1 Ecclesiastes, 10:19 See also Grotius, De Jure Belli ac Pacis, ii 12.17. It has been said that ‘Next to language, money is the most important medium through which modern societies communicate’—see Widdig, Culture and Inflation in Weimar Germany (University of California, 2001) 79. Further, as the US Supreme Court noted in Briscoe v Bank of Kentucky (1837) 11 Peters 255, ‘there is no principle on which the sensibilities of communities are so easily excited, as that which acts upon the currency’.
2 The significance of money for the evolution of modern society can scarcely be overstated. A society could not have moved from subsistence production to specialized production and distribution of goods and services unless a medium of exchange had been created—see Silard, International Encyclopaedia of Comparative Law, Vol XVII (1975) ch 20 and sources there noted. In a work of this kind, it is not possible to consider the history of money in any detail, although the general subject is a fascinating one. For interesting surveys, see Davies, A History of Money from Ancient Times to the Present Day (University of Wales, 1994); Chown, A History of Money from 300 AD (Routledge, 1994); Sinclair, The Pound—A Biography (Arrow Books, 2001). A major work in this area is Simmel, The Philosophy of Money (Routledge, 2nd edn, 1990).
3 This state of affairs necessarily complicates the search for a single and comprehensive definition of ‘money’.
4 The general statements made in this opening paragraph are subject to various reservations expressed below. As will be seen, some have doubted the value or purpose of a definition of ‘money’.
5 See s 2(1) of the 1979 Act. The term ‘goods’ therefore necessarily excludes money—see s 61(1) of the 1979 Act.
6 See Chitty, para 43–013; Goode, Commercial Law, 220–1; Simpson v Connolly  1 WLR 911, 915; and Robshaw v Mayer  1 Ch 125. Similar distinctions are recognized in the German Civil Code—see Markesinis, The German Law of Obligations (Clarendon, 1997) 35.
7 There is thus no ‘sale’ if the land is to be transferred in order to extinguish some other, pre-existing obligation of the transferor—Simpson v Connolly  1 WLR 911.
8 Bills of Exchange Act 1882, s 3(1).
9 For the relevant legislation and the detailed definition of ‘deposit’ see the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544), art 5.
10 See Hewlett v Allen  2 QB 662, 666 approved in Williams v North's Navigation Collieries (1899) Ltd  AC 136 and Penman v The Fife Coal Co  AC 45. An obligation requiring payment ‘in current coin’ includes banknotes—see Currency and Bank Notes Act 1954, s 1. In the modern context, however, such antiquated terminology is only infrequently encountered.
11 MacLachlan v Evans (1827) 1 Y & J 380; Pickard v Bankes (1810) 13 East 20. See also Spratt v Hobhouse (1827) 4 Bing 173, where it was stated (at 179) that, in the context of an action for money had and received, everything may be treated as money ‘that may be readily turned into money’.
12 In practice, the funds will usually have been paid in by cheque or bank transfer, but the same principle applies.
13 Foley v Hill (1848) 2 HL Cas 28; R v Davenport  1 WLR 569; Midland Bank Ltd v Conway Corporation  2 All ER 972; Grant v The Queen (1981) 147 CLR 501; Space Investments Ltd v Canadian Imperial Bank of Commerce  3 All ER 75 (PC).
14 A point established in Re Diplock  Ch 465, 517 et seq. The meaning of ‘money’ is specifically discussed at 521. The decision was affirmed by the House of Lords (Ministry of Health v Simpson  AC 251) but without reference to this specific point.
15 Perrin v Morgan  AC 399 (HL); Re Taylor  Ch 920. Thus, notwithstanding the authorities mentioned in n 10 above, the terms ‘cash’ and ‘money’ will, in this particular context, frequently include credit balances with banks and building societies, and may extend to holdings of government bonds: Re Collings  Ch 920; Re Stonham  1 All ER 377; Re Barnes Will Trusts  1 WLR 587.
16 The episode is noted by Silard, International Encyclopaedia.
17 This statement is made for the purposes of illustration. However, it will later be suggested that government securities cannot constitute ‘money’; they are merely evidence of indebtedness, or of an obligation which is itself payable at a later date.
18 On the ‘commercial equivalent’ of cash and the performance of monetary obligations, see The Brimnes  QB 929, considered at para 7.11.
19 See Goode, Commercial Law, 488.
20 See in particular Ch 19 below.
21 eg see Crockett, Money, Theory, Policy and Institutions (Nelson, 2nd edn, 1979) 6; Lewis and Mizen, Monetary Economics (Oxford University Press, 2000) 5–6; Lipsey, Purvis, and Steiner, Economics (Harper Collins, 7th edn, 1991) 695–8. Mishkin, The Economics of Money, Banking and the Financial Markets (Little Brown & Co, 1986) 9, defines money as ‘anything that has a fixed and unvarying price in terms of the unit of account and is generally accepted within a given society in payment of debt or for goods and services rendered’. For a more recent discussion, see Mishkin, The Economics of Money, Banking and Financial Markets (Addison Wesley, 2007) 8.
22 That is to say, as a convenient proxy or method to facilitate the effective exchange of goods and services—see, eg, Jevons, Money and the Mechanism of Exchange (Kegan Paul, 14th edn, 2002) 1875; Bannock and Mansor, International Dictionary of Finance (S. Wiley & Sons, 2000) 181.
23 See Crockett, Money, Theory, Policy and Institutions (Nelson, 2nd edn, 1979) 6; Macesich, Issues in Money and Banking (Praeger, 2000) ch 3.
24 That is to say, it acts as a store of value between its original receipt and its subsequent utilization by the holder as a means of payment—see, eg, Butler, Milton Friedman: A Guide to His Economic Thought (Gower, 1985) 67, and Lewis and Mizen, Monetary Economics (Oxford University Press, 2000) 10–11.
25 It may be noted that these criteria are to some extent reflected in Art 10(1) of the Treaty between the Federal Republic of Germany and the German Democratic Republic dated 18 May 1990, which states that (in consequence of the currency union and subsequent unification of the two States), the Deutsche mark would be the ‘means of payment, unit of account and means of storing value’.
26 See Lewis and Mizen, Monetary Economics, 4.
27 See, eg, Robertson, Money (London, 1927)—‘money is anything that is widely accepted in payment for goods or in discharge of other kinds of business obligations’; Brunner, ‘Money Supply’ in Eatwell, Milgate, and Newman (eds), The New Palgrave: Money (W.W. Norton & Co, 1989) 263—‘money is still best defined in the classical tradition to refer to any object generally accepted and used as a medium of exchange’. For an alternative formulation, see Hayek, The Denationalisation of Money (3rd edn 1990, re-issued by Institute for Economic Affiars, 2008) 46—‘to serve as a widely accepted medium of exchange is the only function which an object must perform to qualify as money, though a generally accepted medium of exchange will generally acquire also the further functions of unit of account, store of value and standard of deferred payment’.
