Choice of Law and Foreign Currency Debts: A Comparative Study

Abstract

Choice of law in foreign currency debts is an area where several contradictory rules exist, leaving it unclear how a court will treat the issues of choice of law and foreign currency debt. This article aims at explaining the reasons courts have created ambiguity in this field. In part one I will survey the choice of law rules on foreign currency debts in four different jurisdictions. Two of them are common law jurisdictions, the U.S. and England, while the other two are civil law jurisdictions, France and Egypt. In Part One I demonstrate that courts tend to deal with foreign currency debts not as a single legal issue governed by a single choice of law rule but as a set of legal issues that requires the use of several choice of law rules and doctrines. In Part Two, I examine the manner in which courts have handled choice of law in foreign currency debts through evaluating courts' use of the choice of law rules and doctrines. I explain that in most cases courts have misused the choice of law rules and that the real explanation for their attitudes towards the choice of law in foreign currency debts is a desire to balance the need for enforcing agreements to the maximum extent possible, which requires using the party autonomy choice of law rule, and the need for complying with restrictions, imposed by the forum's law, foreign law, or even the IMF agreement, that guide the court towards other choice of law rules or doctrines such as lex loci solution is.In Part Three I suggest a better choice of law approach to foreign currency debts that is based on enforcing the parties' agreement by using party autonomy as a basic choice of law rule. However, the use of the party autonomy choice of law rule will be restricted in accordance with the IMF agreement whenever the parties’ agreement contradicts the law of a member state. I explain that this restriction should take place once the parties’ agreement at the time of conclusion or at the time of enforcement will affect the IMF member state's monetary system.