Publication date: December 02, 2024
The role and significance of Article 38 of Polish Private International Law
Art. 38 of the Act of 4 February 2011 – Private International Law plays a key role in shaping the rules for indexation of monetary benefits in cross-border relations. This provision introduces the principle according to which “the impact of a change in the value of currency on the amount of the obligation is assessed according to the law applicable to that obligation [1]“. This regulation is a response to the needs of contemporary international trade, characterized by a high level of complexity and diversity of legal systems.
Article 38 of the Polish Private International Law focuses on regulating one of the important aspects of private international law – the indexation of monetary obligations. This issue takes on particular significance in the context of transactions involving different currencies or legal systems. The main function of this provision is to ensure the stability and predictability of legal relations by assigning these issues to the statute of obligations.
The statute of obligations, i.e. the law applicable to the obligation, is chosen by the parties to the agreement or determined in accordance with the conflict of laws rules. Its task is to comprehensively regulate the obligation relationship, including the indexation of monetary benefits. Thanks to this, Article 38 allows for the separation of the sphere of obligation law from the law of currency, which includes provisions related to the issue and functioning of monetary units. Currency plays a central role in international economic relations, constituting a measure of value and a means of payment. In the legal context, two basic concepts related to currency are distinguished: the currency of debt and the currency of payment. The former indicates the monetary unit expressing the obligation, while the latter concerns the actual means by which the debtor fulfills the obligation. This distinction has significant practical consequences. For example, in international agreements, the parties may agree that the debt will be expressed in euros, but payment may be made in the currency of the debtor’s country (of course, if the parties establish an appropriate conversion mechanism). Article 38 of the Private International Law assigns the assessment of such issues to the bond statute, which means that the law applicable to the obligation regulates both the currency of the debt and the conditions for its possible change.
The basic assumption in many legal systems is the principle of nominalism, according to which the debtor is obliged to pay the nominal amount specified in the contract, regardless of changes in the value of money. This principle is widely used because it ensures simplicity and transparency in the regulation of monetary obligations. However, its application in conditions of economic instability, such as hyperinflation or rapid changes in exchange rates, can lead to injustice between the parties. In such cases, there are exceptions to the principle of nominalism, which include:
– contractual indexation, thanks to which the parties can introduce indexation clauses into the contract, allowing the adjustment of the value of the performance to changes in exchange rates, inflation or other economic indicators.
– statutory indexation, which means that the law of a given country can provide for protective mechanisms that automatically correct the value of the obligation in situations of drastic economic changes.
– judicial indexation, in which the court, based on the applicable law, can correct the obligation in order to restore the contractual balance between the parties.
In the case of contractual indexation, the parties introduce the indexation clauses mentioned earlier, such as indexing the benefit to exchange rates or the inflation rate, which are commonly used in international agreements. The choice of the applicable law, allowing such mechanisms, allows the parties to limit the risk resulting from economic instability. It is worth noting, however, that the compliance of such clauses with the law must be assessed in the light of the bond statute. Moreover, in accordance with Article 38 of the Private International Law, the obligations statute also decides on the effects of non-performance or improper performance of the obligation. This means that indexation clauses may be subject to court analysis in the event of a dispute between the parties, which additionally emphasizes their practical significance.
It is also worth mentioning that so-called mandatory provisions play a special role in international economic transactions. These are norms that, due to a special public interest, take precedence over the regulations of the obligations statute. In the context of monetary obligations, these provisions may concern issues such as restrictions on the expression of obligations in foreign currencies, exchange control or consumer protection. An example of such a provision may be a regulation prohibiting the indexation of monetary benefits in a manner contrary to the interests of the country issuing the given currency. Art. 38 of the Private International Law takes into account the possibility of interference by such norms, which additionally emphasizes its importance in shaping legal certainty in cross-border relations.
Article 38 of the Private International Law fits into the broader context of international regulations concerning monetary obligations. Compared to other jurisdictions, the Polish legislator adopted a solution that combines elements of traditional conflict of laws principles with a modern approach to currency regulations. For example, Article 147 of the Swiss Conflict of Laws Act clearly indicates that currency issues are subject to the law of the country issuing the given currency. Similarly, the EU Rome I Regulation (Article 12) refers to the law applicable to the contract, which determines the performance of the obligation. Although Article 38 of the Private International Law is more flexible in its scope, it lacks uniform mechanisms of harmonization at the international level.
In practice, Article 38 of the Private International Law facilitates international trade transactions by providing clear rules for the indexation of monetary obligations. Businesses benefit from the possibility of choosing the applicable law, which allows them to reduce the risk related to currency instability. The application of Article 38 of the Private International Law also contributes to building trust in international trade, especially in relations between partners from different legal systems. Moreover, by assigning indexation to the obligations statute, decisions on changing the value of monetary obligations remain in the hands of the law applicable to the obligation, allowing for flexible adjustment to the needs of the parties to the contract.
Although Article 38 of the Private International Law introduces significant facilitations in international trade, its practical application may encounter difficulties. One of the challenges is the interpretation of provisions that impose their application in the context of a specific case. Another problem is the lack of uniform international standards that could support the effective resolution of disputes concerning the indexation of monetary obligations.
In summary, Article 38 of the Private International Law plays a key role in regulating monetary obligations in a cross-border context, ensuring consistency and predictability in legal relations. Its solutions allow for determining the principles of indexation of benefits based on the law applicable to the obligation. What is also important, this provision supports the development of international trade, allowing the parties to flexibly adjust the terms of cooperation, while at the same time enabling the protection of their interests. This is an important element in building trust and stability in economic relations between partners originating from different legal systems. As a result, Article 38 of the Private International Law remains one of the pillars of the regulation of international monetary obligations, emphasizing the role of private international law in adapting to the dynamic needs of modern economic trade.
Sources:
[1]Art. 38 of the Act of 4 February 2011 – Private International Law.