Currency issues can significantly complicate cross-border litigation. Here's a breakdown of the key problems and considerations:

1. Currency Conversion:

• The Basic Problem: When parties from different countries engage in litigation, they often have debts or judgments expressed in different currencies. The court needs to determine the equivalent amount in a single currency, usually the currency of the jurisdiction where the case is being heard.


• Date of Conversion ("Breach Date," "Judgment Date," or "Payment Date"): The critical question is when to convert the currency. Different jurisdictions use different dates, and the choice can significantly impact the final amount due to exchange rate fluctuations. Common choices are:


• Breach Date (Cause of Action Date): The date when the breach of contract or tort occurred. This is often favored in common law countries and can be seen as restoring the injured party to their original position. It's also the date on which the debt was incurred.


• Judgment Date: The date the court issues its judgment. This provides certainty at the time of judgment.


• Payment Date: The date when the judgment is actually paid. This aims to compensate the plaintiff for any losses due to currency fluctuations between the judgment and payment.


• Date of Demand: The date the plaintiff demanded payment.


• Source of Exchange Rate: Which bank, financial institution, or published rate to use for the conversion? Courts usually rely on reputable sources like the central bank of the relevant country or well-known financial news providers.


• Choice of Law: The applicable law (contractual or otherwise) can specify the currency of payment and the date of conversion. Contractual provisions are usually enforced. Absent a contractual clause, the choice of law rules of the forum will dictate which law governs.

• Volatility: Exchange rates can fluctuate significantly, especially during periods of economic uncertainty or global events. This volatility can make it difficult to predict the ultimate cost of litigation or the amount to be recovered.


• Hedging: Parties may use financial instruments like forward contracts or currency options to hedge against currency risk. The costs and benefits of hedging need to be considered when assessing potential damages.


• Devaluation/Revaluation: A sudden devaluation or revaluation of a currency can drastically alter the value of a claim or judgment.

• Enforcement: Whether a court will enforce a judgment expressed in a foreign currency depends on the jurisdiction.


• Common Law Approach (Historical): Historically, some common law jurisdictions (e.g., the U.S., UK) insisted on converting the judgment to the local currency. However, the trend is now toward allowing judgments in foreign currencies.


• Modern Trend: Many jurisdictions now allow courts to render judgments directly in a foreign currency. This is particularly true in commercial disputes.


• Recognition: Even if a court can render a judgment in a foreign currency, enforcing that judgment in another jurisdiction requires recognizing the foreign judgment. The rules for recognition vary widely.

• Legal Tender: Even if a judgment is expressed in a particular currency, the defendant might legally be required to pay in the legal tender of the jurisdiction where enforcement is sought. This can necessitate a further currency conversion at the time of payment.


• Restrictions on Currency Transfers: Some countries have strict regulations on the transfer of currency across borders. These regulations can affect the ability to collect a judgment or make payments.


• Sanctions: International sanctions can restrict the flow of funds to or from certain countries or individuals, further complicating cross-border payments.

• If one of the parties is a foreign government, sovereign immunity may be invoked to protect the government's assets from seizure to satisfy a judgment. There are exceptions to sovereign immunity, often related to commercial activities.

• Strategic Considerations: The choice of forum and the applicable law can significantly impact the currency issues in the case. Parties often negotiate these clauses in contracts to minimize uncertainty.


• "Currency of the Contract": Courts often consider the "currency of the contract" (the currency in which the parties contemplated the underlying transaction) when resolving currency disputes.

• Currency of Payment Clause: Specifies the currency in which payments must be made.


• Exchange Rate Fluctuation Clause: Addresses how exchange rate fluctuations will be handled (e.g., by adjusting the amount due, using a specific conversion mechanism, or setting a floor or ceiling on exchange rates).


• Choice of Law Clause: Specifies the governing law for the contract.


• Forum Selection Clause: Specifies the jurisdiction where disputes will be resolved.


• Gold Clause: While less common, some contracts link payment to the price of gold to protect against currency devaluation.

• Expert Testimony: Currency experts are often needed to provide evidence on exchange rates, currency regulations, hedging strategies, and the impact of currency fluctuations.


• Pleadings: Clearly specify the currency of the claim and the basis for any currency conversion.


• Discovery: Obtain information about the parties' currency practices, hedging strategies, and any relevant currency regulations.


• Judgment Drafting: Propose a judgment that takes into account currency considerations and minimizes potential disputes over enforcement.


• Enforcement Strategy: Carefully research the currency laws and regulations of the jurisdiction where enforcement will be sought.

• A U.S. company contracts to supply goods to a German company. The contract is silent on the currency of payment. A dispute arises, and the U.S. company sues in a U.S. court. The court must decide whether to convert the damages to U.S. dollars and, if so, as of what date.


• A Canadian bank lends money to an Argentinian company. The loan agreement specifies that payments are to be made in U.S. dollars. Argentina experiences a severe economic crisis, and the Argentinian company devalues its currency and imposes exchange controls. The Canadian bank sues in Canada. The court must address the enforceability of the payment clause and the effect of the Argentinian currency regulations.

Currency issues in cross-border litigation can be complex and require careful planning and expert advice. Understanding the applicable laws, regulations, and the principles of currency conversion is crucial to effectively litigating and resolving international disputes. Failing to properly address currency issues can result in significant financial losses.