Constitutional legal regulation of monetary system V. N. Nazarov, Associate professor of administrative and financial law of Plekhanov Russian University of Economics (Moscow) Analysis of constitutional provisions concerning economy regulation in general and monetary system 1 in particular, is not an object of research for specialists in area of Constitutional law though such provisions are very important for formation and development of all of branches of legislation. This paper contains results based on the analysis of the contents of more than fifty modern constitutions, including the Constitution of the Russian Federation, the Constitution of the Republic of Belarus, the United States Constitution, the basic documents of the EU and constitutions of many other countries all around the world. Analysis of constitutions of different countries allows to say that there are three groups of constitutions grouped in according with provisions concerning the money regulation. The first group includes the constitutions in which there is no constitutional legal regulation of money. E.g. constitutions of China, France, Japan and a number of countries do not contain provisions that are responsible for the monetary system regulation. The second group includes constitutions in which there are only one or few provisions concerning the money regulation. As a rule, they are quite symbolic provisions that cannot form monetary system of a country. 1 For this research terms "monetary system" and "money" are interchangeable, as well as terms "regulation of monetary system" and " money regulation". 1
Among such type of constitutions first of all the United States Constitution is interesting because it is the oldest "written" constitution today. According to Section 8 Clause 5 The Congress shall have Power To coin Money, regulate the Value thereof. Also according to Section 10 Clause 1 «No State shall coin Money; emit Bills of Credit; but gold and silver Coin a Tender in Payment of Debts». It should be noted that though the US dollar is a reserve currency and the US monetary system is reliable, nevertheless the constitutional provisions mentioned above are not a basis of it. The Basic Law The State Economy (Israel) says: «The printing of legal tender currency notes and the minting legal tender coins, and the emission thereof, shall be done under Law». It means that establishment of an order of money regulation is referred to competence of the legislator. The Constitution of the Kingdom of Saudi Arabia (Art.75) contains similar provision according to which «Monetary unit, banking activity is regulated by relevant provisions». In the Constitution of the Socialist Republic of Vietnam is a provision according to which the Government is given tasks and authorized powers uniform monetary policy. Interesting provision, which could be related to the sphere of money regulation, is in the Constitution of the Arab Republic of Egypt. Clause 38 of the Constitution of the Arab Republic of Egypt states that «Savings are a national debt, are protected, encouraged and organized by the State». Similar provision is in the Constitution of the Syrian Arab Republic: «Money savings are a national debt which are protected, encouraged and organized by the State». 2
The Constitution of India is the biggest in volume in the world today and it contains many rules concerning financial legal regulation. But, nevertheless, in the Constitution of India only one provision directly relates to money regulation (Clause 36 of the Union List of Seventh Schedule): Currency, coinage and legal tender; foreign exchange are referred to the Union jurisdiction. Only few constitutions contain more developed provisions concerning money regulation. Constitutions of these countries form the third group. Among constitutions of the third group it is necessary to allocate the Constitution of the Federative Republic of Brazil which was passed in 1988. This constitution contains some separate provisions which are not usually considered in constitutions, but are written quite in detail in this Constitution. Under Art. 164 the Union right concerning money emission is performed by exclusively the Central bank. The Central bank is forbidden to allow to provide, directly or indirectly, loans to the National treasury and any official body or organization which is not monetary institution. The Central bank can buy and sell the securities issued by the National treasury for the purpose of money regulation or the money market rate of interest. The cash of the Union is stored in the Central bank; the cash liquidity of the States, the Federal districts, municipalities and public authorities or their autonomous organizations and the enterprises which they supervise, should be stored in official monetary institutions, except as specified, provided by the law. One more example where legal status of a central bank is fixed in a constitution is the Constitution of the Democratic Republic East Timor. Provisions concerning the Central bank are included in a special part of the Constitution. It should be said that the Democratic Republic East Timor passed the Constitution just in 2002, i.e. it is one of the youngest constitutions in the world. 3
This research does not include, so-called «currency unions» where two or more states share the same currency without a purpose of having any further integration towards an economic union. But within this research basic documents of interstate unions, that can also be called "constitutions" of these unions, were investigated. For this research the main interest is the provisions fixed in basic documents of the Union State of Russia and Belarus which current unity is at the beginning of its development, and also a new development of the European Union since 2009. First we will consider the constitutional provisions of the money regulation, fixed in the Constitution of the Russian Federation and the Constitution of the Republic of Belarus. These constitutions can be included into the third group. The Constitution of the Republic of Belarus contains the Section VII which establishes financial and credit system of the State. Clause 136 is fixed that the banking system of the Republic of Belarus consists of the National bank of the Republic of Belarus and other banks. Also it is established that the National bank regulates credit relations, currency circulation, determines the procedure of payments and possesses an exclusive privilege of the currency emission. At the same time, according to Art. 107 of the Constitution of the Republic of Belarus the Government provides the framework for uniform monetary policy. This provision is supplemented with Art. 132 according to which «In the territory of the Republic of Belarus the uniform budget and financial, tax, monetary, currency policy» is conducted. The Constitution of the Russian Federation contains not much more, but some bigger set of money regulation provisions. According to Art. 71 under the authority of the Russian Federation there is a currency, credit regulation, money emission and federal banks. Basic provisions are fixed in Art. 75. According to which the Russian currency is the Ruble. Issuing money is performed by exclusively the Central Bank of the 4
