Andreas Meidell International Contracts and Currency Fluctuations CAPPELEN AKADEMISK FORLAG
Contents 1 INTRODUCTION 15 1.1 The subject 3 15 1.1.1 Currency risks 15 1.1.2 Special challenges of the subject 17 1.1.3 Characteristics of international monetary obligations 20 1.2 Applicable law? 22 1.3 The problems to be examined - Overview 27 2 GENERAL ASPECTS OF CURRENCIES AND EXCHANGE RATE FLUCTUATIONS 29 2.1 The occurrence of currency exchange rate fluctuations 29 2.1.1 Introduction r 29 2.1.2 The exchange rate explained 30 2.1.3 Political control of exchange rates 32 2.2 International monetary cooperation 33 2.2.1 Introduction 33 2.2.2 The International Monetary Fund (IMF)... 34 2.2.3 European Monetary Union (EMU) and the Euro 35 2.2.3.1 Introduction 35 2.2.3.2 The need for a common currency in the EU 35 2.2.3.3 The launch of the Euro - institutions of the EMU, 36 2.2.3.4 The Euro as legal tender - some practical problems 37 3 MONETARY NOMINALISM 40 3.1 Introduction 40
INTERNATIONAL CONTRACTS AND CURRENCY FLUCTUATIONS 3.2 General remarks 40 3.2.1 Definition and nature of the principle of monetary nominalism 40 3.2.2 Competing concepts: metallism and valorism. 41 3.2.3 The purpose of monetary nominalism 42 3.2.4 Legal effects of monetary nominalism 43 3.3 The application and legal status of nominalism in anational law 44 3.3.1 A general principle - dissemination in national laws 44 3.3.2 Monetary nominalism as a principle of anational law 46 3.3.3 Discussion: What are the purposes of monetary nominalism and what interests does it serve when applied to international transactions?... 48 3.3.4 Conclusion 50 DETERMINATION AND CONVERSION OF DEBT CURRENCIES 51 4.1 Introduction 51 4.1.1 Presentation of the problems 51 4.1.2 The purpose of the determinations 52 4.2 Determination of the currency of account 54 4.2.1 The agreed currency of account 54 4.2.1.1 Ambiguous denotations of currency.. 54 4.2.1.2 Subsequent uncertainties caused by the abolishment of a currency 58 4.2.2 The currency of account in absence of agreement 59 4.3 Determination of the currency of payment,.. 59 4.3.1 The currency of payment distinguished from currency of an award 59 4.3.2 The agreed currency of payment 60 4.3.3 The currency of payment in the absence of agreement 63 4.4 Determination of the exchange rate for conversion... 64 4.4.1 Introduction 67 4.4.2 The date of the conversion rate 68 10
CONTENTS 4.4.3 The place of the applicable exchange rate... 72 4.4.4 Types of exchange rate 73 5 PROTECTION AGAINST CURRENCY EXCHANGE RATE FLUCTUATIONS 74 5.1 Introduction 74 5.2 Protection provided by the parties. 76 5.2.1 Leading and lagging 76 5-2.2 Foreign currency accounts and netting 77 5.2.3 Exchange rate clauses 78 5.2.4 Multi-currency clauses and currency baskets.. 79 5.2.5 Maintenance of value clauses 82 5.2.6 Price reservation clauses 83 5.2.7 Hardship clauses 84 5.3 Protection provided by the foreign exchange market.. 85 5.3.1 Introduction 85 5.3.2 Forward exchange contracts 85 5.3.3 Currency futures 88 5.3.4 Currency options 88 5.3.5 Currency swaps 89 5.3.6 Derivatives 91 5.3.7 Exchange rate insurance 91 6 COMPENSATION FOR EXCHANGE LOSSES CAUSED BY CURRENCY EXCHANGE RATE FLUCTUATIONS. 92 6.1 The problem 92 6.2 The currency in which to assess damages 94 6.2.1 The problems and possible solutions 94 6.2.2 Choice of the most appropriate currency 95 6.3 Determination of the conversion rate 98 6.3.1 Delayed payments 98 6.3.2 Reimbursements 105 6.4 Compensation by means of interest and damages... 107 6.4.1 Introduction 107 6.4.2 The award of default interest. 108 6.4.3 Damages for exchange losses 110 6.5 Conclusions ;._:... ^ 115 11
