The Federal Republic Of Yugoslavia And The World Bank
| Author | Ko-Young Tung |
| Profession | Vice President and General Counsel World Bank |
| Pages | 379-392 |
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Note contributed by Elizabeth B. Lin, Assistant to the Vice President and General Counsel, Legal Vice Presidency, The World Bank.
Page 379
Other than with respect to the original members, membership in the International Bank for Reconstruction and Development (Bank) is open to International Monetary Fund member countries "at such times and in accordance with such terms as may be prescribed by the Bank."1 While the admission of new members is a matter reserved to the Bank's Board of Governors, membership of one or more states succeeding to the rights and obligations of a previously admitted member country is a matter that is decided, within certain constraints, by the Bank's executive directors.
Among the constraints limiting the discretion of the executive directors in succession decisions is the requirement that the same conditions for succession must be applied equally to all states succeeding to the membership of a particular preexisting member. In addition, all conditions for succession " like all conditions for admission of a new member " must be relevant to the Bank and its work. Thus, for example, a succession decision may not rest on political considerations that the Bank is prohibited by its Articles from taking into account in its work.2
On February 25, 1993, the executive directors determined that the Socialist Federal Republic of Yugoslavia (SFRY) had ceased to be a member of the Bank and set forth the conditions under which each of the five successor republics to the SFRY (namely, Republic of Croatia, Republic of Slovenia, Former Yugoslav Republic of Macedonia, Bosnia and Herzegovina, and Federal Republic of Yugoslavia) could succeed to the SFRY's membership in the Bank.
The following two legal notes issued in October 2000 and March 2001 by the Vice President and General Counsel of the Bank address membership and succession issues with respect to the Federal Republic of Yugoslavia (FRY), the only successor country that had not yet succeeded to SFRY membership by that time. The first note explains the conditions for succession to membership as applied to FRY and addresses the question whether trust funds could be used to provide pre- membership assistance. On the latter issue, a 1999 legal memorandum was annexed that analyzed the legal basis for the Bank's assistance to Kosovo. The second note provides a detailed discussion of the legal basis for Bank assistance to FRY as a non-member in the context of a U.S. $30 million trust fund approved by the executive directors of the Bank and the International Development Association to assist in the financing of an emergency recovery and transition program for FRY.3
Page 380
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During the Management briefing of the Executive Directors of October 10, 2000 on the recent events in the Federal Republic of Yugoslavia (FRY), the General Counsel indicated that a note would be circulated to the Board on the legal matters relating to the membership of the FRY in the Bank. This note presents a short summary of the arrangements for membership of the FRY in the Bank.4 The note also briefly discusses the possible use of trust funds to provide assistance to the FRY before membership, in response to a question raised at the Board meeting.
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In February 1993, following a similar decision of the International Monetary Fund (the Fund) of December 1992, the Executive Directors of the Bank decided that the Socialist Federal Republic of Yugoslavia (SFRY) had ceased to be a member of the Bank, and established a mechanism under which each of the successor Republics of the SFRY would succeed to its membership in the Bank when it had met certain requirements5. The requirements were that the successor Republic had:
(a) become a member of the Fund;
(b) notified the Bank, that (a) it has accepted, as successor to the SFRY, the Articles of Agreement of the Bank and the terms and conditions related to the shares of the Bank's capital to which it succeeded; and (b) it had taken all steps necessary to carry out these obligations (a legal opinion from the Federal Attorney General or another official acceptable to the Bank, confirming that all necessary steps have been taken, is also required);
Page 381
(c) made such payments as are necessary with respect to the shares of capital stock to be allocated to it;
(d) entered into a final agreement with the Bank with respect to the loans made by the Bank to or with the guarantee of SFRY which the Republic would assume; and
(e) eliminated, or agreed with the Bank on a plan to eliminate, arrears, if any, in the servicing of Bank loans made to or with the guarantee of the SFRY to be assumed by the successor Republic.
Four of the five successor Republics, namely the Republic of Croatia, the Republic of Slovenia, the Former Yugoslav Republic of Macedonia, and Bosnia and Herzegovina, have become members of the Bank by fulfilling these requirements. The FRY has not met these requirements. There follows short comments on these requirements as they relate to the FRY.
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In December 1992, the Executive Board of the Fund determined that the SFRY had ceased to6 exist and had therefore ceased to be a member of the Fund. The Fund also established a mechanism under which, when certain conditions were met, each successor Republic could succeed to the membership of the SFRY in the Fund.7Overdue payments to the Fund amount to around SDR 99 million (around $135 million). One of the conditions of succession is the actual clearance of the arrears.
Page 382
This is to be contrasted with the situation in the Bank, where the condition is either that the successor Republic eliminates its arrears, or that it agrees with the Bank on a plan to eliminate them.
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In order to succeed to the membership of the SFRY, a successor Republic needs to notify the Bank, that (a) it has accepted, as successor to the SFRY, the Articles of Agreement of the Bank and the terms and conditions related to the shares of the Bank's capital to which it succeeded; and (b) it had taken all steps necessary to carry out these obligations (a legal opinion from the Federal Attorney General or another official acceptable to the Bank, confirming that all necessary steps have been taken, is also required). In addition to the formal notification of succession and legal opinion, the Bank would need to be provided with the legislation authorizing succession.
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Payments made by the SFRY on account of its shares of the Bank's capital were apportioned to the successor Republics on the same basis as the shares themselves.8As a result, no new USD payment is required of the FRY. As the FRY has adopted a new currency since 1993, it would need to make payments in this currency to replace the payments made in the old currency.
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In January 1992, the Bank concluded agreements on an interim basis with the SFRY (consisting at the time of Serbia, Montenegro, Macedonia, and Bosnia and Herzegovina), with Slovenia and Croatia, and later with Macedonia after it had become independent, for the service of debt due for projects benefiting these Republics, subject to the overall guarantee of the SFRY. Under these interim agreements, each Republic agreed to ensure the service of loans allocated to it, and the SFRY agreed to continue to guarantee the loans until final agreements were reached with each Republic...
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