Although the Euro crisis appears to be more stable, it still
appears far from resolved, and so stable, but critical.
Jersey investors with Euro portfolios may therefore eye our
Continental neighbours increasingly nervously, 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.
Obviously, this will depend on many variables including the
steps taken at national and international level 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 the 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 will be calculated at the market
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 contracting party cannot avoid his obligations
on the ground they have become impossible unless they are truly
impossible, not merely difficult or onerous to perform.
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
Although admittedly rough and ready, this shows reluctance to
allow a 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.
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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From the early 1990s, Cyprus has developed a niche as the natural intermediary for investment into the newly marketized economies of Russia and Eastern Europe, for both cultural and commercial reasons.