The Introduction of the Euro: Overview of the Legal Framework and Selected Legal Issues

4 Colum. J. Eur. L. 321 (1998)

Jan Meyers. Lic. jur. Katholieke Universiteit Leuven 1974, LL.M. Harvard 1975, J.S.D. Stanford 1982; currently a partner at Cleary, Gottlieb, Steen & Hamilton, Brussels.

Damien Levie. Lic. jur. Katholieke Universiteit Leuven 1992, lic. in economics U.C. Louvain 1993, LLM. University of Chicago 1994; currently an associate at Cleary, Gottlieb, Steen & Hamilton, New York.

The purposes of this Article are twofold: (1) to describe the process by which a new currency, named the “euro,” will replace the national currencies of those Member States of the European Union that will form a monetary union as of January 1, 1999, or will adhere to such union on a later date; and (2) to review the principal legal issues raised by the introduction of the euro.

This Article is divided into three parts.
Part I summarily describes the process by which monetary union is brought about, its institutional framework and its principal operating rules.

Part II reviews specific EU legislation organizing the introduction of the euro. It discusses the draft Council Regulation that sets out how the euro will be substituted for the national currencies of the participating Member States over a maximum period of three-and-one-half years commencing on January 1, 1999. Part II also discusses Council Regulation 1103/97 of June 17, 1997, which, in relation to the introduction of the euro, establishes the principle of continuity of contract (i.e., the principle that the change of currency should not trigger the operation of any legal theory-such as frustration of contract in common law-that offers relief in circumstances where an unforeseen event negatively affects the performance of the contract).

Part III briefly considers a number of legal issues that companies will need to examine in connection with the introduction of the euro, including: (a) contract issues, particularly in relation to financial matters; (b) market conventions for euro-denominated financial instruments (e.g., the day count convention for calculation of yields and accrued interest); (c) the possible redenomination of shares and outstanding debt securities in euros prior to January 1, 2002; (d) dual price displays during the transition period; (e) accounting consequences; and (f) European tax issues.