How to change the terms of the payment currency agreement?

Purpose of a currency clause and its main types

Let's look at the essence of currency clauses in a situation. Let’s say that counterparty A, located in Russia, entered into an agreement in 2021 with counterparty B, a foreign supplier, for the purchase of goods. Moreover, the main currency of the agreement is rubles, and the term of the agreement is 2 years. Total contract price: 10,000,000 rubles. Considering the situation with the ruble exchange rate, the Russian ruble can be considered an unstable currency, subject to fluctuations. Contractor-supplier B. has the following situation:

• at the time of conclusion of the agreement, the exchange rate was 62 rubles per 1 US dollar (i.e., the contract price in US dollars was conditionally 161,290 US dollars);
• at the end of the contract, in 2021, the rate was 67 rubles per 1 US dollar. The price of the contract in dollar equivalent was already 149,253 US dollars.

As you can see, the difference is quite significant - $12,037. And if counterparty B. also pays in dollars for the purchase or production of goods, which he then supplies to the Russian Federation under a contract, the losses of counterparty B. become obvious.

To avoid such losses, when concluding foreign exchange contracts, a technique called a currency clause is used. With a special clause, settlements under the contract are “linked” to a currency with a stable exchange rate, for example, the US dollar, pound sterling, euro, etc.

For example, in the situation under consideration, a sample currency clause in a contract could look like this: “The total cost of the goods is the equivalent of $161,290. Payment is made in Russian rubles at the rate in effect on the date of payment at the bank serving the buyer.” That is, if the Russian counterparty A. carried out settlements under the 2021 contract in 2021, he should have paid not 10,000,000 rubles, but about 10,806,430 (161,290 × 67).

Note! Many course options for “binding” are allowed. This could be the Bank of Russia, the national bank of the supplier’s country, or the internal exchange rate of the bank of one of the partners - this condition is determined only by the parties to the transaction.

Based on the range of risks covered by the currency clause, as well as the individual characteristics of the transactions being executed, we can highlight:

• direct and indirect reservations;
• unilateral and bilateral reservations;
• other clauses sometimes applied by the contracting parties.

The ruble exchange rate is fixed in the contract

Let's consider a situation where the ruble exchange rate in the contract is not specified as the official rate of the Central Bank of the Russian Federation, but is fixed
somehow differently - with a certain value, or is set, for example, as the rate of the Central Bank of the Russian Federation + 2%. What will happen to the tax base for value added tax (VAT) and income tax?

VALUE ADDED TAX

In this case, everything depends on the date of payment and the date of fulfillment of obligations under the contract. Therefore, we will consider 3 options for the development of events. But first, let’s highlight the main legislative norms relating to VAT calculations in conventional units, dollars and euros.

Clause 1 of Article 167 of the Tax Code of the Russian Federation and clause 14 of Article 167 of the Tax Code of the Russian Federation.

Determines the moment of the tax base. It turns out that in our situation this is the earliest date: receipt of advance payment, or provision of a service (shipment of goods). Moreover, if the moment of determining the tax base is the date of payment, then on the date of shipment, on account of the previously received payment, the moment of determining the tax base also arises.

Clause 4 of Article 153 of the Tax Code of the Russian Federation.

Gives us the right to consider the moment of determining the tax base for VAT the day of shipment of goods, while when determining the tax base, the conventional monetary unit is recalculated into rubles at the rate of the Central Bank of the Russian Federation on the date of shipment of goods. Upon subsequent payment, the tax base will not be adjusted, and the resulting differences will have to be attributed to non-operating income or expenses.

These are the main legislative norms on which we rely. In addition, we mention the Letter of the Ministry of Finance dated 07/06/2012 No. 03-07-15/70, which should be used in the work and brought to the attention of taxpayers and tax authorities. The main essence of the letter: the received full prepayment (100%) gives the right not to recalculate the tax base for VAT at the rate of the Central Bank of the Russian Federation on the day of shipment of the goods.

