SDRs are reserve assets because a participant has an assured

right to use them to obtain currencies from other participants

with which to support its own currency. The Fund has an obliga-
tion to ensure that SDRs can be used in this way. The SDR can
also be regarded as a unit of account because it measures the
amount of currency that holders can get for it. If any entity,
public or private, including a participant or an other holder, enters
into a contract under which it has rights denominated in SDRs,
the resulting claims are not SDRs issued by the Fund or governed
by the Articles. There may be a tendency to call the resulting
claims SDRs, but they would not be treated by the Fund as SDRs.
The claims are subjected to the Fund's method of valuation of
the SDR in accordance with agreement between the parties.
Similarly, the parties determine the other legal incidents of the
claim, including the currency or currencies of payment. Contracting
parties are not restrained by the Articles in determining the cur-
rencies of account or of payment, although their freedom may be
limited by domestic law.

JOINT RESOLUTION OF U.S. CONGRESS

OF JUNE 5, 1933
The U.S. Treasury Department issued a statement on Decem-
ber 9, 1974 that refers to a problem of domestic law in the United
States. The statement was made as a result of the inquiries the
Treasury had received after the announcement of the repeal of the
restrictions on the private ownership of gold that became effective
on December 31, 1974.151 The inquiries dealt with the continuing
151
U.S. Treasury Department, News (WS-175), December 9, 1974: "Contracts
containing multiple currency clauses, as in the past, are unenforceable under the
Resolution. The reason for this is that in the late 1930's the Supreme Court
construed the Resolution to prohibit enforcement of multi-currency contracts."
See also a statement by the Secretary of the Treasury on December 3, 1974:
"You also asked whether new legislation should be considered to allow contracts
containing a multiple currency clause. This is a subject that is not directly re-
lated to private gold ownership. The Supreme Court, in the late 1930's construed
the Gold Clause Joint Resolution, which as 1 have noted continues in effect,
to prohibit enforcement of multiple currency contracts in the United States.
Today, such financing devices have become common in international financial
markets. For example, bonds are issued and denominated in Eurcos which
provide for payment in a number of European currencies in an amount measured

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validity of the Joint Resolution enacted by the Congress of the
United States on June 5, 1933.152 The preamble of the resolution
declares that in the emergency existing at that time obligations
were being entered into that gave the obligee a right to require
payment "in gold or a particular kind of coin or currency of the
United States, or in an amount in money of the United States
measured thereby," and that these obligations obstructed the power
of Congress to regulate the value of the money of the United
States and were inconsistent with the policy of Congress to main-
tain at all times the equal purchasing power of every dollar of the
United States. Congress resolved, therefore, that provisions giving
rise to these obligations were against public policy and would be
discharged dollar for dollar. The term "obligation" for this pur-
pose was defined as an obligation "payable in money of the
United States."
In its reply to these inquiries, the Treasury stated that in its
view the Joint Resolution would continue to apply. Therefore, in
its opinion, contracts containing multiple-currency clauses would
continue to be unenforceable because the Supreme Court in the
late 1930s had construed the resolution to prevent the enforcement
of these clauses. The statement noted, however, that multicurrency
clauses were now in common use in international financial markets.
For example, bonds were issued and denominated in Eurcos and
provided for payment in a number of European currencies in an
amount measured by an index composed of these currencies. The
statement recalled that the Secretary of the Treasury had said that
consideration of a change in the law at the next session of Congress
would be desirable in order to allow U.S. businessmen to deal
safely in this kind of instrument.
by an index composed of these currencies. I see no reason why American busi-
nessmen should not be able to deal in this kind of instrument. Consideration of
a change in the law at the next session of Congress would be desirable" (U.S.
Congress, House, Committee on Banking and Currency, Subcommittee on Inter-
national Finance, To Delay LJntilJuly I,1975, the Date for Removing Restrictions
on Private Ownership of Gold, Hearings, 93rd Cong., 2d Sess., December 3 and
5, 152
1974 (Washington, 1974), p. 8).
Public Resolution No. 10 (HJ. Res. 192), 48 Stat. 112; 31 U.S.C §463.
For an argument that, as a consequence of the restoration of the right of private
ownership of gold, the resolution has at best a shaky foundation, see Gerald T.
Dunne, "Gold Clauses: Dead or Well?" Banking Law Journal, Vol. 92 (1975),
pp. 927-29.

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 On June 11, 1974, a member of the House of Representatives had
proposed the inclusion of the following provision in H.R. 15311:
The provisions of the gold clause joint resolution of June 5, 1933 (31 U.S.C.
463) shall not apply to any multicurrency obligation providing for payment
in dollars or a foreign currency or foreign currencies.

