The ECB's Membership in the IMF: Legal Approaches to Constitutional Challenges

• Published date: 01 November 2005
• Author: Der‐Chin Horng
• DOI: http://doi.org/10.1111/j.1468-0386.2005.00289.x
• Date: 01 November 2005

*Dr Der-Ching Horng is Associate Research Fellow at the Institute of European and American Studies,

Academia Sinica, Taipei, Taiwan. He is also a part-time Associate Professor in EU Law and WTO Law

at the National Chengchi University, Taipei, Taiwan. This article is revised from a paper presented at

the International Conference on the Constitutionalization of the EU, Academia Sinica, Taipei, Taiwan,

12–13 December 2003.

1ECB, The European Central Bank (March 2001), 11, 19; ECB,‘Constitution of the ESCB History—three

stages towards EMU’,(1999); and T. Padoa—Schioppa, ‘The Genisis of EMU: A Retrospective of EMU’,

in Academy of European Law (ed.), Collected Courses of the Academy of European Law,Vol. VI,

Book 1 (Martinus Nijhoff, 1998), 35–37.

2C. Bretherton and J. Vogler, The European Union as a Global Actor (Routledge,1999), 59, 60.

3K. Dyson, The Politics of the Euro-Zone-Stability or Breakdown? (Oxford University Press, 2000), 13–21.

The ECB’s Membership in the IMF: Legal

Approaches to Constitutional Challenges

Der-Chin Horng*

Abstract: Although the European Central Bank (ECB) is only an observer in the Inter-

national Monetary Fund (IMF), its membership in the IMF will spark constitutional

changes for both the EU and the IMF. The ECB’s participation in IMF activities has so

far been undertaken pragmatically, and is likely to evolve over time. This arrangement will

limit the ECB’s ability to fully develop in international monetary cooperation. This paper

reviews what kinds of constitutional challenges the ECB faces in its bid for membership

in the IMF. The research is based on the legal method and assesses the relevant provisions

of both the EC Treaty and the IMF’s Articles of Agreement. It also suggests some fea-

sible approaches for ECB membership in the IMF.

IIntroduction: Issues of ECB’s Membership in the IMF

European Central Bank (ECB) was established on 1 June 1998 and is located in Frank-

furt-am-Main. The ECB is an independent supranational central bank with its own

legal personality. With monetary sovereignty transferred by participating Member

States of the euro area, the ECB started to exercise its powers fully with the start of

the third stage of the European Economic and Monetary Union (EMU) on 1 January

1999.1While the operation of the ECB implies an economic and monetary policy

régime change primarily for the participating countries, it also has important external

implications.2

As the centre piece of the European System of Central Banks (ESCB), the ECB is

empowered to coordinate all aspects of common monetary policy with the objective of

maintaining price stability and supporting general macroeconomic policy.3The ESCB

European Law Journal, Vol.11, No. 6, November 2005, pp. 802–822.

© 2005 The Author

Journal compilation © 2005 Blackwell Publishing Ltd 2004, 9600 Garsington Road, Oxford, OX4 2DQ, UK

and 350 Main Street, Malden, MA 02148, USA

is composed of the ECB and the national central banks (NCBs) of all 25 EU Member

States. The design set out in the ESCB Statute4was aimed at cementing confidence

through a credible and anti-inflationary monetary policy. The ECB itself is a new body

with constitutional status under the EC system, and in particular, has an independent

status in the EC legal order under Articles 8 and 108 EC.5

The direct effect of EMU is that the ECB will have a single exchange rate and a single

monetary policy, and at the same time the organisation is charged with ensuring price

stability and improving the EC’s economic performance.Member States of the eurosys-

tem have the obligation to closely coordinate their economic policies, thereby enabling

the ECB to pursue consistent policies and provide a valid reference point for monetary

affairs in international bodies.6

Unlike ordinary international treaties, the EC Treaty has created its own legal frame-

work,which, once the treaty is ratified, becomes an integral part of the legal systems

of the Member States. The ECB itself is of unlimited duration, has its own bodies,

legal personality, legal capacity and real power stemming from the transfer of partial

sovereignty powers from the euro-area States to the ECB.7In particular, the indepen-

dence of the ECB is guaranteed by Article 108 EC, which covers not only the perfor-

mance of the ESCB’s basic tasks as set out in Article 105(2) EC but also the exercise

of all the ECB’s other powers under the EC Treaty. This legal status of the ECB was

further underscored by the Court of Justice, in its statement that ‘the draftsmen of the

EC Treaty clearly intended to ensure that the ECB should be in a position to carry out

independently the tasks conferred upon it by the Treaty’.8The ECB can thus be seen

as a ‘sui generis’supranational central bank in the international monetary system.9

The ECB also strengthens the EC as an economic pole within the world economy

because of the adoption of a common monetary policy. As the ECB becomes a more

prominent feature of the international economy, spillover effects of internal policies

and therefore the need for coordination at the global level increase.10 The policy-mix

on the euro exchange rate and on the arrangement for representation and presentation

of the EC’s position in the IMF reflects the internal division of power between the ECB

and the EC institutions. At the same time, however, the ECB is only an observer at

the IMF,11 with only partial influence on monetary policy. The IMF was set up in the

1940s, when the international legal personality of international organisations was

November 2005 The ECB’s Membership in the IMF

© 2005 The Author 803

Journal compilation © Blackwell Publishing Ltd. 2005

4For the text of ESCB Statute, see European Commission, Economic and Monetary Union:Compilation of

Community legislation (Office for Official Publications of the European Communities, 1999), 35–49. See

also ECB, Institutional Provisions (2004), 5–28.

5Elements of ECB’s independence cover institutional independence, personal independence, functional

independence and financial independence, see R. Smits, ‘Central Bank Independence and Accountability

in the Light of EMU’, in M. Giovanoli (ed.), International Monetary Law: Issues for the New Millennium

(Oxford University Press,2000), 255–258.

6O. Issing, V. Gaspar, I. Angeloni and O. Tristani, Monetary Policy in the Euro Area: Strategy and

Decision-Making at the European Central Bank (Cambridge University Press,2001), 65–71.

7With reference to Case 6/64 Costa v ENEL [1964] ECR 585 at 593, 594.

8Case C-11/00 EC v ECB,Judgment of the Court, delivered on 10 July 2003, para 130. Available at:

9C. Zilioli and M. Selmayr, ‘The External Relations of the Euro Area: Legal Aspects’, (1999), 36 CMLR

273, 285; and C. Zilioli and M. Selmayr, The Law of the European Central Bank (Hart, 2001), 27, 29.

10 M. Emerson, D. Gros,A. Italianer, J.Pisani-Ferry and H. Reichenbach, One Market, One Money (Oxford

University Press,1990), 178; and European Commission, External aspects of economic and monetary union,

Euro Papers No. 1 (July 1997), 15.

11 IMF, ‘IMF Grants Observer Status to the European Central Bank’, Press Release No. 98/64, December

22, 1998; and IMF, IMF Survey: Supplement on the Fund (September 1999), 20, 21.