All other letters from the Ministry of Finance and tax authorities devoted to this issue do not contain legal norms and are not addressed to a wide range of taxpayers, and therefore cannot be used in our conclusions.
1. We have received 100% prepayment to the settlement account for the future shipment of goods (performance of work, provision of services).
Using the Letter of the Ministry of Finance dated July 6, 2012 No. 03-07-15/70, we can conclude that upon receipt of 100% prepayment, we can use As a tax base for VAT, our fixed rate established by the agreement

, on the date of payment.
An example of VAT calculation with 100% prepayment.
A contract for the provision of services has been concluded. The cost of services is 1000 dollars, while the ruble exchange rate against the dollar is set at 54 rubles per 1 dollar. The contract provides for 100% prepayment. On the date of payment, the exchange rate of the Central Bank of the Russian Federation was 59 rubles per 1 dollar.

The customer pays 100% of the cost of the service in the amount of $1,000 at the rate of 54 rubles per $1.
The contractor receives 54,000 rubles into the account. VAT in the amount of 54,000*18/118=8,237 rubles will be charged on the prepayment amount. The cost of services provided after receiving full prepayment will no longer change for VAT purposes. The VAT amount will be fixed and on the date of service provision will remain at the level of 8,237 rubles. 2. Partial payment has been received to the bank account for the future shipment of goods (performance of work, provision of services).
If partial payment is received, then for the purposes of calculating VAT it is necessary to use only the official exchange rate of the Central Bank of the Russian Federation

and calculate VAT on the date of payment at the official rate, despite the fixed rate stipulated in the contract. At the time of provision of the service, the tax base will be determined for the unpaid part of the service at the rate on the date of provision of the service, and the prepaid part of the service, for the purpose of calculating VAT, has already been recorded as an advance payment.

Example of VAT calculation for partial payment

A contract for the provision of services has been concluded. The cost of services is $1,000, while the ruble/dollar exchange rate is fixed in the contract at 54 rubles per $1. The contract provides for 50% prepayment. On the date of prepayment, the official exchange rate of the Central Bank of the Russian Federation was 59 rubles per 1 dollar. On the date of service provision, the official exchange rate of the Central Bank of the Russian Federation is 60 rubles per dollar. On the date of subsequent payment for services, the official exchange rate of the Central Bank of the Russian Federation is 62 rubles per dollar.

The customer pays 50% of the cost of the service in the amount of 500 dollars at the rate of 54 rubles per 1 dollar (the rate fixed in the contract). The contractor receives 54*500=27,000 rubles into the account. But, for the purposes of calculating VAT, the tax base will be calculated from the cost of 500 dollars multiplied by the official exchange rate of the Central Bank of the Russian Federation

59 rubles/dollars, i.e. from the amount of 29,500 rubles. VAT in the amount of 4,500 rubles will be charged on the prepayment amount.

At the time of service provision, the official exchange rate of the Central Bank dollar is 60 rubles and the balance of our unpaid amount is 500 dollars. For the purposes of calculating VAT, it is necessary to take the official exchange rate of the Central Bank on the date of provision of the service

, therefore, the tax base for the purposes of calculating VAT will be 60*500=30,000 rubles and VAT on this cost will be 4,576 rubles.
The customer will pay at the rate fixed in the contract, i.e. 54 rubles per dollar, and an amount of 27,000 rubles will be credited to the current account. When paying after the service is provided, VAT will not be recalculated
on the date of payment 62 rubles/dollar, its amount is calculated
at the official exchange rate of the Central Bank of the Russian Federation on the date of service provision - 60 rubles ./Doll.
and will amount to 4576 rubles.
3. The goods are shipped in full (work completed, service provided) and only after that payment is received.
In this case, the rule of paragraph 4 of Article 153 of the Tax Code of the Russian Federation applies. VAT will be calculated on the date of sale of goods (rendering of services) at the official rate of the Central Bank of the Russian Federation

and its amount will not change in the future.
An example of VAT calculation for payment after shipment.
A contract for the provision of services has been concluded.
The cost of services is $1,000, while the ruble to dollar exchange rate is fixed in the contract at 54 rubles per $1. The contract provides for postpayment. On the date of service provision, the exchange rate of the Central Bank of the Russian Federation was 59 rubles per 1 dollar. On the date of subsequent payment for services, 62 rubles per dollar. At the time of provision of the service, VAT will be calculated on the amount of 59,000 rubles in the amount of 9,000 rubles, based precisely on the official exchange rate of the Central Bank, although the act in rubles will be issued in the amount of 54,000 rubles, precisely at a fixed rate. This tax amount will not change in the future, upon receipt of postpayment. INCOME TAX
Clause 8 of Article 271 of the Tax Code of the Russian Federation. We calculate income on the date of service provision

(shipment of goods, performance of work)
at the rate specified in the contract
.
If the company received an advance, then the amount of proceeds from the sale is determined at the official rate established by the Central Bank of the Russian Federation on the date of receipt of the advance
or the rate fixed in the contract, depending on which rate is linked to in the contract.