The provision was deleted as unnecessary in the context in which

it appeared.
The same congressman introduced H.R. 8324 on June 26, 1975
(A Bill to Declare the Public Policy of the United States and to
Remove All Legal Obstacles to the Use of Gold Clauses):
Be it enacted . . . That the joint resolution of June 5, 1933,... is hereby re-
pealed, and nothing shall prohibit any contractual provision which gives the
obligee the right to require payment by the obligor in gold, in gold coin, or
in an amount of currency measured by the value of gold or gold coins.

Action has not yet been taken to modify or abrogate the Joint
Resolution.
The attitude of the U.S. Treasury is probably based on the de-
cisions of the U.S. Supreme Court in Guaranty Trust Co. of New
York v. Henwood1™ and Bethlehem Steel Co. v. Zurich General
Accident & Liability Ins. Co. Ltaf.154 In the Henwood case the
petitioners claimed payment in Netherlands guilders under bonds
that gave the holders a right to payment in New York of a stated
amount of U.S. dollars in gold coin of the United States and an
option of payment in various other countries, including the Neth-
erlands, of the equivalent in the currency of the country selected
at a stated rate of exchange. The court held that the obligations
were subject to the law of the United States, the Joint Resolution
applied to the option, and the obligation could be discharged dol-
lar for dollar in current legal tender of the United States. The
court rejected the argument, which the minority accepted, that
each promise to pay in a particular currency was severable from
the promises to pay in the other currencies, and that the promises
to pay in currencies other than the U.S. dollar were not tied to
gold. The Bethlehem case involved substantially the same obliga-
tions as those in the Henwood case, but some other facts were
153
154
307 U.S. 247(1939).
307 U.S. 265 (1939). In both cases the court was divided five to four.

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different. The bonds had been offered abroad as well as in the
United States, and the holders were foreign corporations, some of
whose holdings had been purchased abroad. The court held that
these differences did not justify a decision that the Joint Reso-
lution did not apply.
The decisions have been strongly criticized by various experts
on the ground that the Joint Resolution did not invalidate promises
to pay foreign currency. The resolution should not have this effect
merely because such promises are added to a promise to pay gold
dollars. These experts have contended that in any event the deci-
sions do not apply when the options contain no promise to pay
gold dollars, and even more obviously do not apply if there is no
promise to pay dollars in any form.155
The Henwood and Bethlehem cases, as the critics have pointed
out, involved promises to pay in gold dollars. The Eurco is a unit
of account, and it does not in itself prescribe the currencies of
payment. The Secretary of the U.S. Treasury does not seem to
have suggested that the Joint Resolution might apply to the Eurco
because the Eurco calls for payment in U.S. dollars. On the con-
trary, he noted that European currencies were the means of pay-
ment in the bonds in which the Eurco had been employed as a
unit of account. In the first bond issue denominated in Eurcos,
which was offered on behalf of the EIB and to which reference has
been made earlier in this pamphlet, the U.S. dollar was the cur-
rency of subscription and one of the prescribed means of payment.
The bonds were payable in any of the nine currencies composing
the Eurco or in U.S. dollars in Luxembourg or in nine specified
cities in the member states of the Communities. The holder could
choose the currency of payment, and if he failed to exercise his
option, the principal paying agent had a similar option.
If the courts in the United States were to hold that the Eurco
is inconsistent with the Joint Resolution, it is not obvious that the
SDR as a unit of account in private contracts could be distin-
guished from the Eurco. A further difficulty is that the SDR is
155
See Mann, The Legal Aspect of Money (cited fn. 74), p. 187, fn. 2; Arthur
Nussbaum, Money in the Law: National and International (Brooklyn, 1950),
pp. 435-36; Ernst Rabel, The Conflict of Laws: A Comparative Study (Ann Arbor,
J 964), Vol. Ill, pp. 44-46.

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defined by the present Articles in terms of a quantity of gold and
therefore might appear to be a gold clause within the meaning of
the Joint Resolution.156 Contracting parties might be able to avoid
this difficulty by adopting a unit defined not as the SDR but as a
basket of the amounts of currencies composing the SDR at the
date of the contract, and by agreeing to maintain this unit as a
"fixed" unit until after the amendment of the Articles, which will
eliminate the definition of the SDR in terms of gold. Thereafter,
the unit could be the SDR of the Fund, valued according to the
method of valuation adopted by the Fund from time to time.
If the experts who have criticized the two decisions of the U.S.
Supreme Court are correct, the difficulty posed by a multiple-
currency clause might be avoided by not providing for payment
in U.S. dollars.157 The parties might agree on payment in other
currencies.158 Another approach might be agreement that the obli-
gation was to pay the various amounts of the currencies in the
basket, including the U.S. dollar. The obligee would then be en-
titled to a fixed amount of U.S. dollars and fixed amounts of 15
other currencies. The obligation could be discharged dollar for
dollar to the extent of the dollar component, and in the same
nominal amounts of the other currencies as was prescribed or in
their value in U.S. dollars if proceedings were brought to enforce
the claim to payment in courts in the United States. It is not ob-
vious that the courts would refuse to enforce claims formulated
in this way on the ground that they were inconsistent with the
Joint Resolution. The practical approach adopted by courts in

