Great
Depression and World War II. After the Bretton Woods exchange rate
regime collapsed and countries began to set their own exchange rate
policies, the focus of the IMF shifted to assisting countries in
dealing with Balance of Payments crises. Likewise, the IBRD was
originally conceived to fund post-war reconstruction and
development in Europe predominantly. With a number of African
states declaring independence in the 1960s and 1970s and the
collapse of communism in Eastern Europe and the former Soviet Union
in the late 1980s and early 1990s, the IBRD shifted its focus to
funding development and poverty reduction activities in these
regions.
A country must ratify the Articles of Agreement to gain
membership of these organisations. Australia became a member of the
IMF and IBRD in 1947. Both Agreements are schedules to the IMA Act,
which was enacted to approve of Australia becoming a Member of [the
IMF] and of [the IBRD] and to make such provisions as are necessary
or expedient in relation to Australia s membership of the Fund and
Bank, or in relation to Australia s support of the Fund and its
programs .[3]
Proposed amendments to either the Fund Agreement or the Bank
Agreement require a motion to be put to the Board of Governors (the
highest decision-making body in each organisation)[4] and then must be accepted by
three-fifths of the members having 85 per cent of the total voting
power.[5] Once this
has occurred (and a formal communication to that effect has been
issued by the relevant organisation to its members), the amendment
enters into force and all members are bound by that amendment
(unless they withdraw their membership of the IMF and/or IBRD). For
the IMF, this is contained in Article XXVIII of the Fund
Agreement:
- Any proposal to introduce modifications in this Agreement,
whether emanating from a member, a Governor, or the Executive
Board, shall be communicated to the chairman of the Board of
Governors who shall bring the proposal before the Board of
Governors. If the proposed amendment is approved by the Board of
Governors, the Fund shall, by circular letter or telegram, ask all
members whether they accept the proposed amendment. When
three-fifths of the members, having eighty-five percent of the
total voting power, have accepted the proposed amendment, the Fund
shall certify the fact by a formal communication addressed to all
members.
- Notwithstanding (a) above, acceptance by all members
is required in the case of any amendment modifying:
- the right to withdraw from the Fund (Article XXVI, Section
1);
- the provision that no change in a member s quota shall be made
without its consent (Article III, Section 2(d)); and
- the provision that no change may be made in the par value of a
member s currency except on the proposal of that member (Schedule
C, paragraph 6).
- Amendments shall enter into force for all members three months
after the date of the formal communication unless a shorter period
is specified in the circular letter or telegram. [6]
For the IBRD, the relevant Article is Article VIII of the Bank
Agreement, which provides:
- Any proposal to introduce modifications in this Agreement,
whether emanating from a member, a governor or the Executive
Directors, shall be communicated to the Chairman of the Board of
Governors who shall bring the proposal before the Board. If the
proposed amendment is approved by the Board the Bank shall, by
circular letter or telegram, ask all members whether they accept
the proposed amendment. When three-fifths of the members, having
eighty-five percent (1) of the total voting power, have accepted
the proposed amendments, the Bank shall certify the fact by formal
communication addressed to all members.
- Notwithstanding (a) above, acceptance by all members is
required in the case of any amendment modifying:
- the right to withdraw from the Bank provided in Article VI,
Section 1;
- the right secured by Article U, Section 3 (c);
- the limitation on liability provided in Article II, Section
6.
- Amendments shall enter into force for all members three months
after the date of the formal communication unless a shorter period
is specified in the circular letter or telegram.[7]
At the time of writing, the Bill has not been referred to any
committee for consideration.
This Bill does not have any direct financial implications.
Under the terms of the both Fund Agreement and the Bank
Agreement, if amendments are adopted to either Agreement (according
to the 3/5ths, 85 per cent voting rule mentioned above),
Australia will be bound under international law to conform to the
amendments to whatever extent they, or subsequent decisions made
under them, place obligations on member countries. In some cases,
Australia s ability to discharge such obligations may depend on the
Government s legal powers under the IMA Act, and these powers may
depend on both the main body of the Act (sections 1 11)
and the text of the Agreements contained in the Schedules to the
IMA Act.
As the IMA Act currently stands, unless the Act is itself
amended, a mere amendment to either Agreement will not alter the
Government s domestic legal powers. Therefore a failure to keep up
to date the versions of the Agreements that are contained in the
Schedules to the IMA Act could theoretically mean that the
Government could face difficulty in upholding its international
obligations. From this perspective, the policy intent of the Bill
to ensure that the Agreements contained in the Schedules are in
effect automatically updated without the need to amend the IMA Act
is understandable.
