6 - Financing

Question 1

What is a paradox regarding the financing of IOs? (2)

Answer 1

1/ members do not like to pay contributions

2/ members really want to pay contributions (‘he who pays the piper calls the tune’)

Question 2

Why is the study of the financing of IOs relevant? (2)

Answer 2

1/ better understanding of IOs

2/ better understanding of law & practice IOs

Question 3

What are the 2 main types of costs of IOs?

Answer 3

1/ administrative (running the IO)

2/ operational (substance IO, carrying out operations)

Question 4

What are costs of IOs mainly made up of and what does this illustrate? (2)

Answer 4

1/ administrative costs

2/ IOs are fora for consultation, policy coordination (‘talkshops’)

Question 5

What are some exceptions to IOs as ‘talkshops’? (3)

Answer 5

1/ EU

2/ financial organizations

3/ etc.

Question 6

Characteristics of zero growth policies? (5)

Answer 6

1/ popular in politics & finance ministries

2/ not a legal principle

3/ substance = no automatic growth of budget

4/ understandable in times of financial crisis

5/ but members must put their money where their mouth is as IOs are mandate driven (not resource driven)

Question 7

Various types of income of IOs? (2)

Answer 7

1/ compulsory contributions by members

2/ voluntary contributions (members and other entities)

Question 8

Various examples related to IOs’ income? (3)

Answer 8

1/ US and UNESCO after admission of Palestine in 2011

2/ sponsoring of EU presidency by private companies, such as Coca Cola & Romania in 2019

3/ Interpol & increase in voluntary contributions which led to adoption of new financial rules

Question 9

What are 2 important considerations regarding voluntary contributions?

Answer 9

strike a balance between :

1/ need for money

2/ guarantee reputation, independence, transparency

Question 10

What are various ways to share expenditure between members? (3)

Answer 10

1/ equal contributions

2/ optional classes

3/ scales of assessment

Question 11

Examples of IOs using scales of assessment? (2)

Answer 11

1/ IMO, share of each member divided in 3 parts (minimum, basic and tonnage assessment)

2/ other IOs have scales of assessment related to the interest of the member in the work of the IO (see lecture notes for list)

Question 12

What are the 2 main functions of the budgets of IOs?

Answer 12

1/ estimation of expenditure and income

2/ authorization of making expenses and collecting contributions

Question 13

Which organ usually adopts the budget and why? (3)

Answer 13

1/ general congress (plenary organ)

2/ legitimacy (‘no taxation without representation’)

3/ for scope of powers, see Effect of Awards (1954) and Certain Expenses (1962) AOs
=> substance first

Question 14

What are the 2 main types of budgetary periods?

Answer 14

1/ 1 year

2/ 2 years

Question 15

What were 2 main problems of the LoN regarding financing?

Answer 15

1/ which organ decides?

2/ rigid scale of assessments

Question 16

What are some of the lessons learned by UN from problems LoN? (5)

Answer 16

1/ Article 17 UN Charter : clear definition on which organ decides (UNGA)

2/ in practice, there are separate accounts

3/ financial regulations adopted by UNGA, financial rules adopted by UNSG

4/ there are criteria for apportionment (esp. capacity to pay)

5/ there are also minimum and maximum contributions

Question 17

Since 1971, EU income from own resources. What do these include? (3)

Answer 17

1/ traditional own resources

2/ % of MS Value Added Tax

3/ % of MS GNP

Question 18

What the tension between theory and practice in relation to income of IOs? (2)

Answer 18

1) Theory/law: distinction between compulsory and voluntary contributions
2) Practice: much more blurred

Question 19

How may the distinction between compulsory and voluntary contributions be blurred? (2)

Answer 19

1) compulsory contributions: but MS cannot/will not pay

2) voluntary contributions: but schemes are made with an expectation to pay so and so much over a given period

Question 20

What were implications of US refusing to make compulsory contributions to UNESCO? (5)

Answer 20

1) US lose right to vote in General Conference (Art IV(8)(b) Constitution)
2) US maintain right to vote in Executive board
3) UNESCO lose 22% of budget
4) UNESCO make budget adaptations and seek income from voluntary funds
5) US however maintained financial support for certain UNESCO affiliated NGOs

Question 21

How has Interpol’s sources of income changed? (3)

Answer 21

1) 1995: 5% voluntary contributions
2) 2013: 32% voluntary contributions
3) these come from esp. EU, CAN, QAT (also FIFA and Tobacco Industry)

Question 22

Why are equal contributions rarely used in practice?

Answer 22

because States are very unequal in practice (in terms of finances, interest in the IO etc)

Question 23

What are IOs using equal contributions? (3)

Answer 23

1) OPEC
2) East African Community
3) Mercosur

Question 24

What are the Optional Classes mode of contribution? (3)

Answer 24

1) comes from old IOs
2) each MS choose their contribution class
3) EX: UPU, PCA

Question 25

What are the scales of assessment mode of contribution? (2)

Answer 25

1) the IO decides what each MS must pay

2) Most IOs have this

Question 26

What are the reelvant factors in assessing the correct contribution under scales of assessment? (4)

Answer 26

1) Ability to pay (UN)
2) Interest in IO’s work
3) Flexibility of the scale
4) limits to contirbutions (Max/min contributions)

Question 27

What considerations go into setting the flexibility of the scale of assessment? (2)

Answer 27

1) too rigid: not reflect ability to pay/interest in work of IO
2) too flexible: difficult for MS to plan national budget

Question 28

What are justifications for setting maximum contributions? (3)

Answer 28

1) to reflect sovereign equality (voting and IO’s functioning)
2) not make IO too dependent on single MS
3) easier for MS to justify domestically joining the IO if not v expensive

Question 29

what are disadvantages of setting maximum contributions? (2)

Answer 29

1) Leaves a greater burden per capita on poorer states

2) leaves IO with less money in absolute terms (unless increase for other states)

Question 30

what are justificatiosn for setting minimum contributions? (2)

Answer 30

1) a price to be paid for sovereign equality (voting parity etc) - they get better money for value
2) otherwise some delegations might receive more in travel costs for delegates than what they contribute

Question 31

What are disadvanatages of minimum contributions? (2)

Answer 31

1) might force poor states to neglect domestic development bc no money
2) may mean some poor states cannot afford to join (denying them ability to influence Int’l community - maintain poverty)

Question 32

What are 2 reasons that IOs might not have zero growth policies despite MS wanting it?

Answer 32

1) Ind. MS cannot choose unilaterally how much to contribute - this is decided at IO level
2) IOs are mandate driven: they were given certain functions that must be performed and financed