Argentina: Obligations Established In Foreign Currency And Their Payment In Legal Tender

A ruling issued by the Commercial Court of Appeals (i) revoked a decision of the lower court which had rejected the payment with Argentine Pesos of an amount owed in US Dollars which had considered that article 765 of the Civil and Commercial Code was inapplicable and (ii) considered that defining the legal framework of obligations in foreign currency and determining whether article 765 of the Civil and Commercial Code is of public order or of a non-mandatory nature was not essential to decide the case.

On May 17, 2016, Division F of the National Court of Appeals in Commercial Matters (hereinafter, the "Higher Court"), revoked the ruling issued in judicial proceedings "Unipox S.A. vs Plastilit S.A. in re Ordinary" which had rejected the payment made by the defendant by depositing a sum in Argentine Pesos, alleging its equivalence with the US Dollar amount of the judgment, according to the quotation of the currency on the date of payment.

The Higher Court began by pointing out that according to caselaw of the Supreme Court which it quotes, rulings must be issued in accordance with the current circumstances of the case where verification can be carried out even when not requested by the parties.

Thus, the Higher Court referred to the legal context in force at the time of the payment and made it clear that subsequent regulatory amendments did not need to be considered for the analysis of the case.

In this perspective, the Higher Court considered that "(...) it is not essential to define the legal framework around the obligations in foreign currency - which would lead to determining as logical prius if article 765 of the Civil and Commercial Code is of public order or of a supplementary nature, in view of the distinction which article 7 of the Civil and Commercial Code encourages (...)".

Accordingly, the regulatory context taken into account by the Higher Court was exclusively that of the foreign exchange policy existing at the time when the respondent made the payment. In this framework, it explained that the Central Bank had issued Communiqué "A" 5,318 limiting access to the foreign exchange market as from July 6, 2012, only validating it by reason of tourism and travel, and Communiqué "A" 5,526 dated January 27, 2014, which reduced such restriction enabling the purchase of foreign currency for accumulation in a restricted manner.

Under such circumstantial situation which the Higher Court noted as beyond the control of the parties and while the aforementioned regulations were in force, it is clear from the ruling that the debtor was unable to comply with the obligation in the currency set, without contravening the regulation in question whose constitutionality had not been challenged by the parties.

Therefore, the Higher Court decided to grant the debtor the attribution to settle the obligation in currency of legal tender, in accordance with the official exchange rate in force on the date of payment, stressing that the debtor cannot be required to evidence the impossibility to comply with the payment of the obligation in the currency set, since the impediment was stipulated by a legal regulation.

In this regard, no reference was made to the alternative ways to acquire foreign currency by means of securities transactions, available during the period in which the restrictive foreign exchange regulations were in force. We refer to procedures confirmed by settled caselaw, e.g. a ruling issued by Division B of the National Criminal Court of Appeals in Economic Matters dated March 11, 2015 in proceedings "BBVA Banco Francés S.A. in re Breach of Law No. 24,114"; a ruling issued by Division F of the National Court of Appeals in Civil Matters dated August 25, 2015 in proceedings "Fau, Marta Renée vs Abecian, Carlos Alberto and others in re Consignment" and "Libson, Teodoro and others vs Fau, Marta Renée in re Foreclosure" (see " Foreign Currency Obligations – Blue-Chip Swap Transactions" in Marval News # 154, September 30, 2015, and the ruling of the First Division of the Civil and Commercial Court of Appeals of Bahía Blanca, Province of Buenos Aires, dated December 3, 2015, in proceedings "Carpo, Elena Nora vs Peralta, Ceferino Víctor Alberto in re Contract Compliance" (see " Foreign Currency Obligations - Lawful Alternative Means to Acquire It - Non-Mandatory Nature of Section 765 of the Civil and Commercial Code" in Marval News No. 158, February 29, 20169..

Although the Higher Court established that the lower court should decide the sufficiency or otherwise of the payment "(...) since given the way in which it was decided at the lower instance no resolution on the topic was adopted (...)", no reference was made to the possibility that the Argentine Pesos deposited as equivalent to the amount owed in US Dollars, according to the official exchange rate, are not sufficient for the plaintiff to acquire the amount of foreign currency to cover the credit by any alternative method.

The judgment specifically refers to "(...) the different opinions that the matter raises and which has no doctrinal or jurisprudential interpretative uniformity". However, even though the decision of the lower court does rule on the non-applicability of article 765 of the Civil and Commercial Code, the Higher Court refrains from approaching analysis of the nature of the new rules of the Civil and Commercial Code in force, relating to obligations assumed in foreign currency, and whether their application is appropriate or not in the contracts in course of execution.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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