What are direct and indirect currency clauses

The above example is an example of an indirect currency clause. Conditions are classified as indirect when payments under the contract occur in the national currency of one of the parties, and the price of the product is fixed in one of the stable currencies common in international payments.

With a direct clause, both the price of the goods and the currency of payment are expressed in one, relatively stable currency. However, to be on the safe side, a condition is included in the contract according to which the payment can be adjusted if the contract currency exchange rate changes significantly in relation to another stable currency.

Example

Currency clause: “The price of the goods under the contract is 250,000 USD. Settlements under the contract are carried out in USD. If on the date of payment the USD to GBP (pound sterling) rate on the New York Currency Exchange is lower than the USD to GBP rate on the date of conclusion of the contract, then the price of the goods and the payment amount in USD must be recalculated to increase, compensating for the corresponding change in the rate USD to GBP".

This means that if there is, say, 100,000 USD left to pay under the contract and on the day of the next payment the USD exchange rate against GBP has decreased, for example, from 1.3000 USD per GBP (on the date of conclusion of the contract) to 1.2350 USD per GBP, then :

• the contract price in USD for settlements will become: 100,000 + 100,000 × ([1.3000 – 1.2350] / 1.3000) = 105,000 USD;
• additional payment - 105,000 USD.

Important to consider! Recommendation from ConsultantPlus: Currency corridor. To protect yourself from losses caused by sharp fluctuations in the exchange rate, we recommend stipulating in the agreement a currency corridor - the minimum and/or maximum rate at which the payment will be made. For an example of how to do this, see K+.

How to correctly make a currency clause in a contract

04/17/2020 Due to the instability of the situation in the foreign exchange market, we remind you that when determining the terms of payment in the contract, the parties have the right to use a currency peg (clause).

Currency peg means that although settlements between residents, as a general rule, are carried out in Belarusian rubles, and monetary obligations must be expressed in Belarusian rubles (Article 298 of the Civil Code), the contract price can be linked to the equivalent in foreign currency , which is especially important for companies selling goods, works, services with deferred payment.

Currency peg allows you to overcome the restrictions established by law regarding setting prices and making payments in foreign currency between Belarusian companies and individual entrepreneurs and hedge the risks of exchange rate changes.

When establishing a binding, the parties can choose:

• the means of payment to which the link is made is the monetary unit of a certain state (standard option), it is also possible to link to a basket of foreign currencies - currency pegs. Despite the fact that the currency clause is the most common, the contract price can be linked to an index of prices on the market (index peg), and to the cost of gold (gold peg), and to special drawing rights (SDR), and to another conventional unit. The parties may provide for a condition to change the binding upon the occurrence of certain circumstances;
• bank , whose exchange rate will be taken as the basis for calculating the fixed amount in foreign currency, or another platform that sets the price of a conventional unit;
• date and time at which the parties agree to calculate the amount payable based on the rate established by the bank on this date (for example, the date of invoice, the date of sending a payment order to the bank, the date of debiting the sender's current account or the date of their crediting to recipient's current account, exact calendar date, etc.);
• a condition on how the contract price will change - automatically, by agreement of the parties, or unilaterally at the request of any party;
• other conditions for calculating the amount to be paid.

Possible currency peg options:

“The cost of services is determined by the parties in accordance with Article 298 of the Civil Code of the Republic of Belarus in Belarusian rubles in an amount equivalent to an amount in foreign currency in the amount of 3,500.00 (three thousand five hundred) US dollars. Payment is made at the exchange rate for selling US dollars for cash Belarusian rubles, established at Alfa-Bank CJSC (branch “On Krasnaya”) for individuals and valid as of 11:00 on the date the payer sent the payment order to the bank.”

“At the time of conclusion of the contract, the total cost of the goods is 150,000 (one hundred fifty thousand) Belarusian rubles. If on the date of payment the official exchange rate of the Belarusian ruble to the US dollar, established by the National Bank of the Republic of Belarus, decreases by more than 3%, then the amount payable is recalculated. To do this, the cost of the goods at the time of concluding the contract is converted into US dollars (according to the official exchange rate of the National Bank of the Republic of Belarus on the date of concluding the contract) and then into Belarusian rubles (according to the official exchange rate of the National Bank of the Republic of Belarus on the date of payment).”