156 nO reference to gold is made in the Eurobonds denominated in SDKs. It

has been explained that this omission was deliberate in order to avoid legal
obstacles
157
in some countries.
A clause providing for payment in other currencies would seem to dispose
of any argument that a debt expressed in SDKs is a claim to U.S. dollars because
the par value of the U.S. dollar is defined by U.S. law as "0.828948 Special
Drawing Right or, the equivalent in terms of gold, of forty-two and two-ninths
dollars
158
per fine troy ounce of gold" (87 Stat. 352).
Cf. the discussion of Norwegian law by Smith, "Legal Principles in Mone-
tary and Credit Policy" (cited fn. 27), p. 214: "There are several variations of
multiple-currency bonds on the market, and the conspicuousness of the multiple-
currency character of one bond may be greater than that of another. In my
view, the [Norwegian] act of 1933 ought to be given a restricted scope and
should be applied only to those multiple-currency bonds in which a definite
amount in kroner has been stipulated. But this conclusion cannot be drawn with
certainty on the basis of existing legal sources, which are very scarce."

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other countries might induce courts in the United States to give a
restrictive interpretation to the Joint Resolution now that the
U.S. dollar is floating, although it must be recognized that
hitherto the courts have tended to give a broad application to the
resolution.159
The Federal Reserve Bank of New York requested the Chase
Manhattan Bank to delay initiation of the services in New York
involving the use of the SDR as a unit while the services were
being studied. An official of Chase is reported to have said that
Chase knew of no legal reason why it could not proceed with the
services.160 The problem is not clarified by the final paragraph of
the U.S. Treasury's statement, which notes that "this area of the
law is subject to varying legal interpretations and, as in other
cases of statutory construction, the final arbiter must be the
courts."161
159
Aztec Properties, Inc. v. Union Planters National Bank of Memphis (Tenn.
Sup. Ct.), 530 S.W. 2d 756 (1975), 44 L.W. 2209 (November 11, 1975), in which
the resolution was applied to a domestic loan contract that defined the debt in
constant U.S. dollars adjusted for inflation; N. V. Motorscheepv. Maats. Josephine
and Dammers & Van Der Heide's Shipping & Trading Co., Ltd. v. Azta Shipping
Company and 2,350 Bags of Costa Rican Coffee, 1975 A.M.C. 1339 (U.S. District
Ct., Eastern District of La., May 22, 1975), in which the resolution was applied
to a clause in a charter party granting a right of cancellation if the official rate
of exchange between the U.S. dollar and the Netherlands guilder at the date of
signing the contract should change by more than 5 per cent. See also Gerald T.
Dunne, "Gold Clause Prohibitions—Alive and Well," Banking Law Journal,
Vol. 93 (1976), pp. 131-32.
leo" *We're looking for them to respond shortly,' . . . adding that the bank
knows of no legal reason why it could not proceed. These transactions 'would
not create risk for the bank, affect the value of the dollar or result in an outflow
of dollars'..." (Wiegold, "Chase Will Offer SDR-Denominated Loans, Time
Deposits,
161
Future Contracts" (cited fn. 132), p. 12.
U.S. Treasury Department, News (cited fn. 151), p. 2. See also Report by
the Committee on International Monetary Law of the International Law Asso-
ciation (New Delhi Conference, 1974), p. 4: "... the precise scope of the famous
1933 Joint Resolution of the U.S. Congress, invalidating gold clauses, remains
to be determined with sufficient clarity and, on account of that uncertainty,
draftsmen of monetary guarantee clauses abstain from recourse to the dollar as
currency of reference in international contracts which might become subject to
American law or to the jurisdiction of American courts." With respect to unit-
of-account clauses that refrain from reference to gold, "most national systems
of law (with the possible exception of the U.S.) recognise their validity in inter-
national contracts...." The conference adopted the following resolution:
"Considering that more and more currencies are floating in relation to each
other and that the margins of fluctuation for the other currencies are tending to
become enlarged;
Considering that the proposals for the reform of the international monetary
system envisage stable yet adjustable parities;
Considering that international transactions in the fields of trade, services and

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