Choice in Currency

And A Portent...?

Currency option for foreign creditors20

The House of Lords decided yesterday that foreign creditors should not suffer in English courts from the combination of sterling's falling exchange rate and the ancient procedural rule that English courts can award money payments only in sterling.

By a majority of four to one, the Law Lords ruled that in English courts, foreign creditors could now have their claims recognised in their own currencies.

The decision is of great significance for trade, improving the prospects for foreign creditors facing the possibility of litigation in English courts. But the very breadth of issues involved led Lord Simon of Glaisdale to dissent. He held that the issue was unsuitable for judicial reform as it required a wide range of official and commercial advice.


The Law Lords confirmed the view that world currency fluctuations called for a change which would enable the foreign creditor to get what he bargained for in his contract — a view taken for the first time by the Court of Appeal with Lord Denning presiding, in Schorsch Meier 'D. Henninin November 1974.

They dismissed an appeal by George Frank (Textiles) of London, against a Court of Appeal decision of 10 February that they must pay their Swiss supplier, Michael Miliangos, Payerne, in Swiss francs.

When the case was heard before Mr Justice Bristow in the High Court last December, the British company did not dispute the liability to pay for textiles delivered in 1972, but they did contend that payment should be made in sterling. The judge accepted this view and delivered a judgement for £42,038 — the 1972 equivalent of the invoice in Swiss francs. This was about £18,000 less than was necessary to buy the same sum in Swiss francs at the exchange rate of the day when the case was decided.

The decision was however reversed by the Court of Appeal and the reversal has now been confirmed on further appeal to the Lords. The Swiss supplier will recover his claim undiminished by currency changes and the British importer will pay about £30,000 more than he would have paid in 1972, plus legal costs which are likely to double this amount.

Giving judgement, Lord Edmund-Davies said that to apply the old rule to the present case would perpetrate a great injustice.

Lord Cross of Chelsea said that the change in the foreign exchange situation and the position of sterling over the last 15 years justified the House in overturning the old rule.

Lord Wilberforce said that a creditor should not suffer from sterling fluctuation.

  • 20Reproduced with permission from The Financial Times, 6 November, 1975.