The Gazette 1986

GAZETTE

APRIL 1986

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?" 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. • Barrister at law.

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. 37 However, Directives have been issued seeking to render Article 67 (1) effective — one in 1960 38 and the other in 1962, 39 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, 40 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. 41 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. In East -v- Cuddy, the defendants, Irish residents, bought securities through the London Stock Exchange from the plaintiffs, who are a London firm of stock-

57