“If at the time of execution of the contract the exchange rate of the Belarusian ruble to the euro, established by the National Bank of the Republic of Belarus, decreases by more than 5% compared to the rate on the date of payment, the cost of the contract increases by 5%, and the seller issues an invoice to the buyer for the amount of the exchange rate difference.”

“If the exchange rate of the Belarusian ruble to the Russian ruble, established by the National Bank of the Republic of Belarus on the date of payment, changes in relation to the rate established by the National Bank of the Republic of Belarus on the date of signing the agreement by 6% or more in any direction, then the conditions on the cost of the goods must be revised.”

“The total cost of the work is an amount in Belarusian rubles equivalent to 2,000 (two thousand) US dollars. Settlements under the agreement will be made in Belarusian rubles (BYN) at the US dollar (USD) exchange rate established by the National Bank of the Republic of Belarus on the date of payment. The agreement provides for the following exchange rate framework: 2.3-2.5 BYN per 1 USD. If the US dollar exchange rate is less than 2.3 BYN, then a rate equal to 2.3 BYN will be applied; if the USD rate is more than 2.5 BYN, then a rate equal to 2.5 BYN will be applied.”

Some bindings may protect both the seller and the buyer depending on the circumstances.

A currency clause can also be used for the purposes of a loan agreement.

“Under the Agreement, the Lender transfers to the Borrower the ownership of funds in an amount in Belarusian rubles equivalent to 3150 (three thousand one hundred and fifty) US dollars (hereinafter referred to as the Loan Amount) at the rate of the National Bank of the Republic of Belarus on the date of provision of funds, and the Borrower undertakes to return the amount in Belarusian rubles to the Lender rubles equivalent to the Loan Amount at the exchange rate of the National Bank of the Republic of Belarus on the date of repayment and pay interest for using the Loan in the manner and on the terms specified in the Agreement.”

Against the backdrop of growing demand for the dollar and euro, banks are experiencing a shortage of foreign currency. In 2015, a similar situation led to the introduction of a 30% tax for banks when they purchased currency on the exchange, which increased the price of currency for companies and individual entrepreneurs. A currency clause will help protect the seller (primarily the importer) from additional costs.

“The cost of the goods is 200,000 (two hundred thousand) Belarusian rubles, which at the time of concluding the contract is equivalent to 72,000 (seventy-two thousand) euros at the exchange rate of JSC ASB Belarusbank (branch at 6 Bobruiskaya St.). The amount to be paid in Belarusian rubles is determined at the exchange rate for selling euros for cash Belarusian rubles, established by OJSC "ASB Belarusbank" (branch at 6 Bobruiskaya St.) for individuals and valid as of 11.00 on the day of payment. If in order to purchase foreign currency the seller will need to incur additional expenses (fees, taxes, duties, etc.), then the amount to be transferred in Belarusian rubles increases by the amount of such additional expenses.”

What to do if the contract has already been signed, but the binding was not included in it?

Devaluation, restrictions on the sale of currency (as was the case, for example, in 2014) and other similar situations are unlikely to be interpreted in Belarus as force majeure - extraordinary and unavoidable circumstances that make proper fulfillment of obligations impossible and therefore relieve the obligated party from liability for non-performance. Belarusian courts believe that when these circumstances occur, the obligations, although difficult, can be fulfilled, therefore the instability of the foreign exchange market remains a commercial risk of the parties. It is unlikely that the court will recognize changes in the foreign exchange market as a significant change in circumstances (Article 421 of the Civil Code), sufficient to force a forced change in the agreement of one of the parties.

If the contract has already been concluded, the interested party may try to negotiate with the counterparty to change the contract, for example, propose to include a currency peg in the contract, but at the same time provide for a deferred payment under the contract.
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What are unilateral and bilateral currency clauses?

The reservations we discussed above are so-called unilateral reservations. They insure only one party - the recipient of funds under the contract. In fact, a change in the exchange rate, of course, affects the one who pays under the contract. For example, in the example given at the beginning of the article, buyer A also cares whether he pays 10,000,000 or 10,800,000 rubles. Therefore, a clause in a contract can be drawn up in such a way as to take into account the interests of both parties - both the one who pays and the one who receives the funds. For example, a “fork” of rates may be provided, within which prices and payments under the contract are automatically recalculated, and if the rate jumps beyond the established values, another mechanism is used to level out negative impacts, for example, revising the terms of the contract by a separate agreement.

