Bailey McCann, Opalesque, New York: As funds and regulators look for ways to work through the eurozone crisis, exchange controls may be gaining more widespread use. However, they will impact how agreements are constructed and may impact if an agreement goes forward at all. A new legal brief from UK-based law firm, Clifford Chance highlights the potential impact on transactions taking place within the EU.
In essence, exchange controls are designed to place tighter definitions and controls on the buying and selling of a national currency or to preserve foreign currency reserves. "Controls might include a ban on the conversion of the proceeds of certain assets or
by certain categories of person, an obligation to surrender foreign exchange proceeds to the central or local bank, authorization requirements, minimum stay requirements, quantitative limits, or indirect methods, such as tax charges on capital flows," writes Simon James, partner, Clifford Chance, in the brief.
Exchange controls have seen little use since the 1970s, but in the wake of the 2008 crisis, International Monetary Fund (IMF) member states, relying on the IMF Articles of Agreement have reignited their use. Iceland instituted exchange controls with......................
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