Bill to Reform the Argentine Civil and Commercial Codes - Foreign Currency Obligations

As mentioned in Marval News # 118, the Argentine Government sent the Bill of Civil and Commercial Code (the “Bill”) to the Argentine Congress; this Bill includes provisions on the treatment of obligations in foreign currency.

In July 2012, the Two-chamber Commission for the Amendment, Update and Unification of the Civil and Commercial Codes was created (the “Commission”) with the purpose of preserving the integrity and coherence in the creation of a single Civil and Commercial Code. The Commission was initially given ninety days as from its integration to produce an opinion on the Bill prior to its legislative treatment. However, this term was postponed and the Commission will continue studying the Bill next year.

The proposed sections of the Bill in connection with the treatment of obligations in foreign currency, in their current wordings, give rise to some doubts as to their interpretation.  

Section 765 of the Bill states the following: “The obligation is to deliver money if the debtor owes a certain amount of money, determined or to be determined, at the time of the creation of the obligations. If by the act that creates the obligation, it was agreed that money that is not legal tender will be delivered, the obligation must be considered as an obligation to deliver amounts of goods and the debtor may release itself by delivering an equivalent amount of money which is legal tender.” Thus, this section considers that the obligations in foreign currency are obligations to deliver amounts of goods, enabling the debtor to deliver the equivalent amount in currency which is legal tender (i.e. Argentine pesos).  

In turn, section 766 of the Bill, within the same paragraph, referred to obligations to deliver money, reads as follows: “The debtor must deliver the stated amount of the designated specie.” This creates a certain apparent contradiction between the two sections.

Likewise, section 765 of the Bill, considered together with other sections of the Bill, gives rise to other questionings. It is unclear whether this section will be considered as a private law provision that would make up for the will of the parties in contractual matters. In this respect, section 962 of the Bill regarding the nature of legal provisions, reads as follows: “Legal provisions relating to contracts supplement the parties’ will, unless from the way they are stated, their content, or their context, may not be left aside by the parties.” Section 958 of the Bill, regarding freedom to contract, states that “the parties are free to enter into contracts and determine their content, within the limits imposed by the law and the public order, morality and generally accepted good habits.”

In relation to the above, and with respect to potential application to existing legal relations, it is also worth mentioning that section 7 of the Bill regarding the entering into effect of the laws, in its last paragraph, states that “… new supplementary laws are not applicable to existing contracts, with the exception of such laws which are more favorable to the consumer in consumer relations.” Debate among legal authors and within the courts is therefore to be expected around the concept of “consumer” in the different existing contractual relations.

Finally, the prohibition to index the rate of inflation would be maintained. Section 7 of Law No. 23,928 on the Convertibility of the Austral, substituted by section 4 of Law No. 25,561, reads as follows: “The debtor of an obligation to deliver an amount of pesos complies with its obligation by delivering, on the stated date, the quantity nominally expressed. In no event will monetary updates, index to rates of inflation or prices or others will be accepted, whichever their cause and irrespective of whether the debtor is in arrears or not, with the exceptions stated in this Law. Legal or regulatory provisions, or contractual provisions, contrary to the foregoing will not be valid.”