Example

A direct clause, tailored to the interests of both parties, may look something like this: “If on the date of payment the USD to GBP exchange rate on the New York Currency Exchange changes in relation to the USD to GBP rate on the date of conclusion of the contract by an amount established within 5% in any direction, then the price of the goods and the amount of payment in USD must be recalculated, compensating for the corresponding change in the USD to GBP exchange rate. In other cases of fluctuations in the USD to GBP exchange rate (in excess of the 5% established by this paragraph), the contract price and further payments are subject to revision and additional agreement by the parties.”

A clause in the contract or bank insurance?

Enterprises can protect themselves from currency risks not only with the help of currency clauses in the contract, but also with the help of banking instruments such as hedging.

To understand the essence of a hedging transaction, let's look at an example again.

Example

A Japanese company entered into a 6-month contract to supply goods to the United States. Let's say payment under the contract - 1,000,000 USD - should also be received in 6 months, in USD. In case of fluctuations in the ratio of JPY to USD during the contract period, the selling company entered into an agreement with its bank that after 6 months the company would sell the bank, and the bank would purchase 1,000,000 USD at the rate of 0.0087 USD per 1 JPY (market average for day of conclusion of the contract). Even if the JPY exchange rate changes in a way that is unfavorable for the Japanese supplier in 6 months, its risks will be offset by an agreement with the bank, under which the bank will still buy the proceeds in USD at 0.0087.

Thus, bank insurance in relation to currency risks is the ability of a party to a contract to use banking instruments instead of introducing a clause into the contract. What to choose depends on each specific transaction and the general economic situation. For example, in Russia such operations are practically not common, but the rules for the repatriation of foreign currency earnings are in force (established by Article 19 of the Law of December 10, 2003 No. 173-FZ “On Currency Regulation”). That is, for Russian participants in foreign trade relations, the only option left is with a clause in the contract: it will not be possible to arrange hedging in Russia or receive proceeds into an account in a foreign bank where hedging is possible.

Of course, there may also be an option with “regular” insurance issued by an insurance company. If, of course, it is possible to insure currency risks against unstable currencies within the framework of an insurance contract.

Nuances: multi-currency clauses, “gold” clauses and clauses in the loan agreement

We examined the main types of clauses on currency risks. Other clauses that may occur in practice are derived from the main ones.

Examples of the most common clauses include:

• Multicurrency - when, instead of the rate of one stable currency, a certain settlement rate for a group of currencies (basket) is taken as a “peg”.
• “Gold” - the price of gold is used as a “peg”: the established value of the contract is expressed in gold equivalent. For example, the exchange value of 1 troy ounce of gold accepted by the parties as of January 25, 2017 is 1,196.00 USD. The cost of goods under the contract concluded on the same day is 1,000,000 USD. Then the contract price under the clause will be 836.12 troy ounces. If the exchange price of gold changes, contract settlements will change in accordance with it.

As a separate nuance, one can also highlight the clauses included in loan agreements. For example, in similar agreements between residents of the Russian Federation you can often find a condition that the ruble amount in the agreement must be calculated based on “conventional units”. The role of such units is usually the same stable currency. Simply, due to the current currency restrictions in the Russian Federation on foreign exchange transactions between residents, the parties prefer to avoid concluding loan agreements directly in foreign currency.

An interesting point in such agreements is that the currency clause in this case insures the parties not so much against the risk of currency exchange rate fluctuations on the international market, but rather against a decrease in the purchasing power of the ruble within the country, which is expected during the course of the loan agreement itself. That is, if a resident lender of the Russian Federation lends 70,000 rubles and knows that today he could buy a new iPhone with this money, then he wants to be sure that at least he will be able to buy an iPhone on the day he receives his money back from borrower.

Commentary on Article 317 of the Civil Code of the Russian Federation

1. Clause 1 of the article establishes that the basis of the monetary system of the Russian Federation is the national currency - the ruble, which is the official monetary unit. On the meaning of the ruble as legal tender, see commentary. to Art. 140.

