Although the Euro crisis seems to be more stable, it still
appears to be far from resolved - so stable, but critical. Jersey
investors with Euro portfolios may therefore eye our Continental
neighbours with increasing apprehension, thinking the previously
unthinkable: will the Euro survive? If not, of immediate importance
amid the chaos will be what happens to debts they have, or are
owed, in Euros.
This will obviously depend on many variables including the steps
taken at national and international levels to regulate the
position, especially those that provide new currency to replace the
Euro. They also include the exact terms of the relevant contract
creating the debt, especially (among other things) price, payment
and governing law. However, subject to those variables, a starting
point to negotiate through them can be ascertained by resorting to
first principles applicable to a simple contract without elaborate
terms and conditions, subject to Jersey law.
The law can distinguish between the currency of account (by
which the price is measured) and the currency of payment (in which
the price so measured is paid). These are usually the same, as
there is an express price (e.g. €1,000) which must be paid.
However, even where there is only one currency mentioned, there may
be a different acceptable currency of payment.
In Jersey, according to the Loi (1835) sur la monnaie, the only
legal tender is 'la monnaie Anglaise' i.e. Sterling. So,
although Jersey's Royal Court is happy to and frequently does
order payment in other currencies because they are specified in the
contract sued on, strictly the parties may insist on Sterling as
the currency in which they make the payment or are paid. If so, the
relevant amount of Sterling (as the currency of payment) must be
calculated to match the relevant amount of foreign currency as the
currency of account. This is calculated at the market rate.
So what happens if there is no Euro market rate to refer to? The
debtor will try to argue that the calculation is impossible,
although the Royal Court is unlikely to take kindly to this
argument, especially if the debtor owes money in respect of
services already rendered by the creditor. Previously, the Royal
Court has held that the contracting party cannot avoid his
obligations on the grounds they have become impossible, unless they
are truly impossible, not merely difficult or onerous to
An advantage of Jersey law is its flexibility to adopt solutions
from other jurisdictions, where appropriate, and some English cases
may provide the answer. In cases decided after the Second World War
concerning debts in German Reichsmarks, for which there was no
market, the Courts made their best assessment of an appropriate
rate on the best evidence available - even if (as they admitted)
that amounted to an educated 'judicial guess'. Although
admittedly rough and ready, this shows reluctance to allow even a
currency's disappearance to thwart the obligation to pay, and
the Royal Court is likely to adopt this approach as an attractive
solution – should the previously unthinkable actually
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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