It is, however, arguable that the Bill will reduce parliamentary
scrutiny of proposed amendments to the Agreements. It is true that
such amendments (being an amendment to an international treaty) are
tabled in Parliament and receive consideration by the Joint
Standing Committee on Treaties (JSCOT) before Australia formally
accepts the amendment. Where JSCOT recommends against acceptance of
the amendment, or heavily qualifies its recommendation for
acceptance, it may be that Parliament might engage in a substantial
debate about the proposed amendments. Nonetheless, the current
situation, whereby the versions of the Agreements in the Schedules
to the IMA Act can only to be updated to incorporate proposed
amendments via an amendment to the Act itself, does allow
Parliament the opportunity to debate the amendments fully, and
indeed Australia s role in influencing IMF and IBRD policy on any
matter.
Another difficulty with the solution proposed in the current
Bill to the problem of needing to amend the IMA Act every time the
Agreements are amended is that it contains no mechanism for
updating the Agreements that currently appear as schedules to the
IMA Act. If either Agreement is amended by the IMF or the IRBD
(following a 3/5ths, 85 per cent minimum vote by member states),
the changes will not readily be reflected in the copies of the
Agreements that currently appear as Schedules 1 and 2 to the IMA
Act. The current method of amending the IMA Act every time the
Agreements are themselves amended has the advantage of forcing the
Australian Parliament and government/legal publishers to keep our
statute books up to date. Under the current method, the IMA Act
clearly sets out the current terms of the Agreement(s) to which
Australia is a party, and it is easy to trace the legislative
history of the Act to see when and how the Agreements have been
amended over time. While the text of the Agreements can be accessed
via the websites of the World Bank and related organisations, it
may be better to maintain our own records in a neat and coherent
way that is readily available to the Australian Government and
public.
The singular key issue with this Bill is that, if passed, it
will enable what is largely an administrative task to be completed
automatically, rather than tying up the Parliament.
However, the fact remains that as trivial as passing an
amendment to the IMA Act to reflect any change to the Agreements
contained in Schedules 1 and 2 may seem, it remains a legislative
activity, not an administrative activity. It may thus be
appropriate for the Parliament as a whole to retain greater
oversight over any amendment to the Agreements. Instead of the
current situation whereby each amendment to the Agreements must
result in an amendment to the IMA Act, it may be possible to
require the amended Agreements to take the form of a legislative
instrument. If the amendments (or more precisely, the whole
Agreement as amended) were to appear as a legislative instrument,
the Agreement would then (unless otherwise excepted) attract the
disallowance procedures set out in the Legislative Instruments
Act 2003, particularly Part 5 of that Act. Any motion to
disallow the relevant legislative instrument could be used as an
opportunity to debate the relevant amendment, in much the same way
as a debate regarding a Bill amending the IMA Act would.
The writers do not prefer one solution to another, but simply
raise this alternative option for the consideration of
Parliament.
Schedule 1 to the Bill contains 3 items.
Item 1 amends the definition of Bank Agreement in
subsection 3(1) of the IMA Act, and item 2 amends
the definition of Fund Agreement in the same provision. Both items
expand the current definitions so that any reference to the terms
includes amendments to the Agreements that have entered into force
for Australia.
Concluding comments
The passage of this Bill would enable what is predominantly an
administrative task to be greatly simplified, specifically, by
removing the requirement for the Parliament to pass an
International Monetary Agreements Amendment Bill every time an
amendment to the Fund Agreement or Bank Agreement is made. The IMF
in particular has recently debated and adopted amendments to their
Articles of Agreement (and there are likely to be more amendments
in the future, in both the short- and long-term) and any successful
amendments become binding on all member states. This would
typically result in further Bills before the Parliament.
Nonetheless, Parliament may wish to consider whether the
measures in the Bill are adequate, or indeed represent the best
solution to the problem of frequent and ongoing amendments to the
Agreements. It also remains to consider how (or if) Parliament
intends to keep the schedules to the IMA Act updated, given that
they contain the current text of the Agreements. If the schedules
are not regularly updated, there may be some confusion as to what
Australia s obligations under the Agreements are, particularly if
someone is relying on the text of the Agreements as they appear as
schedules to the IMA Act, as opposed to rely on the text of the
Agreements as they are actually in force.
Therefore, if Parliament is minded to pass the Bill in its
current form, it may also wish to consider repealing existing
Schedules 1 and 2 to the IMA Act, to avoid any confusion that may
arise in the future about what the current text of the Agreements
are. It may also wish to consider including a reference in the IMA
Act to an authoritative source for the Agreements.
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277 2455 (Scott
Kompo-Harms) or (02) 6277 2795 (Morag Donaldson).
Scott Kompo-Harms
Morag Donaldson
14 May 2009
Bills Digest Service
Parliamentary Library
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