Denomination
In international contract law, denomination is the selection of the currency in contracts or securities .
General
As soon as money and payment flows have been agreed in international contracts , it must be clarified in which currency they are to be paid by the debtor to the payee . The reason for this is that the exchange rates of the currencies are very different and it should therefore not be indifferent in which currency a payment is to be made. The denomination decides who has to bear an exchange rate risk . This also applies to securities ( nominal value shares , bonds or investment certificates ).
Contracts with denomination occur in particular in the areas of foreign trade finance , export and import , trade agreements , interbank trade or international credit transactions .
Legal issues
The denomination is taken into account as a contractual clause in the context of payment terms by which the debtor is obliged to make payments exclusively in a certain currency ("Payments are made exclusively in US dollars."), Especially if this is not his domestic currency. In the case of bonds, it is regulated in the bond terms and conditions . In the event that such a clause is lacking, the law makes a clear decision. If a monetary debt expressed in a currency other than euros is to be paid domestically, payment can be made in euros, unless payment in the other currency has been expressly agreed ( currency debt ; Section 244 (1) BGB ). Accordingly, if the contracts do not contain any express provision, payments may be made in euros. Since this regulation applies in all EU member states , a denomination is still required for contracts with third countries .
By choosing a currency, the contracting parties submit to a certain currency statute ( Latin lex monetae ); the selected currency is based on the law of the country whose currency has been agreed. It is the respective currency law of the country, which determines what is legal tender at the time of payment , how the currency unit is broken down ( denomination ) and whether value protection clauses are permitted. The legal principle of the "lex monetae" is the reference inherent in every cash benefit contract to the currency law of the state whose currency is used in the contract. The "lex monetae" is the conflict of laws principle that only the state in whose currency a monetary debt is expressed determines which currency is legal tender in its country. The currency statute also determines which currency is eligible tender at a certain point in time and in a certain place .
economic aspects
With such a clause, the creditor pursues the goal of completely eliminating the exchange rate risk inherent in cross-border payments. The negotiating power of a contract partner decides on the denomination . As a rule, this will be a contractual partner whose place of business is in a hard currency country so as not to be subject to the risk of devaluation of a soft currency . Developing country debts are largely denominated in hard currencies. For bonds, only those currencies are used that are expected to show exceptional stability; these are mainly key currencies . The denomination for Eurodollars is the US dollar in which investors are based in the euro area . Dual currency bonds have two denominations relating to face value and interest payment and redemption . The denomination in foreign currency as a defining characteristic of the foreign currency debt is not affected by the recourse to the home currency.
Demarcation
The denomination does have to do with currencies, but means the sovereign of the state in denominations of currency into individual denominations .
Individual evidence
- ↑ Klaus W. Staehle (Ed.), Das große Euro-Handbuch , 1999, p. 8 f.
- ↑ Silke Schwirz, The Euro, international contracts and financial derivatives , 1999, p. 28 f.
- ↑ Silke Schwirz, The Euro, international contracts and financial derivatives , 1999, p. 87
- ↑ Klaus W. Staehle (Ed.), Das große Euro-Handbuch , 1999, p. 8
- ^ Franz Zehetner, Monetary Value Clauses in Cross-Border Commercial Transactions , 1976, p. 11
- ↑ Georg Schlichting, The Debt Problem of the Third World , 1997, p. 257
- ^ Franz Zehetner, Monetary Value Clauses in Cross-Border Commercial Transactions , 1976, p. 29
- ↑ Helmut Grothe, Foreign Currency Liabilities , 1999, p. 11
