Introduction

1. On 1 January 1999, the euro will become the single currency in the eleven Participating Member States.1 This changeover to the euro is dealt with chiefly in two Regulations of the Council of the European Union, namely:

- Council Regulation (EC) No 1103/97 of 17 June 1997, which lays down certain provisions relating to the introduction of the euro;2 and

Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the euro.3

As is well known, this changeover to the euro, which constitutes a change in the monetary law of the various Member States, will take place in two phases - a transitional period from 1 January 1999 to 31 December 2001, and a final period from 1 January 2002 onwards.

The purpose of this contribution is to consider firstly to what extent international arbitrators are bound by these changes (I) and then the impact this change-over to the euro will have on arbitral procedures both during the transitional period (II) and thereafter (III).4

I. The applicability to international arbitration of the changeover to the euro

2. The applicability of the changeover to the euro needs to be considered from various viewpoints.

The Euro Regulations 1103/97 and 974/98 are binding in their entirety and directly applicable in all the Member States of the European Union.5

The authorities in the Member States of the European Union - judicial authorities included - will therefore be bound by these Regulations. [Page10:]

The first question which arises is whether or not arbitral awards are covered by these Euro Regulations. The 'legal instruments' to which these Regulations apply are defined therein as follows: 'legislative and statutory provisions, acts of administration, judicial decisions, contracts, unilateral legal acts, payment instruments other than banknotes and coins, and other instruments with legal effect.' 6

It may seem surprising not to find arbitral awards amongst these legal instruments. This is a problem easily overcome insofar as, in a certain number of cases and under certain conditions, arbitral awards are likened to 'judicial decisions' under the meaning of the aforementioned Euro Regulations in international conventions. In any event, arbitral awards certainly come within 'other instruments with legal effect' under the meaning of these Regulations.

Accordingly, the authorities, including judicial authorities, in the Member States of the EU must apply these Regulations to arbitral awards, from which certain consequences are to be drawn.

3. The second, and undoubtedly more tricky, question which arises is to what extent international arbitrators who make a decision relating to one of the national currency units of the eleven Participating Member States will be bound by these Euro Regulations.7 It is true that the Court of Justice of the European Communities, in a very recent judgement, albeit in a very different context, acknowledged arbitrators as having a role in settling disputes. 8 Does this necessarily mean, however, that they are bound by the direct effect of EC Regulations? This question is akin to that with which third countries are faced.

It is pointed out in one of the recitals to Euro Regulation 1103/97 that the introduction of the euro 'constitutes a change in the monetary law of each participating Member State'9 and Article 6 of Regulation 974/98 also refers to monetary law.

The Participating Member States have thus decided to change their monetary law (lex monetae) and have empowered the Council of the European Union for this purpose.

According to monetary law, it is for each state to regulate the method of issuing its currency, to name such currency and decide how it will be defined and sub-divided.10 A state is entitled to substitute one currency for another and history provides several such examples (the new French franc which replaced the old franc, and the mark which replaced the Ostmark).11

It is a well established principle of international law that changes in monetary law must be recognized by everyone.12

This, moreover, is what is very rightly pointed out in recital No 8 to Euro Regulation 1103/97 in the following terms: 'the recognition of the monetary law of a State is a universally accepted principle.' [Page11:]

Thus, even though there may be some doubt in certain people's minds as to whether the Euro Regulations are directly applicable to international arbitrators, the nature of these Regulations, which concern a change in monetary law, implies that they be recognized and applied by international arbitrators, just as they will be by third countries.13

International arbitrators will therefore be bound to apply them, even of their own motion, as they involve public policy provisions of international law.14

How then will such applicability be realized? A distinction will be made between the transitional period and the final phase, consideration being given for each of these periods to the currency of the application and the incidental claims, the currency of the award and, lastly, that of enforcement, even if the matter of enforcement does not come directly within the scope of the arbitrators' powers.

