B —Observations of the Government of the United Kingdom
Article 67 and the succeeding articles in the chapter headed ‘Capital’ do not define the term ‘capital’ and this Court has so far not been called upon to define or construe the term. However the word ‘capital’ as internationally understood ordinarily applies to precious metals such as gold and silver and money including coins. The articles of the chapter with their references to ‘exchange authorizations’, ‘the capital market’, ‘loans’, ‘exchange restrictions’ and ‘the Monetary Committee’ are clearly using the word in this sense. This is confirmed by the First Directive of the Council issued under Article 69 for the implementation of Article 67 on 11 May 1960 (Official Journal 921/60) for the purpose of ‘the greatest possible freedom of movement of capital between Member States and therefore the widest and most speedy liberalization of capital movements’. Although the term ‘capital’ was not defined in this directive, there are listed in Annex I various transactions to which the directive applies. The directive does not require restrictions to be abolished in respect of those capital movements set out in List ‘D’ of Annex I, but under Article 4 the Monetary Committee is required to examine such restrictions and under Article 7 Member States must make known to the Commission any amendment of the provisions governing the capital movements set out in List ‘D’. The. United Kingdom in fact notified the Commission orally on 4 July 1974 and in writing on 15 July 1974 of the restrictions on the export of pre-1947 silver alloy coin which came into force on the latter date, and in writing on 15 April 1975 of the restrictions on the import of, inter alia, gold coins, which came into force on 16 April 1975.List ‘D’ covers, inter alia,‘physical import and export of financial assets’ which by reference to the explanatory notes in Annex II includes:A. Securities (not included under IV) and means of payment of every kind.B. Gold.’Thus the physical import and export of financial assets includes import and export of gold and means of payment of any kind. As well as being covered by this directive it should be noted that gold is classified in the Common Customs Tariff under heading 71.07 and coin (which is a means of payment) is classified under 72.01 of the Tariff. It is submitted that while financial assets may for the purposes of customs control be classified on import and export as goods, this does not mean that such assets are not regarded as capital within the meaning of Part Two, Title III, Chapter 4 of the Treaty. It merely means that on the import and export of such financial assets it would appear that both Community instruments apply.With regard to paragraph (a) of Question 1, the gold coins in this case are Krugerrands and are ‘capital’ being coins containing one ounce fine gold, which are legal tender in South Africa where they are minted. They are covered by the said directive both as gold and as means of payment of any kind. The term ‘gold’ in the said directive must be interpreted as including not only gold bullion but also gold coin other than coin which is classifiable as ‘a collector's piece of numismatic interest’ under heading 99.05 of the Tariff. In this particular case the Krugerrands which formed the subject of counts 2 to 8 of the indictment were used as means of payment for the silver coin which the appellants sold to Allgemeine Gold- und Silberscheideanstalt.With regard to paragraph (b), silver alloy coins which are legal tender in a Member State are ‘capital’ within the meaning of the said chapter of the Treaty. They are ‘means of payment of any kind’ and thus covered by the said directive. The fact that the silver content of United Kingdom coins minted before 1947 exceeds the face value of such coins emphasizes the status of the coins as capital. Furthermore, silver being a metal which historically has been used as money means that such coins should be regarded as capital and means of payment irrespective of whether they are legal tender.With regard to paragraph (c), silver alloy coins which have been but are no longer legal tender in a Member State do not automatically cease to be capital on ceasing to be legal tender. They can be considered to be ‘means of payment of any kind’ while they are still accepted by the central bank concerned (in this case the Bank of England still accepts the half-crown) and they are still protected as if they were legal tender. Because of silver's historic role as a medium of currency the fact that (as in the case of the half-crown) the silver content of the silver alloy coins exceeds their face value means that they will still be accepted as a means of payment.It should be noted that the term ‘legal tender’ in the above two paragraphs has a technical meaning in United Kingdom law and although coins may not be legal tender for certain purposes, under United Kingdom law this does not affect their status as means of payment.Question 2 relates only to such of the coins as are, as the United Kingdom contends, ‘capital’. It is submitted that the quantity and manner in which, and the purposes for which, the coins in this case were traded cannot for the purposes of Part Two, Title III, Chapter 4 of the Treaty affect the essential nature of such coins as capital. Whether the coins were capital has, for the purposes of this case, to be judged at the time when they were imported or exported. The transactions which took place in regard to the silver coins subsequent to their export are irrelevant. Items which are capital for the purpose of the Treaty do not cease to be capital by reason only of the nature of the commercial transactions in which they are involved. Coins may (but do not necessarily) cease to be capital as a result of their being subjected to a process which changes their identity, but the fact that it is intended to carry out such a process cannot be sufficient to achieve this result and the coins will remain ‘capital’ at least until the process is carried out.As to Question 3 the jurisprudence of this Court has demonstrated that where more than one set of Treaty provisions could apply to a given set of circumstances, if such provisions are in conflict then those provisions which relate specifically to those circumstances apply to the exclusion of any of the more general conflicting provisions (generalia specialibus non derogant). Deutschmann v Germany(Case 10/65) [1965] ECR 469 and Iannelli & Volpi(Case 74/76) [1976] ECR 557 are referred to.The provisions of Part Two, Title