28 See, eg, Perry, Elements of Banking (Methuen, 4th edn, 1984) 22; see also Mishkin, The Economics of Money, Banking and the Financial Markets (2007) 21: ‘to define money as currency is too limited for economists, because travellers cheques and savings deposits can be used to pay for goods and services [and] they can be converted quickly into currency.’
29 It is for this reason that, in earlier editions of this work, Dr Mann stated that ‘a distinction must be drawn between money in its concrete form and the abstract conception of money. It is with respect to the former that we ask: What are the characteristics in virtue of which a thing is called money? It is with regard to the latter that we enquire: What is the intrinsic nature of the phenomenon described by the word “money”?’ (fifth edition, 5). In strict terms, this remains a valid distinction, although, at least in terms of the private law of obligations, the distinction is of diminishing importance (see below). The formulation just noted was approved in Conley v Deputy Commissioner of Taxation  152 ALR 467 (Federal Court of Australia).
30 There may, however, be more overlap than was previously thought to be the case. Monetary policy and exchange rate policy are subject to a degree of legal regulation (see, for example, the discussion on the legal framework of the European Central Bank, at para 27.07).
31 Thus, whilst a bank deposit may be ‘money’ so far as the economist is concerned, to the lawyer the arrangement creates an obligation to pay money—see Foley v Hill (1848) 2 HL Cas 28; Universal Adjustment Corp v Midland Bank Ltd (1933) 184 NE 152, Richardson v Passumpto Savings Bank 13 A 2d 184 (1940). Yet, as will be shown below, this does not necessarily disqualify a bank deposit from the status of ‘money’.
32 That legal and economic definitions of money cannot be uniform was noted by von Mises, The Theory of Money and Credit (translated by H.E. Batson, Jonathan Cape, 1953) 69: ‘The fact that the law regards money only as a means of cancelling outstanding obligations has important consequences for the legal definition of money. What the law understands by money is in fact not the common medium of exchange but the legal medium of payment. It does not come within the scope of the legislator or the jurist to define the economic concept of money.’ This statement reinforces a point which has already been made, namely that the lawyer's preoccupation with private and commercial rights and the performance of financial obligations tends to diminish the importance of ‘money’ as an independent legal concept, because the notion of ‘payment’ usually plays a greater role in those cases in which a dispute does arise. Nevertheless, the point must not be overstated: see, in particular, the discussion of the institutional theory of money at paras 1.30–1.44.
33 This is inherent in the very notion of legal tender. Yet the importance of this point should not be overstated. As others have pointed out, the growth of modern systems of payment mean that the legal concept of money can no longer be linked purely with physical tokens and, in any event, case law in which legal tender issues have been disputed is virtually non-existent: see Sáinz de Vicuña, ‘An Institutional Theory of Money’ in Giovanoli and Devos (eds), International Monetary and Financial Law—The Global Crisis (Oxford University Press, 2010) paras 25.15–25.16 (although, conversely, it may be argued that the merit of legal tender laws is that their application is accepted without litigation or dispute). As also there noted, ‘Scriptural money has won the day with regard to the basic function of money as a means of payment’. As will be seen, the courts have stepped in to decide when payment has been achieved by means of bank transfer or other instrument, for there is no equivalent notion of legal tender in that sphere.
34 The view that the ‘store of value’ feature must be recognized in a legal definition of money may also have additional consequences, eg it may support the view that the formal demonetizations of a currency may only occur as a result of legislative action in the State of issue—a proposition discussed at para 1.25. Furthermore, it may support the view that a State which substitutes its currency is obliged to provide for a ‘recurrent link’ between debts expressed in the old and the new currencies; this point is considered at para 2.34.
35 i, 276. Blackstone did, however, add that the coining of money also represented an act of sovereign power (i, 277).
36  2 QB 111, 116, drawing upon Walker, Money, Trade and Industry (London, 1882). The latter part of this definition both describes and emphasizes the character of money as a means of exchange, even though the term itself is not used. The phrase quoted in the text is perhaps more of a functional description, rather than a definition. A note or coin thus only constitutes ‘money’ when it is being used as a medium of exchange or payment: see Ilich v R  HCA 1 (High Court of Australia) referring (at para 25), to the fourth edition of this work, 8. The Hancock formulation was adopted by the Federal Court of Australia in Travelex Ltd v Federal Commissioner of Taxation  FCA 196. The same court in Messenger Press Pty Ltd v Commissioner for Taxation  FCA 756 referred to paras 1.07–1.14 of the sixth edition of this work and noted that the definition would exclude settlement funds held with a central bank, which would form a significant part of the monetary base.
37 Reference Re Alberta Statutes  SCR 100, 116. The final part of this statement recognizes the undoubted truth that ‘money’ is a much broader concept than ‘legal tender’—see para 2.25. The statement in the text was approved by the High Court of Australia in Bank of New South Wales v Commonwealth (‘Bank Nationalisation Case’) (1948) 76 CLR 1, at para 46.
38 See s 1–201(2.4) and the comment on s 3–107.
39 See Keynes, Social Consequences of Changes in the Value of Money (1923) reprinted in Collected Writings, ix, 63. Adam Smith also noted that money required a ‘public stamp’ although this remark seems to have been directed at the need to protect the integrity of money by preventing forgery; he therefore contemplated the State as the guardian of the quality of money, not necessarily as the exclusive issuer—see The Wealth of Nations, Vol 1 (reprinted 1904) 27.
40 Even this already broad definition is stated to be non-exclusive. Yet foreign government securities would not generally be regarded as ‘money’ in a legal sense, for their value in terms of the domestic currency will vary according to prevailing interest rates and other factors. Further, as noted previously, even domestic currency securities represent an obligation to pay money at a later date; it is therefore difficult to see how, in law, such securities could themselves be regarded as ‘money’.
41 See the discussion at Ch 19, and see Carreau and Juillard, Droit international économique (Dalloz, 2003), who describe money as ‘L'un des elements essentiels de la souveraineté de l’Etat moderne’ (para 1428). In the light of points that will be made later, it is suggested that this assertion remains accurate notwithstanding the transfer of sovereignty involved in the creation of a monetary union—see para 31.03.
42 See, eg, Brownlie, Principles of Public International Law (Oxford University Press, 6th edn, 2003) ch 15. If international law is to provide, at least in part, the source of a definition of money, then it must not be forgotten that such a sovereignty can be restricted, delegated, or transferred by treaty. This point is relevant in the context of economic and monetary union, and is discussed in Ch 31.
43 For the background, see Department of Justice Press Release (Western District of North Carolina), 18 March 2011 and ‘When Private Money Becomes a Felony Offense’, Wall Street Journal, 31 March 2011.
44 ie under 18 USC section 486, which provides that an offence is committed by any person who ‘except as authorised by law, makes, or utters or passes or attempts to utter or pass, any coins of gold or silver or other metal, or alloys of metals, intended for use as current money, whether in the resemblance of coins of the United States or foreign currencies, or of original design’.
45 Art 1, s 10 of the US Constitution provides that ‘No State shall … emit Bills of Credit [or] make any Thing but gold and silver Coin a Tender in Payment of Debts.’ The States thus have a limited right to issue money consisting of gold or silver. That right was clearly not available to Mr von NotHaus in the context of the Liberty Dollar (para 1.13).
