Foreign Currency Obligations in the Civil and Commercial Code

On October 1, 2014 the Argentine Congress passed Law No. 26,994 approving the Argentine Civil and Commercial Code (the "New C&CC"). The New C&CC, which will be in force as of January 1, 2016, introduced significant amendments with respect to foreign currency obligations.
 
In the Federal Civil Code currently in force, foreign currency obligations are considered "obligations to deliver sums of money", which are complied with by delivering the committed foreign currency. Instead, the New C&CC returns to the original criteria established in the Federal Civil Code prior to the Convertibility Act, considering foreign currency obligations as "obligations to deliver amounts of goods", and enabling an individual holding a debt denominated in foreign currency to comply with its obligation by delivering its equivalent in legal tender.
 
Notably, the original text of the Draft of the Civil and Commercial Code maintained the principle of nominalism of the Civil Code currently in force, on the basis of "respect for the principles of Argentine monetary law and the broad outlines of legal scholarship and case law". Accordingly, the original text considered obligations denominated in currency other than legal tender as "obligations to deliver sums of money", enabling the creditor to demand payment in the foreign currency agreed on by the parties.
 
However, after the amendments introduced by the Executive Branch, Section 765 of the New C&CC reads as follows: "An obligation to deliver sums of money is that of a debtor that owes a certain amount of currency, determined or to be determined, at the time of the obligation. If by the act that creates the obligation it was agreed that a certain amount of currency that is not legal tender in Argentina 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 in legal tender.” Therefore, the provision allows the debtor to comply with an obligation denominated in foreign currency by delivering to the creditor its equivalent in Argentine Pesos. It should be noted that the provision does not clarify how the "equivalent in legal tender" shall be determined.
 
In turn, the wording of Section 766, in reference to foreign currency obligations, states that “[t]he debtor shall deliver the corresponding amount of the designated kind.” The provision set forth in Section 766 seems to contradict the provisions of Section 765, since it establishes that a debtor complies with their obligation by delivering the designated kind. This apparent contradiction could lead to different interpretations when applying the two sections and should be resolved in the future by the Argentine courts.
 
As an exception to the provisions of Section 765 of the New C&CC, Section 1390 of the New C&CC states in relation to bank deposits that "[a] money deposit occurs when the depositor transfers the property to the custodian, who is obliged to return the deposit in currency of the same kind, upon simple request of the depositor, or expiration of the term or notice agreed upon by the parties.”
 
It is expected that the wording of the provisions of Sections 765 and 766 of the New C&CC may give rise to doubts as to their construction regarding the potential application to existing legal relations, their effect on agreements entered into after the new legislation comes into effect, agreements in which the parties have agreed on the delivery of foreign currency as an essential element and/or waived any provision enabling the debtor to pay in a currency other than the agreed currency. Therefore, particular attention should be paid to the terms of payment in foreign currency until the Argentine courts interpret the new legislation.