Foreign Currency Obligations

Author:Canosa Abogados
Profession:Canosa Abogados

On August 28, 2015, Division "F" of the National Court of Appeals in Civil Matters (the "Court") hold that, pursuant to Section 765 of the Civil and Commercial Code ("CCC"), foreign currency obligations in Argentina do not involve public order rules. As set forth in Section 766 of the CCC, the parties may agree to allow the debtor to deliver the pertinent amount of the kind designated by them. The decision was made by the Court in an attempt to make the judicial consignment effective in order to pay off a debt in US dollars. This happened in "Fau, Marta Renée vs Abecian, Carlos Alberto and others in re: Consignment" where the parties entered into a Mortgage Loan Agreement by which plaintiff received a USD$37,900 loan, payable in equal monthly payments over 36-month terms of USD$1,536 plus 16% annual interest.

The first payments were cancelled in the agreed currency, but when Mrs. Marta Fau (the "plaintiff") was about to make the sixth payment, she asked one of her creditors, Mr. Juan Jose Abecian, that in view of the restriction to dollar access imposed by the Argentine Government, she could not make the future payments. Therefore, she requested that her obligations with Argentine pesos be cancelled due to the force majeure situation. By means of a registered letter, plaintiff requested defendants to agree -in a ten-day term- on how future payments not due would be collected. Otherwise, creditors would collect each monthly payment in their equivalent in pesos at the official rate of the day before the due date. Finally, the registered letter abovementioned established that in a specified date and place and in the presence of a civil law notary public and two witnesses the plaintiff will make the agreed payment, reserving the right to bring civil proceedings for refusal.

The creditor answered to the registered letter and denied the fact that the "dollar clamp" involved force majeure. In addition, he stated that the only way to cancel the obligations in Argentine pesos is through the use of transactions known as "Blue-Chip Swap Transactions", because otherwise, he cannot acquire on his own the same amount of dollars that Mrs. Fau has a duty to pay. Therefore, when Mrs. Fau attempted to make the seventh payment, her transaction was rejected, and the pertinent process of judicial consignment was initiated for the amount due.

The complaint filed by Mrs. Fau was dismissed since plaintiff could not prove the impossibility of obtaining dollars due...

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