46 See the fifth edition of this work, 8. As Rosa Lastra points out, the State theory is implicitly recognized in the constitutional law of a number of countries: see Lastra, Legal Foundations, 18.
47 If this definition is accepted then there can be no difference between money and the legal tender of any particular State. Money, therefore, would exist as a result of a direct exercise of sovereign power, and thus could readily be distinguished from other forms of payment such as cheques and letters of credit and which function as such by consent of the parties. The point is made by Gleeson, Personal Property Law (FT Tax & Law, 1997) 142–3, noted by Brindle & Cox, para 2.1. For reasons discussed below, the emphasis on the physical aspects of money must now be discarded.
48 Knapp, Staatliche Theorie des Geldes (4th edn, 1923), translated by Lucas and Bonar, State Theory of Money (1924; abridged edn, A.M. Kelley, 1973). Knapp's theory provoked both strong support and vehement criticism—for discussion and further materials, see Hirschberg, The Nominalistic Principle, A Legal Approach to Inflation, Deflation, Devaluation and Revaluation (Bar-Ilan University, 1971) 11–30. The State theory was subjected to withering criticism by Ludwig von Mises in The Theory of Money and Credit—eg, he states (at 69) that ‘the concept of money as a creature of law and the State is clearly untenable. It is not justified by a single phenomenon of the market. To ascribe to the State the power of dictating the laws of exchange is to ignore the fundamental principles of money—using society’. Against this, one may quote the judgment of Strong J in the Legal Tender Cases (see n 70): ‘Every contract for the payment of money, simply, is necessarily subject to the constitutional power of the government over the currency, whatever that power may be, and the obligation of the parties is, therefore, assumed with reference to that power.’ For a discussion of the evolution of the State's modern monopoly over money, see Glassner in Dowd and Timberlake (eds), Money and the Nation State: The Financial Revolution, Government and the World Monetary System (Transaction Publishers, 1997) ch 1.
49 The principle of nominalism is discussed in detail in Part III.
50 The powers of the State in currency matters plainly include the right to issue money, but also include a number of other matters affecting the regulation of money—eg the right to introduce exchange controls. The extent of State sovereignty in monetary matters and its recognition under customary international law are discussed in Ch 19. On the long-standing historical nexus between the monetary system and the State, see Carreau, Souveraineté et coopération monétaire international (Cujas, 1970) 23–47. In terms of history and chronology, however, it must be noted that forms of money came into use before the State had legislated for a monetary system and that, in many respects, the law merely provided a juristic imprimatur to that which had already become common practice. On the whole subject, see Kemp, The Legal Qualities of Money (Pageant Press, 1956) 131. The State theory thus cannot explain the meaning of money against a historical background. It may be that the Societary theory of money, considered at para 1.29 is of greater assistance in that respect.
51 For certain limitations imposed upon that sovereignty as a result of the United Kingdom's membership of the European Union and the introduction of the euro, see Ch 31. But these factors do not affect the general principle described in the main text.
52 The point is implicit in decisions such as Adelaide Electric Supply Co Ltd v Prudential Assurance Co Ltd  AC 122.
53 For cases on this point, see Case de Mixt Moneys (1604) Davis 18; Dixon v Willows 3 Salkeld 238; Pope v St Leiger (1694) 5 Mod 1. The coins issued pursuant to an exercise of the royal prerogative thus constituted legal tender for the settlement of debts in this country. Only later did the courts accept that only Parliament had the right to ascribe the quality of legal tender—Grigby v Oakes (1801) 2 Bos & Pul 527. Parliament considered that its control over the monetary system extended to the American Colonies and, in 1751, passed ‘An act to regulate and restrain paper bills of credit in His Majesty's Colonies or Plantations of Rhode Island and Providence, Connecticut, the Massachusetts Bay and New Hampshire in America and to prevent the same being legal tender in Payments for Money’ (24 Geo II, c 503, 1751).
54 See the Coinage Act 1971, s 3 (as amended). Section 9(1) of that Act (as amended) renders it an offence to make or to issue any piece of metal as a token for money, unless the authority of the Treasury has been given for that purpose.
55 This point is discussed in more detail in Ch 31.
56 Furthermore, China and some other countries have in the past issued two separate units of account—one for use by nationals, and the other for use by foreign visitors.
57 This is apparent from the ‘promise to pay the bearer’ language employed on banknotes. In this context, it may be noted that s 3 of the Currency and Bank Notes Act 1954 simply defines banknotes as ‘notes of the Bank of England payable on demand.’ In a slightly broader context involving note issuers in Scotland and Northern Ireland, s 208 of the Banking Act 2009 now defines a banknote as a ‘promissory note, bill of exchange or other document which … records and engagement to pay money … is payable to the bearer on demand and … is designed to circulate as money’.
58 Wright v Reed (1790) 3 TR 554. In R v Hill (1811) Russ & Ry 191, it was held that banknotes were not ‘money, goods, wares etc’ for the purposes of a criminal statute which created the crime of obtaining property by false pretences. Whatever may have been the position in the early 19th century, such a view is plainly unacceptable in the modern context. See also Klauber v Biggerstaff (1879) 47 Wis 551, 3 NW 357 and Woodruff v State of Mississippi (1895) 162 US 292, 300.
59 Bank of England Act, 1694.
60 Bank of England v Anderson (1837) 3 Bing NC 590, 652.
61 This factor must have influenced the decision in Ontario Bank v Lightbody (1834) 13 Wend (NY) 108 where Lightbody had tendered notes in payment of a debt due to the Ontario Bank. Unknown to both parties, the issuer of the notes had become insolvent. Lightbody's argument that payment had both been tendered and accepted was dismissed by the court; notes could not form the subject matter of a valid tender where the issuer was insolvent. See also Ward v Smith (1868) 7 Wall 447.
62 The Currency School held that the regulation of money supply was the key to sound economic policies.
63 The Banking School took a much broader view of the nature of money, holding that the unrestricted creation of money by means of bank credit was acceptable provided that it was linked with the genuine needs of trade.
64 For the current legislation in this area, see Currency and Bank Notes Act 1954, s 1(2). On the status of the Bank of England see Bank of England Act 1946, s 4 and Currency and Bank Notes Act 1928, s 3. The amount of the notes issued by the Bank of England must be covered by securities as directed by the Treasury, and is subject to such limit as the Treasury may from time to time prescribe—Currency Act 1983, s 2. On the special arrangements for note issuance in Scotland and Northern Ireland, see paras 2.29–2.36.
65 (1861) 3 DeG F & J 217; see in particular 234 and 251. Although the case is useful in many respects, the actual decision was criticized by Dr Mann, Transactions of the Grotius Society 40 (1955) 25, or Studies in International Law (1973) 505. The decision effectively amounts to the enforcement within England of the sovereign prerogatives of a foreign State, which should be impermissible in the light of the principle established in Government of India v Taylor  AC 597 (HL) and many other cases.
