Part II The Private Law of Monetary Obligations, 8 Legal Proceedings and their Effect upon Monetary Obligations

Subject(s):

Legal proceedings and monetary obligations — Bank of England — Federal Reserve System (‘Fed’) — Insolvency set-off — Judicial set-off

This chapter studies whether the institution of legal proceedings have any impact upon the nature or quality of a monetary obligation. The commencement of legal process is a procedural step which is designed to enforce a pre-existing obligation; such a step should therefore have no effect upon the substance of the obligation at issue. This view can only be reinforced when it is considered in a private international law context, where the substance of the obligation is governed by its applicable law while procedural questions are subject to the law of the country in which the proceedings have been instituted. English law now broadly reflects this principle, although inevitably that principle cannot always be applied uniformly. In particular, difficulties may arise where it is necessary to convert one currency into another, for the date of calculation and other matters may tend to distort the substance of the original obligation. The chapter then illustrates the application of the principle by reference to a discussion of English and US law. It also examines exceptions in the context of procedural questions which come to the fore in the context of insolvency and the division of trust funds.