II. The transitional period (from 1 January 1999 to 31 December 2001)

During the transitional period, national currency units continue merely as 'sub-divisions' or 'declensions' of the euro, according to irrevocably fixed conversion rates.15

4. During the transitional period, as is well known, economic players will have the choice of using their old national currency units or the euro. Reference to another national currency unit shall be as valid as if reference were made to the euro unit according to the currency rates.16 The changeover to the euro is neither forbidden nor compulsory. This is what is called the 'neither nor' rule contained in Article 8 of Regulation 974/98.

According to this Article:

Acts to be performed under legal instruments stipulating the use of or de-nominated in a national currency unit shall be performed in that national currency unit. Acts to be performed under legal instruments stipulating the use of or denominated in the euro unit shall be performed in that unit.

The provisions of paragraph 1 are subject to anything which parties may have agreed.

A. Currency of the arbitration request or incidental claims

5. As a rule, the parties are obliged to respect the currency in which the legal instrument concerned (contract, invoice, etc.) is denominated and thus to present their request or their incidental claims in the currency unit used in such instrument.

The claimant, whether the bringer of the main or an incidental claim, could be tempted to anticipate the changeover to the euro when the legal instrument concerned is denominated in a national currency unit of one of the Participating Member States and, from 1 January 1999, denominate its arbitration request in euros.

The respondent could always object to this on the grounds of the 'neither nor' rule, but will have to do so before the transitional period expires. Such person, if ordered to make a payment, will therefore ask for such payment to be denominated in the national currency unit of the legal instrument concerned.

If the respondent does not react, we do not consider it possible for the arbitrator to redenominate the claim in the original currency, as the latter [Page12:] continues only as a 'declension' of the euro during the transitional period. The arbitrator will be bound by the anticipatory choice made by the parties.

In the event of a legal instrument denominated in the ECU, on the other hand, the claim must be denominated in the euro, in accordance with Article 2 of Regulation 1103/97. If, nonetheless, the parties present a claim denominated in the ECU, the arbitrator may redenominate the claim in the euro as it is to be presumed that the ECU in the legal instrument refers to the ECU as referred to in Article of 109 G of the Treaty and as defined in Regulation (EC) 3320/94. Such presumption is always rebuttable taking into account the intention of the parties.

In the event of a conversion into the euro, the rules relating to conversion rates (Art. 5, Regulations 1103/97 and 974/98) and rounding off (Art. 5, Regulation 1103/97) 17 will need to be respected.

B. Currency of the award

6. Arbitrators are required to respect the choice of currency made by the parties, that is to say the national currency unit or the euro. Arbitration costs shall be fixed according to the same rules inasmuch as they relate to national currency units or the euro. 18

Given the principles outlined above, we consider it difficult to accept that arbitrators may de-nominate the payments which they order a party to make at one and the same time in both national currency units and euros.19 In our view, such over-zealousness could undermine the validity of their awards, as they would have respected neither monetary law nor the will of the parties.

C. Currency of enforcement

7. As a rule, authority to enforce arbitral awards denominated in the euro will be granted in such unit and the enforcement thereof will similarly be in the euro. The same goes for awards denominated in the ECU which are rendered before 31 December 1998: authority to enforce such awards will be granted in the euro. 20

Authority to enforce awards denominated in a currency unit of one of the Participating Member States will be granted in such unit, it being impossible for the court granting such authority to change the denomination of such unit unless the parties are in agreement.21 Should the award be enforced in such Participating Member State by crediting an account of the creditor, it could, however, be paid by the debtor in the euro unit or in the national currency unit of the Member State concerned.22

III. The final phase (from 1 January 2002)

8. From 1 January 2002, that is to say as soon as the transitional period comes to an end, the euro will be the single currency in the Participating Member States.23[Page13:]

Banknotes and coins denominated in old national currency units shall cease to be legal tender at the latest six months after the end of the transitional period.24

Inescapably, there will continue to be references to former national currency units in legal instruments after 1 January 2002. To overcome the difficulties arising from such references, Regulation (EC) 974/98 provides in Article 14 that 'where in legal instruments existing at the end of the transitional period reference is made to the national currency units, these references shall be read as references to the euro unit according to the respective conversion rates.'25

A certain number of consequences as far as inter-national arbitration is concerned arise from this 'reading as the euro' rule.