66 See in particular Adelaide Electric Supply Co Ltd v Prudential Assurance Co Ltd  AC 122 (HL) and Bonython v Commonwealth of Australia  AC 201 (PC), discussed in Ch 2.
67 See Art I, s 8, para 5.
68 Hepburn v Griswold (1869) 75 US 603, 615. This case nevertheless held the legal tender legislation to be unconstitutional on the grounds that it required creditors to accept payment in a depreciated medium of exchange and thus constituted a deprivation of property ‘without due process of the law’, contrary to the relevant provision of the Fifth Amendment. The case held that the constitutional power ‘to coin money’ meant precisely what it said; coins could be made legal tender, but notes could not. This followed the similar decision in Indiana in Thayer v Hayes (1864) 22 Ind 282. The effect of these decisions was reversed by Knox v Lee and Parker v Davies (see n 70).
69 See Juilliard v Greenman (1883) 110 US 421, 447 relying on the decision of the English court in Emperor of Austria v Day (1861) 3 DeG F & J 217, discussed at para 20.04. It may be said that the State theory of money became firmly entrenched as a part of federal law as a result of the Juilliard decision. The case arose from an Act of Congress in 1878, which had provided for the reissue of greenbacks in peacetime, and confirmed their quality as legal tender. The Supreme Court held that the power to issue such notes was an extension of the powers of Congress to borrow money—an interesting approach which equates the public law concept of money with the essentially private law of obligations which flow from a bill of exchange.
70 Knox v Lee and Parker v Davis (1870) 79 US 457. It is perhaps unsurprising that issues surrounding national monetary sovereignty have tended to arise in the context of a federal State. Thus, in the Federal Republic of Germany, the Constitutional Court held (20 July 1954, BVerfGE 60) that an enactment by a Land which, ‘in its economic result’ allowed revalorization of executed obligations in order to adjust the effects of a national currency reform, related to the monetary system of the State as a whole and thus fell within the exclusive jurisdiction of the Federal Government.
71 In this context, see the Utah legislation discussed at para 1.14. The point made in the text is in some respects illustrated by the decision of the Supreme Court in Veazie Bank v Fenno 75 US 533 (1869), where a federal tax on notes issued by private institutions was, in part, justified as a measure designed to protect the national currency. The sovereignty of the United States over its own monetary system also justified a power to ban the export of silver coins: Ling Su Fan v United States 218 US 302 (1910). The case in fact relates to a law passed in the Philippines which, at that time, were administered by the US.
72 Such banknotes could be put into circulation without any official authorization—see Bank of Augusta v Earle (1839) 38 US 519.
74 See Briscoe v Bank of Kentucky (1837) 11 Peters 255. In part, the decision relies on the fact that the issuing bank had set aside funds to meet its obligations under the notes in question, constituting obligations of that institution which could be enforced by action. They were not currency notes, where in many respects the promise to pay is in effect illusory—see in particular p 328 of the judgment. The main decision was followed in Darrington v The Bank of the State of Alabama (1851) 13 Harvard 12. It was later decided that a State did not contravene the provisions of Art 1, s 10 by passing legislation which stipulated that the holders of certain cheques could be paid by means of drafts drawn on another bank, because this did not have the effect of converting the drafts into a form of legal tender—see Farmers and Merchants Bank of Monroe, North Carolina v Federal Reserve Bank of Richmond, Virginia (1923) 262 US 649. These cases throw light not only on the prerogative of issuing banknotes, but also on the problem of separate legal persons within the structure of a State. See generally, Hurst, A Legal History of Money in the United States (University of Nebraska Press, 1976); From Rags to Riches: An Illustrated History of Coins and Currency (Federal Reserve Bank of New York, 1992).
75 See the Virginia Coupon Cases, Poindexter v Greenhow (1884) 114 US 270 and Houston & Texas CR Co v State of Texas (1900) 177 US 66. The cases are discussed by Nussbaum, Money in the Law, National and International (The Press Foundation, 2nd edn, 1950) 90.
76 Federal Reserve Act 1913, s 16.
77 See Perry v US 294 US 330 (1935); Nortz v US 294 US 317 (1935) and Norman v Baltimore & Ohio Railroad 294 US 240 (1935). It may be added in passing that the exclusive powers of the Federal Government to issue money necessarily implies the further power to punish counterfeiting of the currency—US v Marigold 50 US 560(1850).
78 For further support for this proposition, see Stephens v Commonwealth (1920) 224 SW 364, where reference is made to money as the ‘circulating medium by the authority of the United States’.
79 Freed v DPP  2 QB 115, a case arising under the Exchange Control Act 1947.
80 See Thorington v Smith 75 US 1 (1869); Hannauer v Woodruff 82 US 439 (1872); Effinger v Kenney 115 US 566 (1995); New Orleans Waterworks v Louisiana Sugar Co 125 US 18 (1888); Baldy v Hunter 171 US 388 (1898); Houston and Texas CR Co v Texas 177 US 66 (1900), but see (to different effect) Thomas v Richmond 79 US 453 (1871).
81 See in particular Madzimbamuto v Lardner-Burke  1 AC 645 (PC); Adams v Adams  P 188; and Re James  Ch 41 (CA). All of these cases arose from Rhodesia's unilateral declaration of independence in 1964. More specific to the present context is the decision in Lindsay, Gracie & Co v Russian Bank for Foreign Trade (1918) 34 TLR 443, where it was suggested that notes issued by the Soviet Government could not be treated as ‘money’ by the English courts, because that Government was not then recognized by the UK.
82 Carl Zeiss Stiftung v Rayner and Keeler (No 2)  1 AC 853 (HL).
83 It is doubtful whether the international renunciation of the use of force could be taken to affect the rule stated in the text. On the subject generally, see, Oppenheim, para 268.
84 Supreme Court of the Philippine Republic in Haw Pia v China Banking Corp (1948) 13 The Lawyer's Journal (Manila) 173. This decision was discussed and followed in Madlambayon v Aquino  Int LR 994 and Aboitz & Co v Price 99 F Supp 602 (District Court, Utah, 1951). These points are discussed in more detail at para 20.08.
85 See Marrache v Ashton  AC 311, 318 (PC). The statement in the text does, of course, presuppose that the issuing State itself continues to exist. If a State ceases to exist or to enjoy independent status, then its notes and coin will thereby lose the necessary legal authority necessary to apply the State theory, and will thus cease to be money—US v Gertz (1957) 249 F 2d 662.
86 For a description of Gresham's Law, see Galbraith, Money (Bantam, 1975). As will be seen, Gresham's Law applies to coins because they can have a metallic value which exceeds their face value. It cannot apply to notes, which have virtually no intrinsic value.
87 Gold coins are legal tender in this country—see the Currency Act 1983, s 1(3).
88 On this subject, see para 1.43. For a discussion of a law which demonetized gold coins, thus leaving them to be treated as a commodity by reference to their intrinsic metallic value, see Ottoman Bank v Menni  4 All ER 9, 13.
