In the case of euro, the principle laid down by the above judgement may hold good when the legacy currency is fully substituted by euro, which is after three years after its introduction. During this period, since both the legacy and substituted currencies will remain legal tender, this question may assume more importance. The further question would be: what happens when the real value of legacy currencies of two member states differ, though the nominal value of euro substituting both the legacy currencies is maintained at par? At this stage, these questions may appear hypothetical, since the irrevocable conversion rates for the euro as fixed on December 31st, 1998 would be identical to the value of the official ECU expressed in units of the legacy currencies as on that date. "Changes in the value of the ECU versus the participating currencies up to the end of 1998 and therefore the euro conversion rates--have no effect on the monetary value of the eurosince all amounts expressed in national currency will be converted at the same rate. When the monetary union begins, the euro will become a currency in its own right and the official ECU basket will cease to exist. The external value of the euro will then develop on its own, no longer based on a currency basket of any type." (Report of the Working Group on Euro, October 31, 1998--Executive Summary, para 11). But does the problem end there? It is probably to address this problem that a provision like Section 10 is incorporated in the Euro Conversion Act, newly enacted by the State of Illinois. Clause (c) of Section 10 provides that performance of the obligations described therein may be made in the currency of the contract, or in euro, but not in any other currency. Such other currency may be the currency substituted by euro.

The next aspect related to the currency of payment. The currency of the contract as also the amount of debt measured in that currency having been ascertained, the question is in whatcurrency must that debt be paid? According to Cheshire and North, this is a matter affecting the mode of performance that is determined by the law of the place of performance, and the rule is that the debt is dischargeable in the currency of the country where the debt is payable. If therefore, the debt is dischargeable say in France, the debtor is discharged by the tender of the requisite amount of French franc. The same result would follow when franc is substituted by euro.

This is not a case of conversion of the amount due from one currency to another currency. Conversion of money of account to money of payment involves determination of liability and is a matter of substance governed by the proper law of the contract. What we are considering here is conversion for the purpose of making payment. The amount due as per the currency of contract is ascertained, and the debtor is to pay the ascertained sum by tendering the amount in that currency. In case the contract is to be performed in another country, thedebtor may pay by tendering the amount in the currency of the place of payment. At that time, the question of conversion would arise. Suppose the contract is expressed in French franc and the debtor is contractually bound to pay the debt in another country, say USA, the debtor may tender the amount in US dollars. Then, the question of conversion arises. This being a mode of payment, it is not a matter of substance, and it follows that the debtor may discharge his obligation either by tender of amount in the currency of contract or in the currency of the place of payment. In case of difference in value of the two currencies, the debtor discharges the debt by tendering the local currency equivalent of the amount measured in the currency of contract.

Application of the law of the place of performance may have various implications. As an illustration, one may refer to the Supreme Court Judgement in the case of Renusagar Power Company Ltd., vs. General Electric Co., 1994 Supp (1) SCC 644. That was the case ofenforcement in India of a foreign award. One of the points urged on behalf of the petitioner was that the matter of conversion of foreign currency and the rate of exchange for such conversion is not a matter of procedure, but is a matter of substance and is governed by the proper law. Since the contact as well as performance thereof in that case were both governed by the New York law, it was argued that the breach-debt rule which was applicable in the state of New York, should be applied for the purpose of ascertaining the exchange rate for conversion of US dollars into Indian rupees.

This argument was not accepted by the court. The question before the court was about enforcement of a foreign award, which in the words of the court, was "a matter of procedure and not of substance and is governed by lex fori that is the law of the forum." The Supreme Court was dealing with the case where the award had already been made and was sought to be enforced in India, and the question was about the conversion of theforeign currency in which the award had been made into Indian currency. In that case, the Supreme Court applied the payment--date rule for the purpose of conversion.