A. Currency of the arbitration request or incidental claims

9. As from 1 January 2002, when arbitration proceedings or incidental claims are initiated, they must necessarily be denominated in euros, even if the legal instrument to which such arbitration relates is denominated in a national currency unit. The claimant, whether the bringer of the main or the incidental claim, will therefore be required to redenominate his or her claim in euros, respecting the conversion and rounding off rules.

Should a claim nonetheless be presented in a national currency unit, it may be redenominated in euros by an arbitrator, even of his own motion. In so doing, the arbitrator will be simply acknowledging the change in the lex monetae, in accordance with the rule of international law. It would be appropriate to effect this redenomination when the terms of reference are drawn up.

The sooner redenomination occurs, the better.

There is every reason to think that the International Court of Arbitration of the ICC or its secretariat will draw the attention of arbitrators and parties to the fact that a claim is denominated in an old national currency unit at the stage of reference 26 (Article 18, paragraphs 2 & 3, 1998 ICC Rules).

In any event, it is not to be inferred from a reference to a national currency unit in an arbitration request that arbitration proceedings are inadmissible or irregular. Such a reference shall be 'read' by the arbitrator, or the International Court of Arbitration of the ICC if such be the case, as a reference to the euro. To use a somewhat facile image, it is as if arbitrators were wearing special spectacles enabling them to read references to national currency units as euros.

The same will apply to any requests relating to provisional or protective measures.

B. Currency of the award

10. There will clearly be a certain number of arbitral awards rendered from 1 January 2002 onwards on the basis of applications and submissions which refer to old national currency units.

Any award handed down after 1 January 2002, however, must necessarily be denominated in euros.

Failing this, the award risks being unenforceable for being in a currency which is no longer legal tender. Indeed, the 'reading as the euro' rule laid down by Article 14 of Regulation 974/98 applies only to 'legal instruments existing at the end of the transitional period'.

11. Furthermore, it may well be asked whether references to national currency units may be changed into euros in proceedings for the correction or interpretation of an award.27[Page14:]

12. Arbitrators may be faced with two possible situations:

- In the first, the parties will have modified their respective claims in their last submissions, redenominating them in euros. The role of the arbitrators will be confined to checking the requirements laid down by the lex monetae with respect to conversion rates and rounding off.

- In the second, the parties will not have redenominated references to national currency units. In this case the arbitrators must, even on their own motion, redenominate references to national currency units according to the lex monetae and having regard to the rules relating to conversion rates and rounding off.

If the issue is being deliberated upon, the arbitrators may (not that this is an obligation, however) re-open discussions and ask the parties to submit their comments and calculations regarding conversion and rounding off.

Insofar as arbitrators apply the public policy rules of international law imposed by the lex monetae, for the purpose of making awards enforceable, they cannot be accused of exceeding their jurisdiction.

As regards certain arbitration costs and fees 28 incurred in an old national currency unit, it is compulsory that they be calculated in euros.

There is every reason to think that the International Court of Arbitration of the ICC will refuse to approve draft awards in which the aforesaid rules are not observed. 29

C. Currency of enforcement

13. Even if arbitrators are less concerned by this point, it is nonetheless relevant to them insofar as they wish to see the awards they make carried out.

To the extent that an arbitral award is a 'legal instrument' as referred to in the Euro Regulations, references which may be made therein to national currency units will be 'read' by the parties and state courts as references to the euro.

Consequently, an application for authority to enforce such an award and the judgement arising therefrom must be denominated in the euro. The same applies to arbitral awards made before 1 January 1999 in which reference is made to the ECU.

In this respect, the enforcement of arbitral awards in which payments are ordered in euros will prove less problematic.

In the final phase of the changeover to the euro, the rule will be for arbitral awards, like state decisions, necessarily to be enforced in euros.

Conclusion

The introduction of the euro will have certain effects upon proceedings in international arbitration.

Arbitrators must see that such changes in the lex monetae are respected.

During the transitional period, they will ensure that the 'neither nor' principle is adhered to and the parties' choice of currency respected.

Following the transitional period, arbitrators will be required to make awards in euros, without reference to old national currency units.