2. Rule clause 2 of Art. 317 on the designation of a monetary obligation in foreign currency or conventional monetary units, the so-called. The currency clause is new and eliminates the adverse effects of inflation. Inflation, which accompanies the transition of the Russian economy to market relations, leads to the fact that the monetary claims of legal entities and citizens are in many cases devalued, which puts them in an unfavorable and sometimes catastrophic situation. The Determination of the Judicial Collegium of the Supreme Court of the Russian Federation states that, in accordance with Art. 317 of the Civil Code, a monetary obligation may stipulate that it is payable in rubles in an amount equivalent to a certain amount in foreign currency; in this case, the amount of money to be paid is determined at the official exchange rate of the corresponding currency on the day of payment (Bulletin of the Armed Forces of the Russian Federation, 2000, No. 12, pp. 1, 2).

3. The concept of “foreign currency” is defined in the Law on Currency Regulation (see commentary to Article 141). Special Drawing Rights (SDR or SDR) is a conventional monetary unit used by member countries of the International Monetary Fund (IMF).

The notional value of the SDR is determined based on the weighted average value and exchange rate movements of the currencies included in the “currency basket”, which includes the currencies of the United States, Germany, Great Britain, France and Japan. On January 1, 2002, the member countries of the European Economic and Monetary Union (Austria, Belgium, Germany, Greece, Ireland, Spain, Italy, Luxembourg, the Netherlands, Portugal, Finland, France) introduced a single currency - the euro. The euro is used in both cash and non-cash transactions.

4. The exchange rate is the price (ratio) of the monetary unit of one country, expressed in the monetary units of other countries. The official exchange rate of the ruble is established in accordance with the Regulation of the Central Bank of December 19, 2001 N 169-P “On the establishment by the Central Bank of the Russian Federation of official exchange rates of foreign currencies to the Russian ruble” (Bulletin of the Bank of Russia, 2001, N 77). According to this Regulation, the Central Bank establishes the official dollar-ruble exchange rate based on the current business day quotes on the exchange and over-the-counter currency markets for “US dollar - Russian ruble” transactions. The official SDR (SDR) to Russian ruble exchange rate is calculated by the Central Bank based on the official US dollar to Russian ruble exchange rate established by the Central Bank, as well as the US dollar to SDR (SDR) exchange rate established by the International Monetary Fund on the previous business day. Official rates of other currencies to the ruble are established on the basis of the official rate of the US dollar to the ruble and the rates of these currencies to the US dollar, which are formed on the international currency markets of the current business day, on the exchange and over-the-counter segments of the domestic foreign exchange market, as well as the official rates of the US dollar to such currencies that are set by the central banks of foreign countries. The official exchange rates of the national currencies of the countries participating in the Economic and Monetary Union to the Russian ruble from January 1, 2002 are considered to be the rates that are calculated on the basis of the official exchange rate of the euro to the Russian ruble. This rate is set by the Central Bank to the US dollar using the corresponding conversion factors of these currencies to the euro, which are fixed by a decision of the Council of the European Union. On the penultimate working day of each calendar month, the Bank of Russia sets the official exchange rates of other foreign currencies to the Russian ruble. Established official rates are put into effect by issuing orders. The official ruble exchange rate is published in the newspaper “Rossiyskaya Gazeta” and in the journal “Bulletin of the Bank of Russia”; posted on the CBR website on the Internet at www.cbr.ru; sent through banking communication channels to the Reuters news agency. If any person is interested in receiving official information about foreign exchange rates established by the Central Bank, he can contact the territorial office of the Bank with a written request.

5. Based on clause 2 of Art. 317 parties to the contract have the right to choose a different rate for calculating the amount of the monetary obligation. They can choose the market exchange rate of the ruble to foreign currency, which is set on currency exchanges, for example the Moscow Interbank Currency Exchange, the St. Petersburg Currency Exchange. These courses are published in the Izvestia newspaper. In addition, the parties have the right to determine in advance in the agreement the exchange rate of the ruble to a foreign currency (for example, an amount of rubles equivalent to 100 US dollars at the rate of 1 US dollar for 30 rubles).