89 See Treseder-Griffin v Co-operative Insurance Society  2 QB 127, 146 (CA). The statement in the text is reinforced by the practice of the American courts during the ‘greenback’ period (1861–79). Gold dollars were at a premium to notes, but the courts insisted on treating them as legal tender for equivalent units. See in particular Thompson v Butler (1877) 5 Otto (95 US) 694; Stanwood v Flagg (1867) 98 Mass 124; Start v Coffin (1870) 105 Mass 328; Hancock v Franklin Insurance Co (1873) 114 Mass 155. A particular example is Frothingham v Morse (1864) 45 NH 545, where the plaintiff had deposited $50 in gold coin as bail. It was held that the return of $50 in currency was sufficient to discharge the debt owed to him; he could not claim more on the grounds that the gold dollar commanded a market premium.
90 Re Smith & Stott (1883) 29 Ch D 1009n. This may be contrasted with Re Chapman & Hobbs (1885) 29 Ch D 1007, which involved a 500-year lease from 1646 at an annual rent of one silver penny. The lease was found to have no value in money—a silver penny may have had a market (or commodity) value, but was no longer money.
92 See The Mint and Coinage Act (No 78 of 1964).
94 The Societary theory does have some value in defining money by reference to its function as a means of payment—see ‘The Modern Meaning of Money’ (para 1.67 below). It has also been shown that the theory is of some value when money is viewed in its historical context.
95 See, eg, Lewis and Mizen, Monetary Economics, 22.
96 It may well be that the Societary theory of money could claim a greater importance when banks began to issue notes and put them into circulation at a time when their legal status was not settled—see para 1.19. That point is now of purely historical interest, although it should be said that support for the Societary theory can be drawn from some of the cases decided during that period—see, eg, Griffin v Thompson (1884) 2 How 249.
97 It is submitted that this statement is true as a purely legal proposition, but inflation and other factors may erode that principle in practical terms. It has been pointed out that, under conditions of rampant inflation, money ‘ceases to be an instrument to work or to produce; it loses its most important quality of being respected as a value in itself for future use. Distrust of the currency leads to hoarding by the farmer, and disinclination to deliver his agricultural products for money … It leads to disinclination on the part of the manufacturer to sell his goods for money unless he receives other tangible goods in return’—Nussbaum, Money in the Law, 194, quoting the Monthly Report of the Military Governor US Zone, No 77 (1945–6), published by the Military Government of Germany, Trade and Commerce.
98 Thorington v Smith 75 US 11 (1869).
99 Resort to systems of exchange control of the kind described in Part IV is an increasingly rare phenomenon.
100 The full force of the State theory is necessarily diminished by the factors just described. The point is made by Sáinz de Vicuña, in the materials about to be discussed in the context of the institutional theory of money. As will be seen, the present edition adopts a variant of the State theory as its working model, largely because this deals more closely with the use of money in a private law context.
101 The scale of the crisis is illustrated by the redenomination of the Zimbabwean dollar at a ratio of 1,000,000,000,000 old units to a single new unit.
102 See ‘Zimbabwe shelves own currency for a year: report’, Reuters, 12 April 2009.
103 See Sáinz de Vicuña, ‘An Institutional Theory of Money’, in Giovanoli and Devos, International Monetary and Financial Law: The Global Crisis (Oxford University Press, 2010), para 25.01. The points discussed in this section are largely derived from that chapter.
104 There is, of course, some degree of linkage between these two points, but the market value of a currency is not exclusively determined by the monetary policy of the central bank. Exchange controls and other administrative measures may also have an impact on the value of a currency.
105 Sáinz de Vicuña, ‘An Institutional Theory of Money’, paras 25.08–25.10.
106 Statistical information is given by Sáinz de Vicuña, ‘An Institutional Theory of Money’, paras 25.13–25.14.
107 On these transitional arrangements, see paras 29.16–29.21.
109 For further discussion, see Sáinz de Vicuña, ‘An Institutional Theory of Money’, para 25.15. See also para 7.27.
110 Sáinz de Vicuña, ‘An Institutional Theory of Money’, paras 25.17 and 25.18.
111 Compare the Bank of England's ‘promise to pay’ on sterling banknotes: see para 1.46.
112 Central bank money does not involve such a risk because such an institution can create liabilities without supporting payment or collateral. These points are made by Sáinz de Vicuña, ‘An Institutional Theory of Money’, para 25.20.
113 Sáinz de Vicuña, ‘An Institutional Theory of Money’, para 25.21.
114 On the points about to be made, see Sáinz de Vicuña, ‘An Institutional Theory of Money’, paras 25.24–25.33.
115 In other words, the central bank must be independent of the Ministry of Finance and other arms of government.
116 As Sáinz de Vicuña, points out (‘An Institutional Theory of Money’, para 25.32), the independence of the ECB is taken a step further, in that the ECB is prohibited from lending to the public sector, since this may have inflationary consequences: see Art 123, TFEU. In this context, the role of the ECB in the ongoing financial crisis is considered at paras 27.20–27.32.
117 See Lastra, Legal Foundations, 21. The reduced role of the State and the enhanced role of commercial banks in the definition of ‘money’ bear some similarity to the present writer's efforts to reformulate the State theory of money in the sixth edition of this work: see now paras 1.67–1.71.
118 In a Eurozone context, this is intended to be achieved through the Stability and Growth Pact, originally established in 1997 and revised in June 2005. On this Pact, see Sáinz de Vicuña, ‘An Institutional Theory of Money’, paras 25.32–25.33. See also paras 26.21–26.27.
119 On these issues and the points about to be made, see Sáinz de Vicuña, ‘An Institutional Theory of Money’, paras 25.35–25.37.
120 In the case of Bank of England notes, see the analysis at para 1.46
121 On payments in bank money, see paras 7.15–7.27. As Sáinz de Vicuña points out, the institutional theory of money thus frees us from the need to regard money as an object or chattel, which was one of the core points of Dr Mann's original work. This is true, although it may be pointed out that the definition of ‘money’ had been significantly widened from that narrow base by the present writer in completing the sixth edition of this work in 2004: see paras 1.67–1.71.
122 The point has already been noted at para 1.40.
123 For the details, see Sáinz de Vicuña, ‘An Institutional Theory of Money’, paras 25.38–25.46.
124 On these points, see Sáinz de Vicuña, ‘An Institutional Theory of Money’, para 25.49.
126 See ‘The Status of Money as a Means of Payment’ (para 1.72).
127 See Banco de Portugal v Waterlow & Sons  AC 452, 487; but see German Supreme Court, 20 May 1926, RGZ 1926, 114, 27; 20 June 1929, JW 1929, 3491.
128 In similar vein, Currency and Bank Notes Act 1954, s 3 defines banknotes as ‘notes of the Bank of England payable to bearer on demand’.
