Abstract

Problems in the Construction of Combined Currency Clauses

In combined currency clauses, the monetary value of a claim is defined by cumulative amounts of various currencies. The object of such clauses is orientation of the monetary value of a claim to the changing values of several currencies in order to reduce the interests of creditors (minimization of inflation loss) and debtors (maximization of inflation gain) to a common denominator. Special interpretation problems arise when it is impossible to deduce from the clause’s definition the legal consequences which arise from the following changes in the political and monetary policy constraints affecting a specific clause: 1. One of the currencies listed in a clause is formally replaced in the course of a national currency reform by a currency with a different designation: In this respect, it is shown that the necessary conversion ruling is not a specific problem of combined currency clauses. But in order to allow for that conversion in the formulation of the clause, an explicit adjustment ruling is recommended for all combined currency clauses. 2. Several currencies listed in a clause are merged into or replaced by a single currency in the course of the implementation of a currency union: Regardless of the number of listed currencies affected, it is recommended, not on economic grounds, but certainly in the interests of legal clarity, that the following explicit adjustment ruling be adopted. In the event that one, several or all currencies listed in a clause are affected by a merger of national currencies into a community currency, the relative currency amounts must be converted into the community currency at the official conversion rate on the effective date of the community currency. 3. One or more of the currencies listed in a clause become invalid, as a result, say, of the dissolution of the issuing states: To ensure legal clarity for this case, too, it is advisable to include a clause which permits just, subsequent settlement of the proportional value of the invalid currency. 4. One or more of the currencies listed in a clause become economically practically valueless in consequence of enormous inflation rates: For this case it is shown that the proportional value of a currency so seriously affected by inflation becomes ever smaller, to the benefit of the proportional values of the other currencies. If we reckon with only a limited number of decimal places, its proportional value will decline to finite 0. From the legal standpoint, no modification of the clause is necessary.