6. Information letter of the Supreme Arbitration Court of the Russian Federation dated November 4, 2002 N 70 “On the application by arbitration courts of Articles 140 and 317 of the Civil Code of the Russian Federation” (clause 3) (Bulletin of the Supreme Arbitration Court of the Russian Federation, 2003, No. 1) explains if in the contract a monetary obligation is expressed in foreign currency without indicating its payment in rubles, such a contractual condition should be considered as provided for in paragraph 2 of Art. 317 of the Civil Code, provided that when interpreting the contract the court does not come to a different conclusion in accordance with Art. 431 Civil Code (see commentary to it). If the contract provides that a monetary obligation is expressed and paid in foreign currency, but due to Russian currency legislation this obligation cannot be fulfilled in foreign currency, then such a contractual condition should be considered as provided for in paragraph 2 of Art. 317 of the Civil Code, provided that when interpreting the contract the court does not come to a different conclusion in accordance with Art. 431 Civil Code. If a court invalidates a condition of an agreement in which a monetary obligation is expressed in foreign currency, this does not entail invalidation of the entire agreement, provided that it can be assumed that the agreement would have been concluded without this condition (see commentary to Article 180) .

7. According to information letter No. 70 dated November 4, 2002 (clause 4), the arbitration court makes a decision to satisfy the claim for the collection of funds in foreign currency if it determines that, on the basis of the currency legislation in force at the time of the decision, the monetary obligation may be executed in foreign currency.

8. If a party refers to the fact that a monetary obligation can be paid in foreign currency by virtue of permission from the Central Bank, then in accordance with Art. 65 of the APC, the party must prove that such a permit was issued to it (clause 5 of the information letter dated November 4, 2002 N 70).

9. In accordance with clause 6 of the information letter dated November 4, 2002 N 70, a writ of execution for the collection of sums of money in foreign currency, issued on the basis of an arbitration award that has entered into force, may be sent by the claimant to a bank or other credit organization where the debtor has an account in the specified foreign currency. The claimant also has the right to submit such a writ of execution to the bailiff for sending to such a bank. If the debtor does not have bank accounts in the specified foreign currency or funds in these accounts, enforcement is carried out by bailiffs in rubles at the expense of any other property of the debtor (including funds in rubles or other foreign currency), based on the official exchange rate of the collected foreign currency on the day of actual execution.

10. The condition for payment of a monetary obligation in rubles in an amount equivalent to a certain amount in foreign currency or conventional monetary units may be established by law or by agreement of the parties not only in relation to contractual but non-contractual obligations (clause 7 of the information letter dated November 4, 2002 N 70).

11. In cases where the amount of a monetary obligation expressed in accordance with clause 2 of Art. 317, interest is accrued for the use of other people's funds (see commentary to Article 395) or other interest in the amount of the bank interest rate, such a rate is determined in the manner established by clause 52 of the Resolution of the Plenums of the Armed Forces of the Russian Federation and the Supreme Arbitration Court of the Russian Federation No. 6/8. In cases where, in accordance with the legislation on currency regulation, a monetary obligation is expressed in foreign currency and there is no official discount rate of bank interest on foreign currency loans on the day of execution of the monetary obligation at the location of the creditor, the amount of interest is determined on the basis of publications in official sources of information on average rates bank interest on short-term foreign currency loans that are provided at the location of the lender. If there are no such publications, the amount of interest to be collected is established on the basis of a certificate provided by the plaintiff from one of the leading banks at the location of the creditor, which confirms the applicable rate for short-term foreign currency loans. The information letter dated November 4, 2002 N 70 explains that one of the possible sources of information on average bank interest rates on short-term foreign currency loans provided at the location of the lender is information on average rates on such loans, which is published in the journal “Vestnik” Bank of Russia".

12. In accordance with clause 9 of the information letter dated November 4, 2002 N 70, legal or contractual interest on the amount of a monetary obligation expressed in accordance with clause 2 of Art. 317, are charged on an amount in foreign currency (conventional monetary units), expressed in this currency (units) and collected in rubles according to the rules of clause 2 of Art. 317. Similar rules apply when calculating and collecting penalties on a monetary obligation expressed in accordance with clause 2 of Art. 317.

13. Paragraph 2 of the commented article provides that the exchange rate of the ruble to foreign currency is established on the day of payment. However, the parties to the contract may choose a different date for determining this rate. According to paragraph 13 of the information letter dated November 4, 2002 N 70, if the law or agreement of the parties does not establish the rate and date of recalculation, the court, in accordance with paragraph 2 of Art. 317 of the Civil Code indicates that recalculation is carried out at the official rate on the date of actual payment.