Russian Federation (CBR). To enter and emit other money on the territory of the Russian Federation are prohibited. Protection and provision of stability of the Ruble is the basic function of the CBR. It is carried out by CBR independently from other public authorities. At the same time Art. 114 of the Constitution of the Russian Federation contains provision that the Government of the Russian Federation provides carrying out uniform financial, credit and monetary policy. Now let s compare provisions of the Treaty on the Creation of a Union State of Russia and Belarus (the Union State Treaty) and the Lisbon Treaty. According to Art. 13 of the Union State Treaty the Russian Federation and Republic of Belarus create uniform currency with the uniform emission center which possesses exclusive competence of money emission. Art. 22 of the Union State Treaty establishes that the uniform currency is introduced gradually. The basic function of the uniform emission center is protection and provision of stability of uniform monetary unit, and it performs this function, cooperating with other bodies of the Union State and state authorities of the states - participants. The uniform emission center does not have the right to provide the credits to bodies of the Union State and to buy securities of the Union State at their primary distribution. The participating countries of the Union State Treaty agree that entering of uniform monetary unit and forming of the uniform emission center should be specified in a separate agreement. The Union State Treaty does not include money regulation restrictions, but financial restrictions which can have a direct impact on a condition of monetary system, among them: the Union State provides and obtains the credits and gives guarantees on the credits, emissions loans and securities in an order defined by Parliament of the Union State and approved by the Supreme State Council. It should be noted that according to the Union State Treaty the uniform monetary and currency policy is within the exclusive competence of the Union State. 5
At the same time to carry out uniform monetary and currency policy is imposed on Council of Ministers of the Union State. These provisions conflict with constitutions both the Russian Federation, and the Republic of Belarus. It follows consequently, that the creation of the currency union is impossible without constitution changes in both countries. Now let's consider provisions of the «European Union Constitution» - the Lisbon Treaty which was came in force since 2009. In Preamble of the Lisbon Treaty it is said that one of the purposes of this Treaty to achieve strengthening and rapprochement of economic systems of the participating countries and establishment of the economic and currency union and uniform and stable currency. According to Clause 4 Art. 3 and Art. 5 of the Lisbon Treaty the European Union possesses exclusive competence on carrying out a monetary policy, including policy in the field of an exchange rate, for the countries, whose currency is Euro. The Lisbon Treaty contains the Section 6 which is devoted to general provisions concerning the status and competence of the European Central Bank (the ECB). And, besides, a part of the Lisbon Treaty includes the Charter of the European System of the Central Banks and the Central Bank of the European Union (Protocol No. 4) and some other provisions (Protocols No. 13 and No. 14). Briefly, the main ideas of these provisions are: Euro is managed by the ECB which is in Frankfurt, and the European system of the central banks (ESCB) which consists of the central banks of member countries of Eurozone; the ECB is an independent central bank and it possesses an exclusive privilege to determine monetary policy in Eurozone; ESCB is engaged in printing of banknotes and stamping of coins, distribution of cash in the Eurozone countries, and also ESCB provides the work of payment systems in Eurozone. I.e. the monetary policy is outside the activities of executive authorities of the EU (The European commission). 6
All members of the EU have the right to enter Eurozone if they meet specified requirements to monetary policy, for all new members of the EU there is a obligation to pass to Euro and it is an indispensable condition of the accession to EU. And at last, it is necessary to say that in their declarations EU members actually declare Euro to be one of the EU symbols. From comparison of the Union State Treaty and the Lisbon Treaty it is visible that the most basic distinction in money regulation consists in competence distribution in respect of monetary policy. Carrying out monetary policy in the Union State is referred to the competence of the Council of Ministers whereas the Lisbon Treaty carries out monetary policy to be a prerogative of the ECB. At the same time it should be noted that even such provisions which were established for the EU are not enough to protect Eurozone stability and prevent serious problems in certain member states of the EU in the budget sphere. That inevitably has the most direct impact on a condition of monetary system of the EU and the economy of Eurozone as a whole. Recent events show that the mechanism of uniform currency debts of the certain countries the EU members are paid by all countries whose currency is Euro. The conducted analysis shows that as a rule constitutions of the different countries contain a short set of propositions which cannot be based on fullfledged monetary system regulation. At the same time, according to the role money in our society as a whole it is necessary to fix certain relevant provisions in the constitution to protect monetary system and proprietary rights. The modern economic history, especially the last financial crisis and is continuing consequences such as «debt crisis» of certain countries of Eurozone, and, also, its influence on the condition of Eurozone and the EU economy, mean that it is necessary to implement wider and deeper money regulation in constitutional law. 7
It is also possible to state that creating of any interstate union implies sorting out the question of monetary system regulation. 8