129 Suffel v Bank of England (1882) 9 QBD 555, 563, and 567; see also The Guardians of the Poor of the Lichfield Union v Greene (1857) 26 LJ Ex 140. A Bank of England note thus embodies a promise to pay which could only be discharged by proffering a replacement note or equivalent coins in exchange. This curious state of affairs—the note is at the same time both a promise to pay and ‘money’—is perhaps the most eloquent confirmation of a view expressed earlier, namely that the concept of ‘payment’ may be more important than the definition of ‘money’ itself. A Bank of England note only constitutes money because it incorporates a promise of payment. The point was neatly expressed by the observation that ‘paradoxically enough, the claims on the central bank are always good because they can never be honoured. Payment does not come into question, since there are no media of payment available’—see Olivecrona, ‘The Problem of the Monetary Unit’, 62–3, quoted by Goode, Commercial Law, 487. In other words, a central bank discharges its own monetary obligations by delivering a further obligation to pay.
131 It should be noted that other commentators continue to adhere to the view that ‘money’ can only exist in the form of a physical token. For example, one writer has observed that: ‘Money simply consists of the chattel held by its owner; other forms of credit—such as banking accounts or bills of exchange—involve the creation of obligations. Thus, in the case of a bank account, the bank owes a debt to the account holder, which is a purely personal obligation. The account holder has no proprietary claim in any money. Where there is payment in money, an object is transferred and, apart from the in rem consequences of ownership, no other rights are created. If there is payment by other means, personal obligations are either created or changed': Smith, The Law of Assignment (Oxford University Press, 2007) para 21.43, noted with approval in Law of Bank Payments, para 2.001. This assumes that money must display a single, homogenous set of characteristics and that the existence of a chattel is a necessary part of the definition. A wider approach to the subject appears to be supported by Fox, Property Rights in Money (Oxford University Press, 2008) ch 1. Likewise, the institutional theory of money (see paras 1.30–1.41) necessarily supports a broader view to the effect that money includes contractual claims on central banks and credit institutions.
132 As far as is known, litigation concerning legal tender legislation as a means of discharging monetary obligations is virtually non-existent, but the observations made in n 33 should be borne in mind in this respect.
133 In many cases, the point will be obvious. If a creditor sues on a dishonoured cheque, then it is plain that he had originally accepted it as the method of payment. Equally, if the beneficiary of a letter of credit seeks to present compliant documents under its terms, then it is clear that the credit was the accepted means of payment.
134 This condition should not be overlooked; if the essential character of the consideration is altered then the contract may cease to involve a monetary obligation at all.
135 Once again, it is necessary to observe that any discussion of the legal definition of money tends unavoidably to veer towards the notion of payment. As noted earlier, traditional legal theory has refused to ascribe the title of ‘money’ to bank deposits, largely on the ground that bank deposits are to be categorized as a debt of the institution concerned. This approach is unrealistic in practical terms, because a bank deposit and transfer may be used as a means of payment. In the view of the present writer, it is also unattractive as a matter of legal theory; that a particular relationship can be classified as a ‘debt’ does not necessarily exclude it from other categories of legal relationship, if it meets the relevant criteria. As has already been shown, banknotes themselves are an illustration of this kind of dual classification. There can be no doubt that notes issued by the Bank of England constitute ‘money’; yet they also incorporate a promise to pay a ‘sum certain in money’ and thus also constitute promissory notes within the meaning of the Bills of Exchange Act 1882. Those chattels which constitute ‘money’ in this country even according to the strictest definition of that term thus exhibit the form of dual characterization which has just been described. Support for this approach may be found in Bank v Supervisors 74 US 26 (1868) where the court regarded US banknotes as both ‘certificate of indebtedness’ and as ‘currency’. In similar vein, see Howard Savings Institute v City of Newark 44 A 654 (1899).
136 This apparently technical departure does, of course, mean that a far wider range of instruments may now fall to be treated as ‘money’, where they would not have been so treated under the more traditional State theory. It may be objected that a claim on a financial institution may be lost in the event of the insolvency of that institution, and that it is thus inappropriate to treat its deposit obligations as ‘money’. This is, of course, true, but the holder of physical money also accepts risks of loss (eg through fire or theft). The view expressed in the text is also consistent with the institutional theory of money (see paras 1.30–1.41).
138 For a discussion of this principle from an economic perspective, see Simmel, The Philosophy of Money (Routledge, 2nd edn, 1990) ch 2.
139 These general remarks must be treated with some caution, for even instruments of this kind can be treated as ‘money’ if the parties so agree. The importance of private law in this context has already been discussed. Yet it is unattractive to treat as ‘money’ an instrument which has a deferred maturity date, which bears interest, and the value of which may vary over time according to prevailing interest rates and other factors.
140 Thus the possession of a £20 note is not evidence of entitlement to £20; it is £20; see Hill v R  KB 329, 334. In another sense, however, the note is evidence, eg, that the owner is entitled to have a new note issued to him by the Bank of England in the event that the original note is damaged.
142 Knapp's State theory of money has been criticized on the grounds that it does not take account of one of the essential functions of money, ie to serve as a measure of value—see, eg, Hirschberg, The Nominalistic Principle, A Legal Approach to Inflation, Deflation, Devaluation and Revaluation (Bar-Ilan University, 1971) 20–4, and sources there noted. Yet this may not be entirely fair, for the unit of account is itself the independent measure of value established by a monetary system. Mr Justice Holmes touched upon the point in Deutsche Bank Filiale Nürnberg v Humphrey (1926) 272 US 517, 519: ‘Obviously, in effect, a dollar or mark may have different values at different times. But to the law which establishes it, it is always the same.’
143 It should be appreciated that references to the ‘State of issue’ may include (as in the case of the euro) a group of States participating within a single currency area. But the State theory of money is not undermined by this qualification, for the authority for the existence of the currency is ultimately still derived from an exercise of monetary sovereignty by the States within the zone. For a discussion of this subject in the context of the euro, see paras 31.03–31.10.
144 See the discussion of Moss v Hancock, at para 1.10.
145 For those particular occasions on which money may be regarded as a commodity, see para 1.61.
146 Cf discussion in Hill v R (n 140).
147 CHT Ltd v Wood  2 QB 63, followed in Lipkin Gorman v Karpnale Ltd  3 WLR 10 (HL).
148 The well-known prohibition against riba.
149 The prohibition against qimar.
150 For further discussion of monetary issues, see, for example, Siegfried, ‘Concepts of Paper Money in Islamic Legal Thought’, Arab Law Quarterly, Vol 16 no 4 (2001), 319. For a discussion of Islamic banking issues, see Proctor, Law and Practice of International Banking (Oxford University Press, 2010) Part F.
151 See Lewis and Mizen, Monetary Economics, 11–13; Savigny, Obligationenrecht, i, 405.
152  AC 452. For discussions of this case from an economic viewpoint, see Kirsch, The Portuguese Bank Note Case (London, 1932); Hawtry (1932) 52 Economic Journal 391; Holland, ‘The Portuguese Bank Note Case’ (1932) 5 Cambridge LJ 91. For a case in which the owner of a patent in relation to security paper issued proceedings against a commercial bank in England which held stocks of foreign currency allegedly infringing the patent, see A Ltd v B Bank  6 Bank LR 85 (CA). The claimant was allowed to proceed because the defendant was a commercial bank. Had the proceedings been commenced against the issuing bank then—notwithstanding suggestions to the contrary in the judgment—the court would have lacked jurisdiction on grounds of State immunity.