During both periods, arbitrators will also be responsible for monitoring the application of the rules of conversion rates and rounding off as set by the lex monetae.

1
Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland. The Member States of the European Union which are not adopting the single currency on this date are: Denmark, Greece, the United Kingdom and Sweden.

2
OJEC No L 162 of 19 June 1997.

3
OJEC No L 139 of 11 May 1998.

4
Amongst the other problems raised by the changeover to the euro, but not specific to arbitration law, mention should be made of the continuity of contracts (on this question see in particular: N. Horn, 'European Monetary Union: legal and institutional aspects in their economic and political setting,' JIBL 1998, p. 76; R. Mullerat, 'The euro and commercial law,' Proceedings of the 42nd Congress of the International Union of Lawyers, Nice 1998, Report p. 15; L. Thévenoz, 'La monnaie unique et les pays tiers : un point de vue suisse,' RDAI/IBLJ No 3, 1997, p. 288; L'euro, Ed. Francis Lefebvre, 1998, No 200, p. 37 ff.; B. Dequesne & F. de Brouwer, 'Aspects juridiques du passage à la monnaie unique,' Journal des Tribunaux, 1998, p. 85; P. Senkovic & P. Lastenouse, 'The influence of the introduction of the euro on international arbitration,' Mealey's International Arbitration Report, June 1998, p. 41).

5
See Article 189 of the Treaty. Regulation (EC) No 1103/97 is directly applicable in Member States. Regulation (EC) No 974/98 is directly applicable in any Member State in accordance with the Treaty and subject to Protocols 11 (United Kingdom) and 12 (Denmark) and Article 109 K, paragraph 1.

6
Art. 1 of Regulations (EC) 1103/97 and 974/98.

7
The significance of this question will no doubt be all the greater the further away from the EU the seat of the arbitral tribunal is located.

8
Judgement of 16 September 1997 in the von Hoffmann case (C-145/96); Rec., 1997, p. I-4876 'the services of an arbitrator are principally and habitually those of settling a dispute between two or more parties, even though this is done on an equitable basis' (point 17); on this judgement see J.P. Le Gall, 'Les honoraires d'arbitrage au regard du droit fiscal communautaire,' Revue de l'Arbitrage 1998, p. 83 ff.

9
Recital 8 of Regulation 1103/97.

10
F.A. Mann, The Legal Aspect of Money, 5th edition, 1992, Clarendon Press, Oxford, p. 15 and p. 461 ff.

11
On these various aspects, see Luc Thévenoz's article 'La monnaie unique et les pays tiers : un point de vue suisse,' RDAI/IBLJ 1997, p. 294 ff.

12
In this vein, see also: N. Horn, 'European Monetary Union: legal and institutional aspects in their economic and political setting,' JIBL 1998, p. 76; P. Senkovic & P. Lastenouse, 'The influence of the introduction of the euro on international arbitration,' Mealey's International Arbitration Report, June 1998, pp. 39-40; F.A. Mann, The Legal Aspect of Money, 5th edition 1992, p. 461 ('The State's undeniable sovereignty over its currency is traditionally recognised by public international law; to the power granted by municipal law there corresponds an international right to the exercise of which other States cannot, as a rule, object'); R. Mullerat, 'The euro and commercial law,' Proceedings of the 42nd Congress of the International Union of Lawyers, Nice 1998, pp. 13-14; L'euro, Ed. Francis Lefebvre, 1998, No 190, pp. 35-36; Canadian Barristers Association, Report and Recommendation on the Need for Euro Legislation, 10 June, 1998 ('the application of the lex monetae doctrine would lead a Canadian court to acknowledge that the Euro replaces any EMU old national currency at the applicable conversion rate (...). Although there is no clear Canadian case law indicating that courts in the common law provinces would necessarily recognise the lex monetae doctrine, Canadian conflict of laws is based in part on English conflict of law which generally recognizes the doctrine of lex monetae'). See, however, J.F. Barbieri, 'Le droit, l'euro et l'an 2000,' Petites Affiches, 1 July 1998, p. 19 No 15.

