Bond notes -a legal perspective

Incidentally, the Reserve Bank Act does carefully delineate what powers the Reserve Bank has in instances where there is a shortage of currency of any denomination. In particular, section 42B of the Reserve Bank Act authorises the issuance of “Reserve Bank vouchers”, not “bond notes” where the Reserve bank is of the opinion that there is a shortage of currency of any denomination to pay civil servants or employees of the State. The shortage must be shown to require urgent action in the interests of public order or the economic interests of the State.

What is clear from this provision is that the Governor does not have a blanket power to create any document he thinks up to replace properly introduced currency. He also does not have the power to create such an alternative medium of exchange except where the shortage is specifically in respect of the payment of civil servants and where it is shown to be a public order emergency. The justification given by the Governor for the creation of bond notes is, therefore, inconsistent with section 42B of the Reserve Bank Act.

The Governor’s justification for the curious move relates to “foreign exchange stabilisation” and an unsatisfactory attempt to ease the cash crisis. Respectfully, the law does not permit him to create alternative “money” for these purposes. It is clear that the law does not empower the Governor to make any plan he deems necessary for the purposes of resolving a cash crisis.

It can therefore be argued with great force that the conduct of the Governor in creating bond notes does not have the force of law and is therefore unlawful contrary to the requirements of section 68 of the Constitution and section 3 of the Administrative Justice Act. His conduct in taking away depositors’ hard earned dollars also arguably breaches their right to property and their right to use and transfer their property as enshrined in section 71 of the Constitution.

Substantive and procedural fairness

Section 68 of the Constitution also requires the conduct of the Governor to be “substantively and procedurally fair.” I am of the respectful view that the policies announced by the Governor are not substantively and procedurally fair to the citizenry.

To illustrate the point, it cannot be fair to take money that a person has banked in US dollars away and give that person “bond notes” which the Governor admits are not currency. If they are not currency, what are they?

What use are they to the business community if they cannot be used to import goods? In terms of what law or economic principle has the Governor decided that one bond note will be equivalent to one US dollar?

It is basic that a person cannot arrogate to himself the power to decide the US dollar value of a piece of paper and impose it as a medium of exchange and transaction. Such an approach offends basic economics and all known law and procedure.

Continued next page

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