It has been shown that States are under a general international duty to recognize the monetary systems of other States. In large measure, this flows from the broader duty to recognize a State’s exclusive jurisdiction over its own internal affairs.1 In private law, this obligation manifests itself in the lex monetae principle, which lies at the heart of monetary law.2 It is now necessary to ask whether there are duties beyond mere recognition; does the State have a broader obligation to protect and defend the monetary systems of other States?
To what extent is a State under an international obligation to afford any form of protection to the monetary system of a foreign country? A State’s duty to protect the monetary systems of other States may arise from treaties or even from an informal network of arrangements such as used to characterize the sterling area.3 As has been seen,4 certain aspects of an exchange control system are entitled to a degree of protection by other States by virtue of Article VIII of the Articles of Agreement of the International Monetary Fund, and other duties of protection may arise under bilateral treaties.
However, apart from treaties, it would at present not be possible to maintain that customary international law imposes upon a State any general duty of affording protection to the monetary systems of other States.5 The existence of such a duty could only be asserted if the development of international law had progressed so far as to outlaw all activities injurious to a foreign State or even to demand the adoption of measures to safeguard the interests of a foreign State. It hardly needs to be stated that customary international law has not arrived at this utopian position.
But if it is not possible to go that far, it may nevertheless be observed that a State is under a duty to prevent the commission within its territory of unlawful acts injurious to foreign States.6 The duty is usually discussed in the context of terrorist or similar activities; a State must take measures to prevent its territory from being used as a base for the planning and launching of terrorist activities against another State. It is by no means inconceivable that monetary or financial practices may acquire a character which would likewise justify international law in demanding their suppression. Thus, when the Hungarian revolutionary Louis Kossuth had banknotes printed in England with the avowed object of introducing them into Hungary upon his return to that country, and had them inscribed: ‘in the name of the nation: Louis Kossuth’, the Emperor of Austria sought an injunction from the English courts.7 He alleged, and the Court found, an infringement of his proprietary rights, but it is significant that the Court also referred to a broader ground for the decision,8 namely ‘that in an English Court of Justice, the manufacturing in England of such notes for such a purpose … cannot be defended’; if it were permitted, this would justify diplomatic protests. The banknotes were being printed as part of a scheme to overthrow the recognized government of a foreign State; the United Kingdom thus came under an international obligation to suppress this activity. Especially in the context of the modern (and relatively open) financial and money markets, concerted action or speculation specifically designed to undermine the international value of a foreign currency could be held to constitute acts of hostility which—in accordance with the principles just discussed—the host State may be under an international obligation to prevent. Yet such actions could only attract international responsibility if they were motivated by a desire to undermine the issuing State or its government; a simple desire on the part of private financial institutions to profit from the declining currency of a foreign State could not engage the responsibility of the State within which those institutions were operating.9 In the nature of things, cases of this type will be exceptional and will have to be judged by reference to their own unique circumstances; as noted earlier, it may be possible to deal with such cases within the parameters of existing principles of public international law.
Leaving aside these exceptional cases, it should be emphasized again that there exists no general duty to protect foreign monetary systems. It thus becomes necessary to consider whether international law imposes any such duty in specific types of case.