International Law and the Operations of the International Financial Institutions

Abstract

International financial institutions (IFIs) have a dual character. First, they are inter-governmental organizations that are created by states for a public purpose; and their authority and mandates are based on an international agreement to which all their Member States are party. As subjects of international law, their rights and obligations arise from the applicable public international law principles. Unfortunately, there is not a well-developed public international financial law that addresses both the public purpose of IFI financial operations and the commercial nature of their transactions. The combination of their dual character and the absence of well-defined international legal principles that are applicable to their operations has a number of consequences for the IFIs. First, it raises the issue of the IFIs’ international legal obligations in planning, evaluating, and implementing the projects, activities, or policies they fund. Second, it confronts the IFIs with the issue of whether or not they have any specific international legal obligations with which they must comply in the structuring and drafting of their financial transactions. Third, there is the issue of the IFIs’ obligations under international law to those who, whether or not they have a contractual relationship with the IFIs, might be affected by their operations. In resolving these issues, the IFIs must also deal with their role as actors in the international legal system. This last issue addresses whether the IFIs are merely passive recipients of international legal rights and responsibilities or if, through their operations, they actually play a role in the creation and interpretation of international law. This chapter seeks to address these four issues in regard to the operations of the two universal and most prominent IFIs – the International Monetary Fund (IMF or the Fund) and the World Bank Group (World Bank).

Keywords: international organizations, international law, international economic law, international environmental law, international human rights law

JEL Classification: F34, K33