13
In this vein and for further details, see L. Thévenoz, op. cit., RDAI/IBLJ 1997, p. 284 ff.

14
In applying the lex monetae, some states have adopted special legislation. American legislation is a model in this respect, regulating thereby the role of the courts and arbitrators. See Uniform Foreign-Money Claims Act 1989: '§ 12 Effect of currency revalorization. (a) If, after an obligation is expressed or a loss is incurred in a foreign money, the country issuing or adopting that money substitutes a new money in place of that money, the obligation or the loss is treated as if expressed or incurred in the new money at the rate of conversion the issuing country establishes for the payment of like obligations or losses denominated in the former money. (b) If substitution under subsection (a) occurs after a judgement or award is entered on a foreign-money claim, the court or arbitrator shall amend the judgement or award by a like conversion of the former money.'

15
Art. 6.1, Regulation 974/98.

16
Art. 6.2, Regulation 974/98.

17
'L'euro : dispositions transitoires et problèmes d'arrondis,' Problèmes économiques, No 2532, 3 September 1997, p. 7.

18
It should be noted that administrative costs and arbitrators' fees are currently fixed in US dollars by the International Court of Arbitration of the ICC (see Appendix III to the ICC Rules of Arbitration) (see H. Grigera Naón, 'The Appendixes to the 1998 ICC Arbitration Rules ,' The ICC International Court of Arbitration Bulletin, Vol. 8, No 2, 1997, pp. 47-52; also E. Schwartz, 'The ICC Arbitral Process - Part IV: The Costs of ICC Arbitration,' The ICC International Court of Arbitration Bulletin, Vol. 4, No 1, 1993, p. 8 ff.). The changeover to the euro should not, therefore, have any immediate impact on the fixing of such costs and fees, unless the Court were to decide to adopt the euro as reference currency. Such a change would necessitate an express amendment to the ICC Rules of Arbitration. However, the changeover to the euro could have an impact on other costs and fees which from 1 January 1999 could be denominated in the euro. The advance which might be requested by an arbitral tribunal to cover an expertise (Article 1.11, Appendix II, 1998 ICC Rules) or certain costs incurred in euros or national currency units for which arbitrators might be reimbursed come to mind. Besides, arbitrators may order the losing party to bear all or part of the legal fees of the winning party, such fees being included in the calculation either in national units or euros according to the lawyers' preferences. As early as 1 January 1999, ICC arbitral awards may therefore contain amounts in the euro for certain costs and fees.

19
The Commission Recommendation of 23 April 1998 concerning dual display of prices and other monetary amounts (OJEC, 1 May 1998, L. 130/26) is of limited scope and in our view would not appear to apply to judicial decisions and arbitral awards.

20
See the controversy raised by L. Thévenoz in relation to the ECU, RDAI/IBLJ 1997, p. 285.

21
R. Martin & G. Block, 'L'euro et la procédure civile' in Euro, Proceedings of the 42nd Congress of the International Union of Lawyers, Nice 1998, pp. 80-81; J.C.P. La Semaine juridique, 1998, No 42, Act., p. 1789-1791.

22
Article 8.3, Regulation 974/98.

23
Articles 2, 3, 14, 15 & 16 of Regulation 974/98.

24
Article 15, Regulation 974/98.

25
See supra § 12 (b) Uniform Foreign-Money Claims Act 1989.

26
See infra on the role of the Court at the stage of approving the award.

27
We believe that such a mistake at law could indeed go beyond a clerical, computational or typographical error under the meaning of Article 29 of the ICC Rules, or lie outside the scope of interpretation, if arbitrators make an order against a party in currency which is no longer legal tender. This opinion is of course pending the stance which will be taken by the International Court of Arbitration of the ICC and state courts to which application for authority to enforce such awards is made. See Kühn W., 'Rectification and interpretation of arbitral awards,' The ICC International Court of Arbitration Bulletin, Vol. 7/ No 2, 1996, pp. 80-85.

28
See supra point 6 relating to arbitration costs and fees.

29
It is therefore ad hoc arbitrations which will be most at risk through the changeover to the euro. Arbitrators who sit in such arbitrations will therefore need to be particularly vigilant.