INTERNATIONAL CONTRACTS AND CURRENCY FLUCTUATIONS 7 SOME REMARKS ON THE COLLECTION OF DEBTS IN FOREIGN CURRENCIES ; 116 7.1 Introduction 116 7.2 Judgements expressed in foreign currencies 116 7.3 Set-off of obligations expressed in different currencies. 118 7.4 Foreign currency obligations in insolvency proceedings 122 8 CONTRACTUAL REMEDIES AS RESPONSES TO EXCHANGE RATE FLUCTUATIONS 124 8.1 Subsequent events and contractual remedies 124 8.1.1 Currency fluctuations as a subsequent event.. 124 8.1.2 The impact of clausula rebus sic stantibus... 125 8.1.3 The available contractual remedies 127 8.2 Monetary nominalism and currency risk speculation.. 129 9 CONTRACTUAL CLAUSES ON REMEDIES AGAINST CURRENCY EXCHANGE RATE FLUCTUATIONS... 131 9.1 Introduction 131 9.2 Special risk clauses 132 9.3 General clauses on changed circumstances 136 9.4 Conclusions 140 10 CONTRACT ADAPTATION AS RESPONSE TO CURRENCY EXCHANGE RATE FLUCTUATIONS... 141 10.1 Introduction 141 10.2 The legal basis for contract adaptation 141 10.2.1 The problem 141 10.2.2 National doctrines on contract adaptation... 142 10.2.2.1 Introduction 142 10.2.2.2 The Scandinavian "generalklausul - Avtaleloven 36" 143 10.2.2.3 Frustration of contracts 148 10.2.2.4. BGB 313 - Wegfall der Geschaftsgrundlage 153 10.2.2.5 Imprevision 156 10.2.2.6 Some comparisons 158 10.2.3 Anational sources.. 159 10.2.4 Conclusions 164 12
CONTENTS 10.3 Currency fluctuations as a cause for contract adaptation 166 10.3.1 Point of departure 166 10.3.2 Exchange rate fluctuations as an event 167 10.3.3 Considerable disparity between exchange rates. 169 10.3.4 The effect on the equilibrium of the contract.j 172 10.3.5 Subsequent and unforeseeable exchange rate fluctuations.* 176 10.3.6 External and unavoidable events 180 10.3.7 The assumptions of the parties 186 10.3.8 The "reasonableness test" i 188 10.3.9 Some conclusions 189 10.4 Procedures of contract adaptation 191 10.4.1 Introduction 191 10.4.2 Renegotiation and mediation 191 10.4.3 Conciliation and revision 193 10.4.4 Resort to court or arbitration 194 10.5 Modes of contract adaptation 194 10.5.1 Point of departure " 194 10.5.2 Modification of contractual terms 195 10.5.3 Adding new terms 196 11 TERMINATION OF CONTRACT AS RESPONSE TO CURRENCY EXCHANGE RATE FLUCTUATIONS... 197 11.1 Introduction 197 11.1.1 Problem and definition 197 11.1.2 Termination compared to adaptation 198 11.1.3 The legal basis for contract termination in anational law?- 199 11.2 Currency fluctuations as a cause for termination 200 11.2.1 The requirements 201 11.2.2 The impact of a more dramatic effect 201 11.2.3 The "reasonableness test"... 202 11.3 Procedures and modes for termination 203 11.3.1 Renegotiation 203 11.3.2 Resort to courts or arbitration to determine the effects of termination. % 204 11.3.3 Restitution ^. 204 13
INTERNATIONAL CONTRACTS AND CURRENCY FLUCTUATIONS 11.3.4 May termination be avoided by offering adaptation? 205 12 EXEMPTION FROM CONTRACTUAL LIABILITY FOR NON-PERFORMANCE 206 12.1 Introduction 206 12.1.1 The problem and legal basis for liability exemption 206 12.1.2 Exemption from liability as compared to termination 208 12.2 Currency fluctuations as a cause for exemption 208 12.2.1 Currency fluctuations as impediment 208 12.2.2 Unforeseeability and unavoidability of currency fluctuations 210 12.2.3 Failure of a third party,.. / 211 12.3 Effects of the exemption 211 12.3.1 Exemption from liability 211 12.3.2 Temporary or final exemptions 212 13 CONCLUSIONS 213 Table of abbreviations 219 Table of cases 223 Table of literature with abbreviations 226 Index 236