The "Euro" has arrived.

• Author: Eaker, Lawrence H., Jr.
• Position: Includes discussion of interaction with Florida law

The Legal Framework for its Introduction and Effect Under Florida Law

"Money speaks sense in a language all nations understand."

Aphra Behn, The Rover

A monetary union for Europe? Plato could only dream of such. Caesar, Charlemagne, and Charles V tried to impose their versions of a "monetary union" by force. On January 1, 1999, the European Union (EU) realized by consensus this long gestating supranational project in giving birth to the "euro"--the new single currency for 11 of the 15 EU nations. As designated by the Council of the European Union on May 3, 1998, the countries of Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal, and Spain constitute the 11 nations of the new "euro zone" (also referred to unofficially as "Euroland"). Only the United Kingdom, Sweden, Denmark, and Greece have not selected--or have failed to qualify for--participation in the single currency. Between now and January 1, 2002, referred to as the "transitional period," these euro zone nations will be busy implementing the legal rules devised by the EU concerning the changeover from their national currencies to the new euro.

Not only are these legal rules of vital necessity to the countries concerned for the smooth transition from their national currencies to the euro, but also these rules will be of utmost importance to the international business community and, of course, international law practitioners. For example, what is the result of this transition to the euro for Florida lawyers facing outstanding contracts denominated in Deutsche marks or French francs, or securities earning interest governed by the now disappeared Paris Interbank Offered Rate (PIBOR)? Will parties to such legal instruments be entitled to cease performance thereunder based upon the defenses of "impossibility," "frustration of purpose," or "commercial impracticability" under Florida law? Accordingly, this article will introduce the Florida lawyer to the historical background leading to the adoption of the euro. This article will then analyze the principal legal rules established by the EU for the transition from the participating national currencies to the euro itself, namely: the "continuity of contracts principle"; the rule of "no compulsion-no prohibition"; and the "conversion and rounding" procedures. Finally, the conflict of laws issue concerning the ultimate application of these EU rules within the Florida law context will be considered, especially in light of the lex monetae principle or "state theory of money" imposed upon states by federal law.

Historical Background and Legal Foundation

In what must be considered as one of the greatest transfers of sovereignty in modern history, an expanding number of Western European nations have, over the past half-century, moved forward from a mere integration of their coal and steel industries and establishment of a "common market" to the creation of today's EU.(1) This supranational entity has now succeeded in adding to its well-developed single internal market a single European currency--a move which should, over the long term, greatly assist the EU in its stated goal of providing for the freedom of movement of goods, services, people, and capital.(2) With its Treaty on European Union agreed to at Maastricht, the Netherlands, in 1992, the EU established the general legal framework and timetable for the realization of an "Economic and Monetary Union" (EMU) and its single currency by the year 1999.(3) The Maastricht Treaty adopted a three-phase EMU process(4)--a process which was later refined during the Madrid meeting of the European Council in 1995.(5) The first phase (which had previously been implemented pursuant to decisions reached during the 1989 European Council meeting in Madrid), was to last from July 1, 1990, to December 31, 1993, and would require the coordination of monetary policy and the freeing up of capital movements within the EU.(6) The second phase, to last from January 1, 1994, to December 31, 1998, called for the establishment of the European Monetary Institute and its successor organization, the European Central Bank, and the selection of the euro-zone nations according to well-defined economic criteria.(7) The final, third phase was scheduled to begin January 1, 1999 (at the latest), with the introduction of the euro within the qualifying nations and the transit to the euro as the sole legal tender for these designated nations as of January 1, 2002.(8)

While the Maastricht Treaty outlined in general form the EMU process and timetable, the tasks of selecting the participants and establishing the detailed legal framework for the implementation of the euro within those nations were left to the council--acting upon the proposals of the commission and the opinions of the Parliament.(9) The council, which consists of one political representative from each of the 15 member states (sitting either as "ministers" or "heads of state/government"), is empowered by the Treaty Establishing the European Community ("EC Treaty") to make final decisions for the EU member states on matters which those states have by treaty transferred to the EU.(10)

The commission consists of 20 commissioners nominated by the member states and appointed by the council for five-year terms. The nations of France, Germany, Italy, Spain, and the United Kingdom are granted the right to nominate two commissioners each while the other 10 member states are only entitled to nominate one commissioner each. The commission is charged with ensuring that all EU laws are applied throughout the EU and is authorized to propose EU laws to the council for final adoption.(11) There are then 23 directorates-general, or administrative departments, attached to the commission and organized according to subject matter. These directorates-general ("DGs") are involved in the preparation and drafting of proposed EU laws and thus lay the groundwork for EU legislation.(12)

The 626 members of the European Parliament are elected directly and the Parliament enjoys, in some circumstances, what is referred to as "co-decision authority" over proposed EU legislation.(13) Beyond the EU treaties themselves, EU law consists of regulations, directives, and decisions.(14) And, as first announced in the landmark Case 6/64, Costa v. ENEL, 1964 E.C.R. 585, [1964] C.M.L.R. 425 (1964),(15) decided by the European Court of Justice in 1964, it is a well-established legal principle that EU laws are considered as supreme over conflicting national laws of the EU member states.(16)

Pursuant to these legal powers and the mandates of the Maastricht Treaty, the council adopted Council Regulation No. 974/98 of 3 May 1998 On the Introduction of the Euro ("council regulation no. 974/98"), thereby confirming the beginning of the third phase of EMU for January 1, 1999, with the introduction as of that date of the euro within the designated 11 nations.(17) But, well before the adoption of council regulation no. 974/98, the council was busy devising a legal framework for the conversion from national currencies to the euro during the transitional period and, of course, the withdrawal of national currencies and mandatory use of the euro beginning January 1, 2002. Such a legal framework was established with the adoption of Council Regulation No. 1103/97 of 17 June 1997 on Certain Provisions Relating to the Introduction of the Euro ("council regulation no. 1103/97").(18) These two EU regulations (taken together and herein referred to as the "euro rules") establish three well reasoned legal concepts which now constitute part of the monetary law of the euro-zone nations, namely: the "continuity of contracts" principle; the rule of "no compulsion-no prohibition"; and the "conversion and rounding" procedures.

The Continuity of Contracts Principle

As mandated by part II of council regulation no. 974/98, the currency unit of the participating nations as from January 1, 1999, shall be one euro. The euro is then divided into 100 cents. It is also provided that the euro shall be substituted for the currency of each participating nation's currency at the "conversion rate."(19) Concerning the transitional period, part III of council regulation no. 974/ 98 then provides that the euro shall also be divided into the national currency units according to the conversion rates. Thus, the national currencies will be mere subdivisions of the euro until January 1, 2002, and it is specifically provided that any reference made in any legal instrument to one of the national currencies "shall be as...