153 It was, of course, an implied term of the contract that notes should only be printed with due authority from Banco de Portugal itself.
154 On these points, see the speeches of Lord Atkin at 487–9; Lord Macmillan at 507–8.
155 For a different view of this case and for criticism of the outcome, see Nussbaum, Money in the Law, 84–9. It may be said that the decision in this case—with its focus on the value of money as issued or created by a central bank—is in some respects consistent with the institutional theory of money, as explained at paras 1.30–1.41.
156 Yet this was not always so; it was often stated that foreign currencies generally fell to be treated as commodities, rather than money—see the discussion under ‘Status of Foreign Money’ (para 1.83). Some of the confusion in this area might have been avoided had more attention been paid to the decision in Acceptance Corp v Bennett 189 NW 901, 904 (1992), where it was noted that money as a medium of exchange ‘is not an article of commerce’.
157 Note to John Howard's Case (1751) Foster CC 77; R v Leigh (1764) 1 Leach 52; R v Guy (1782) 1 Leach 241; R v Hill (1811) Russ & Ry 191. Similarly, at common law, nothing could be taken in execution unless it was capable of being sold, with the result that money could not be seized for these purposes—see Knight v Criddle (1807) 9 East 48 and Francis v Nash (1734) Hard 53. Given the purpose of execution of a judgment, this position was anomalous and was remedied by s 12 of the Judgments Act 1838—see Wood v Wood (1843) 4 QB 397. But the analysis does support the conclusion that money and commodities have legal characteristics which are separate and distinct. Thus, eg, ‘goods’ has been found not to include currency filled into wage packets for the purposes of s 7(1)(e) of the Capital Allowances Act 1968—see Buckingham v Securitas Properties Ltd  1 WLR 380.
158 See, eg, Theft Act 1968, s 34 (2)(b) where the term ‘goods’ is specifically defined to include money. The meaning of the term ‘goods’ will, of course, depend upon the statutory context in which it is used—see The Noordam (No 2)  AC 909. In the US, a package of gold coins were held to be ‘goods, wares and merchandise’ for the purposes of the statute at issue in that case: Gay's Gold (1872) 13 Wall 358; the New York courts have likewise held that, in certain circumstances, gold coins could form the subject matter of a sale requiring the application of the Statute of Frauds—Peabody v Speyers (1874) 56 NY 230; Fowler v New York Gold Exchange Bank (1867) 67 NY 138, 146. Further, in Germany, the Federal Administrative Court, 5 March 1985, held that a law restricting the sale of commodities included a bureau de change because the term ‘commodities’ applied to banknotes and coins ‘in so far as they are not the means, but the subject matter of the turnover of goods’.
159 The theory that money should be regarded as a commodity was pressed by Mater, Traité juridique de la monnaie et du change (Dalloz, 1925). As others have pointed out, this was a very difficult exercise given that a sharp distinction between money and commodities lies at the very core of monetary legal analysis—see Nussbaum, Money in the Law, 23. It should, however, be emphasized that the starkness of this legal distinction does not necessarily find acceptance in other disciplines. In economic terms, money is in some respects amenable to the law of supply and demand, and may thus be regarded as a commodity in that sense.
160  3 KB 533. See also R v Goswani  2 WLR 1163. For a New Zealand decision to similar effect, see Morris v Ritchie  NZLR 196.
161 See Taylor v Plumer (1815) 3 M & S 562 and Banque Belge v Hambrouck  1 KB 321, 326.
162 This point is very clearly illustrated by the decision of the New Zealand court in Morris v Ritchie  NZLR 196.
163 Moss v Hancock  2 QB 111, noted at para 1.10 above. In that case, a dealer in curios received a stolen five pound gold piece which formally amounted to legal tender which had never been put into circulation. The dealer could not rely on the monetary character of the coin, since he had received it as ‘goods’ with a view to resale at a profit. As a result, the thief could not confer upon the dealer a title which he did not himself possess. On this point, it may be observed that the nemo dat principle does not apply to notes and coin: see para 1.55.
164 Jenkins v Horn (Inspector of Taxes)  2 All ER 1141.
165 This point is neatly illustrated by a decision of the Quebec Court of Appeal which draws a clear distinction between silver coins as a means of exchange and their metallic content: R v Behm (1970) 12 DLR (3d) 260 and a New Zealand decision, where gold coins were traded at a price in excess of their legal tender value: Morris v Ritchie  NZLR 196.
166 See the South African Mint and Coinage Act (No 78 of 1964).
169 Relying on similar views expressed in earlier editions of this book, the Federal Supreme Court of Germany (8 December 1983) BGHS 32, 198 or NJW 1984, 311 and the Supreme Court of Zimbabwe (Bennett-Cohen v The State 1985 (1) ZLR 46 or 1985 (2) SA 465) have decided that Krugerrands are not money, but goods or commodities. As a consequence, a sale of a Krugerrand should attract VAT in appropriate cases.
170 Allgemeine Gold & Silberscheidanstalt v Commissioners of Customs & Excise  QB 390.
171 That the contract to produce such notes involves money as a commodity was suggested by Simon Brown LJ in the Camdex case. This must be carefully distinguished from the situation which arose in Banco de Portugal v Waterlow & Sons  AC 452, which was discussed in paras 1.39–1.42.
172 Thus, the ECJ has held that trading in foreign currencies with counterparties must be regarded as a provision of services, rather than goods, since the money is not ‘tangible property’: see Case C-172/96, First National Bank of Chicago v Commissioners of Customs & Excise  ECR I-4387.
173 This comment would appear to be further justified by reference to Camdex International Ltd v Bank of Zambia (No 3)  6 Bank LR 43 (CA); the case will be discussed below in the context of foreign money.
174 See ‘Money as a Chattel’ (para 1.45 above). The statement in the text draws some support from von Mises, The Theory of Money and Credit, 69: ‘In determining how monetary debts may be effectively paid off, there is no reason for being too exclusive. It is customary in business to tender and accept payment in certain money-substitutes instead of money itself.’
175 The conclusion that it is necessary to move away from a purely physical definition of money may derive some support from the decision of the ECJ in Case C-172/96, First National Bank of Chicago v Commissioners of Customs & Excise  ECR I-4387, where the court held that the activity of trading in currencies for customers involved the provision of a ‘service’, since money did not amount to ‘tangible property’. Admittedly, the decision turned on specific legislation relating to value added tax. See also the decision of the VAT Tribunal in Willis Pension Fund Trustees Ltd (VTD 19183).
176 The monetary sovereignty of a State thus involves the right to create and to define a monetary system in the manner just described. This subject is discussed generally in Ch 19. Although not explicitly stated as part of the definition of ‘money’, it will invariably be the case that a central bank or similar authority will be established for the purpose of implementing monetary policy. It may be that the role of such institutions deserves more prominence in the definition of ‘money’ itself—see generally Sáinz de Vicuña, in ‘An Institutional Theory of Money’.
