The International Regulatory Regime on Capital Flows

Capital controls and exchange restrictions are used to restrict international capital flows during
economic crises. This paper looks at the legal implications of these restrictions and explores the
current international regulatory framework applicable to international capital movements and
current payments. It shows how international capital flows suffer from the lack of a
comprehensive and coherent regulatory framework that would harmonize the patchwork of
multilateral, regional, and bilateral treaties that currently regulate this issue. These treaties
include the Articles of Agreement of the International Monetary Fund (IMF Articles), the General
Agreement on Trade in Services (GATS), free-trade agreements, the European Union treaty,
bilateral investment treaties, and the Organization for Economic Co-operation and Development
(OECD) Code of Liberalization of Capital Movements (OECD Code of Capital Movement). Each
of these instruments regulate differently capital movements with little coordination with other
areas of law. This situation sometimes leads to regulatory overlaps and conflict between
different sources of law. Given the strong links between capital movements and trade in
services, this paper pays particular attention to the rules of the GATS on capital flows and
discusses the policy space available in the GATS for restricting capital flows in times of crisis.