III, Chapter 4 of the Treaty and the provisions of Part Two, Title I, Chapter 2 of the Treaty cannot both apply at the same time because there are fundamental differences between the provisions which would give rise to insoluble conflicts if they were both to apply. The liberalization of capital movements is subject to a qualification to which the movement of goods is not; namely, they are to be liberalized to the extent necessary to ensure the proper functioning of the Common Market. It should also be noted that the provisions of the chapter on capital refer not merely to the nationality of persons but also to ‘residence’. The provisions of the chapter on the elimination of quantitative restrictions do not refer to the residence of persons. Between the two sets of provisions referred to in this question the ‘capital’ provisions of Chapter 4 should apply. They are the provisions dealing directly with capital and must, where they are capable of applying, exclude the more general provisions of Part Two, Title I, Chapter 2 of the Treaty. Alternatively, the United Kingdom submits that at least where there is conflict between those two sets of provisions it is the ‘capital’ provisions which must prevail.Question 4 need be considered only if and in so far as it is decided that the provisions of Pan Two, Title I, Chapter 2 of the Treaty apply to any of the coins, whether alone or together with Part Two, Title III, Chapter 4 of the Treaty. In Article 36 of the Treaty the term ‘public policy’ is intended to cover a variety of circumstances. The concept of public policy may vary from one country to another and from one period to another and it is therefore necessary in this matter to allow the competent national authorities an area of discretion within the limits imposed by the Treaty. The term should not be construed narrowly so that it prevents Member States from taking action in novel circumstances some of which it is impossible to anticipate. It is preferable that the Court, instead of laying down general rules, should retain a discretion to consider each specific situation as it arises in the light of the objects of the Treaty. Any disadvantage in adopting this construction of the term is avoided by the specific safeguard contained in the last sentence of Article 36, which provides:‘Such prohibition or restriction should not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States’.The Court is asked if necessary to clarify the limitation which appears to be laid down in Commission v Italy (Case 7/61) and consider whether matters of a purely or partly economic nature can afford justification of restrictions on the grounds of public policy. In this case the items concerned are money and means of payment and so the justification of any restriction on the import or export of them on the grounds of public policy will inevitably involve some economic matters. If Articles 30 to 36 apply to capital, and in particular to money and means of payment, this must influence the proper interpretation of the term ‘public policy’ in Article 36 in relation to the movement of capital. This consideration did not arise in Commission v Italy.As regards paragraph (a) of Question 4, the prohibition on the import of certain gold coins in the United Kingdom was imposed for the following reasons.(i) to prevent a drain on its balance of payments;(ii) to prevent speculation in and hoarding of unproductive assets.At that time, substantial sums were being invested in the purchase of gold coins, particularly Krugerrands. This was resulting in a considerable burden on the balance of payments and therefore adding to constraints on the United Kingdom Government's economic policy. It also represented a diversion of resources away from uses which could be of economic benefit to the United Kingdom into capital investment of a character either purely sterile, in that hoarded gold yields no return, or undesirably speculative to the extent that purchasers simply sought to profit from hedging against a decline in the internal or external value of the national currency.It is relevant in this context to recall Article 104 of the Treaty which provides:‘Each Member State shall pursue the economic policy needed to ensure the equilibrium of its overall balance of payments and to maintain confidence in its currency, while taking care to ensure a high level of employment and a stable level of prices.’As regards Question 4, paragraph (b), the prohibition on the export of pre-1947 United Kingdom silver alloy coins was imposed for the following reasons:(i) to ensure that there was no shortage of current coins for use of the public;(ii) to ensure that any profit resulting from any increase in the value of the silver content of such coins accrued to the Member State which had minted the coins rather than to any individual;(iii) to prevent the destruction of United Kingdom coins occurring outside its jurisdiction when it would be a criminal offence if its coins were destroyed within the United Kingdom.The functions of a State include minting of coins and protecting the coins that it mints to ensure that those within its jurisdiction are able to carry on trade. It is submitted that unless and until the coins of one Member State are protected from destruction in other Member States, Member States should be entitled to take such steps as are necessary to ensure that their coinage is not destroyed indiscriminately. At the time the prohibition on the export of silver coins was imposed, the value of the silver content of these coins was considerably higher than their face value. No licences were given under Section 10 of the Coinage Act 1971 which would have enabled individuals to obtain any profit from destroying these coins within the United Kingdom. As a result large quantities of similar coins were being exported purely for the purpose of destruction and not for any numismatic purpose. Although the proportion of such coins was small in relation to the total amount of coinage in circulation, the amounts of such coins being exported were significant. Thus the United Kingdom took steps to prevent such significant amounts of coins being removed from circulation by private individuals. The measures taken by the United Kingdom are not arbitrary or a disguised restriction on trade between Member States. They do not conflict with the objectives of the Treaty and cause no disturbance to the proper functioning of the Common Market. They were imposed by the United Kingdom as a matter of public policy.
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