14. If, according to the law or agreement, the rate for converting foreign currency into rubles must be determined on the date of the decision or on an earlier date, the court independently converts the foreign currency into rubles and indicates in the operative part of the decision the amount of the principal debt in rubles. If interest and (or) a penalty on the recovered amount are accrued only before the date of the decision, the court also independently recalculates the amount of interest (penalty) expressed in foreign currency into rubles, and indicates in the operative part of the decision the amounts recovered in rubles (clause 10 of the information letter dated 04.11.2002 N 70).

15. If the court satisfies the demand for the recovery of sums of money, which, in accordance with paragraph 2 of Art. 317 are subject to payment in rubles in an amount equivalent to a certain amount in foreign currency or conventional monetary units, the operative part of the judicial act must contain:

a) an indication of payment of the collected amounts in rubles and the amount of the amount in foreign currency (conventional monetary units) with the exact name of this currency (unit);

b) the interest rate and (or) the amount of the penalty accrued on this amount; the date from which they are accrued, and the day on which they should be accrued;

c) the exact name of the body (legal entity) that sets the rate on the basis of which foreign currency (conventional monetary units) should be converted into rubles;

d) an indication of the moment at which the rate for converting foreign currency (conventional monetary units) into rubles should be determined (clause 11 of the information letter dated November 4, 2002 N 70).

16. If the rate and date of recalculation are not established by law or agreement of the parties, the court, in accordance with paragraph 2 of Art. 317 indicates that recalculation is carried out at the official rate on the date of actual payment. If the Central Bank does not establish the exchange rate of a foreign currency (conventional monetary unit) to the ruble, the parties should provide data on the exchange rate of this currency (unit), which is established by the authorized body (central bank) of the relevant foreign state or international organization to one of the foreign currencies or conventional monetary units , quoted by the Central Bank of Russia (clause 13 of the information letter dated 04.11.2002 N 70).

17. Information letter dated November 4, 2002 N 70 (clause 14) explains: if a monetary obligation expressed in foreign currency or conventional monetary units quoted by the Central Bank must be paid in rubles not at the Central Bank rate, but at another rate to be determined , the parties should provide evidence regarding the existence of such a rate and (or) the procedure for determining its size. If the parties do not provide sufficient evidence, the arbitration court applies the CBR course. According to clause 14 of the information letter, if a monetary obligation is payable in rubles and is expressed in foreign currency or conventional monetary units that are not quoted by the Central Bank, the parties should provide evidence of the existence and (or) procedure for determining the rate of such foreign currency or conventional monetary unit. If the parties cannot provide such evidence, then the arbitration court uses for recalculation the data provided by the parties on the exchange rate of this currency (unit), which is established by the authorized body (central bank) of the relevant foreign state or international organization to one of the foreign currencies or conventional monetary units quoted CBR.

18. If, according to the writ of execution, the recalculation into rubles of the recovered amount of money, expressed in foreign currency or conventional monetary units, must be carried out at the rate established by the Central Bank, or at the rate of the bank that carries out the write-off, the bank independently carries out such recalculation and transfers the ruble equivalent to the claimant's account (clause 15 of the information letter dated 04.11.2002 N 70).

19. The information letter dated November 4, 2002 N 70 (clause 16) explains: if a debt in foreign currency or in conventional monetary units is collected in court in accordance with clause 2 of Art. 317, as well as accrued penalties and (or) interest, the court determines the price of the claim in rubles on the day of filing the statement of claim. Changes in the exchange rate of foreign currency or conventional monetary units against the ruble during the consideration of the dispute do not affect the amount of the state duty.

20. Commentary to paragraph 3 of Art. 317 - see comment. to paragraph 2 of Art. 140.

Results

A currency clause is a way to offset the losses of the parties to a foreign exchange contract from fluctuations in exchange rates. For these purposes, a certain basic unit is introduced into the contract as a separate clause, by which the parties are guided when making calculations. Such a unit can be the rate of one stable currency, the average rate of a basket of currencies, or even the exchange price of precious metals. The clause may protect the interests of only one party to the contract or both parties. The characteristics of the clause in each specific case depend only on the agreements between the parties to the contract.

Read more about the peculiarities of working under foreign exchange contracts in the Russian Federation:

• “Currency transactions between residents and non-residents”;
• “Repatriation of foreign currency to the Russian Federation by residents is...”;
• “What is the essence of currency control in customs authorities?”.

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