177 The expression ‘generally accepted measure of value’ has been adopted to emphasize the fact that foreign currencies are now freely used and accepted in many countries. The definition previously adopted in this work used the term ‘universal means of exchange’ in the State of issue but for reasons just given, this would appear to overstate the position. It hardly needs to be said that the State can only prescribe that the specified unit of account is to be the usual medium of exchange within the boundaries of the State itself, for no State can require that another State allow the circulation of its currency within the territory of the latter State: A Ltd v B Bank  6 Bank LR 85 (CA). Nevertheless, the point is noted here because it assumes a certain relevance in relation to the eurocurrency market—see ‘Eurocurrencies’, para 1.91.
178 This requirement recognizes the undoubted accuracy of some aspects of the institutional theory. However, the central bank is created and exists within a legal framework, and this aspect is accordingly consistent with the State theory of money. Lastra expresses similar views, in observing that the State theory of money remains valid, notes that it has to be ‘broadly understood as the public legal framework in which the economic institutions of money and central banking operate’, Legal Foundations, 8.
179 For a different approach, see Crawford and Sookman, ‘Electronic Money: A North American Perspective’ in Giovanoli (ed), International Monetary Law: Issues for the New Millennium (Oxford University Press, 2000) 373–4. The authors hold that money must ‘(i) be commonly accepted as a medium of exchange in an area; (ii) be accepted as final payment, requiring no links with the credit of the transferor; (iii) pass freely and be fully transferred by delivery; and (iv) be self-contained, requiring no collection, clearing or settlement’. This definition obviously differs from that in the text, partly because of its greater emphasis on money as a means of payment and partly because it does not focus on the role of the State in defining the monetary system. It must, however, be said that the authors were discussing the rise of electronic money as a new medium of payment, and the State's underpinning of the basic monetary system was therefore perhaps presupposed. Further, the authors rightly point out that private forms of money (such as travellers’ cheques) are not new, and thus apparently accept the view that rules of private law dealing with questions of payment may now be of greater practical importance than the public law of money. See also the materials referred to in n 182.
180 Furthermore, as has been seen, the conduct of monetary policy is now frequently placed in the hands of an independent central bank, free from interference by the State itself: see the discussion at para 1.30.
181 See Crawford and Sookman, ‘Electronic Money’, 375.
182  FCA 18, para 55. See also Conley & another v Commissioner of Taxation (1988) 88 FCR 98, at 104–5.
183 The Brimnes  1 WLR 386; The Chikuma  1 WLR 314.
184 The concept of payment connotes the discharge of a monetary obligation rather than the receipt of an instrument which might lead to its discharge at a later date.
185 That this should be the case was also recognized at a much earlier stage of monetary development. In 1820, in a case involving the use of banknotes, an English court remarked that ‘the representation of money which is made transferable by delivery only must be subject to the same rules as the money which it represents’: Wookey v Poole (1820) 4 B & Ald 1.
186 Higgs v Holiday Cro Eliz 746; Miller v Race (1758) 1 Burr 452; Wookey v Poole (1820) 4 B & Ald 1; cf also s 935, para 2 of the German Civil Code. The rule should also apply where notes and coins have originally been stolen from the issuing authority for they are indistinguishable from currency which has lawfully been released into circulation. However, a District of Tennessee court held to the contrary in US v Barnard (1947) 72 F Supp 531; the State could recover a gold coin stolen from the Mint, on the grounds that it was merely a chattel and had not acquired the character of money. There is some justification for this view, in that physical cash only acquires the status of ‘money’ once it has been issued by the central bank concerned and delivered to a holder. This view is consistent with the status of a banknote as a promissory note under the Bills of Exchange Act 1882—see para 1.19.
187 Wookey v Poole (1820) 4 B & Ald 1 at 7.
188 Miller v Race (1758) 1 Burr 452, 457. It was formerly said that money could not be recovered because it was not separately identifiable, ie it had no ‘earmark’—see Moss v Hancock  2 QB 111 and the decision of the Supreme Court of Missouri in n 189 below. This approach does not seem to have any grounding in principle and is of no modern relevance.
189 Miller v Race (1758) 1 Burr 452, 457. The same rule developed in the US. In Newco Rand Co v Martin (1948) 213 S W 2nd, 504, 509, the Supreme Court of Missouri said ‘money is currency, is not earmarked and passes from hand to hand. There is no obligation on a transferee to investigate a transferor's title or source of acquisition of money when accepted honestly and in good faith. One may give a bona fide transferee for value a better title to money than he has himself’.
190 Banque Belge v Hambrouck  1 KB 321, 329 per Scrutton LJ. The requirement of good faith is, of course, essential and should not be overlooked. Bad faith in a general sense will not defeat the transferee's title to the currency delivered to him; the bad faith must relate specifically to the receipt of the notes at issue: R v Curtis, ex p A-G (1988) 1 Qd R 546; see also Grant v The Queen (1981) 147 CLR 503.
191 Sinclair v Brougham  AC 398, 418.
192 Clarke v Shee (1774) 1 Cowp 197, followed by the House of Lords in Lipkin Gorman v Karpnale Ltd  3 WLR 10. In so far as banknotes are concerned, these constitute promissory notes for the purposes of the Bills of Exchange Act 1882, so that both good faith and the provision of value are presumed—see ss 30 and 90. Mere possession of a banknote is thus prima facie evidence of ownership: King v Milson (1809) 2 Camp 7; Solomons v Bank of England (1810) 13 East 136; Wyer v The Dorchester and Milton Bank (1833) 11 Cush (65 Mass) 51. Money cannot be recovered by means of an action for wrongful interference with goods, unless the specific notes and coins can be identified: Banks v Wheston (1596) Cro Eliz 457; Orton v Butler (1822) 5 B & Ald 652; Lipkin Gorman v Karpnale Ltd (above) at 15.
193 Golightly v Reynolds Lofft 88; Taylor v Plumer (1815) 3 M & S 652; whether or not a particular asset can be said to be derived from a particular fund can plainly be a difficult question: R v Cuthbertson  AC 470. Taylor v Plumer was followed in Lipkin Gorman v Karpnale Ltd  3 WLR 10, where it was held that the defendant is relieved if he has so changed his position that it would be inequitable to allow the claimant to succeed.
194 See the explanation of Lord Haldane in Sinclair v Brougham  AC 398, 419.
195 Re Hallet's Estate (1880) 13 Ch D 696, overruling Re West of England and South Wales District Bank, ex p Dale (1879) 11 Ch D 772, where the earlier cases are discussed.
196 The principal authorities in earlier times were: Sinclair v Brougham  AC 398 (departed from by the House of Lords in the Westdeutsche Landesbank case, below); Banque Belge v Hambrouck  1 KB 321; Re Diplock  Ch 465, 517, affirmed on other grounds sub nom Ministry of Health v Simpson  AC 251. See now Agip (Africa) Ltd v Jackson  3 WLR 116 and see Millet, (1991) 107 LQR 71; see also the discussion of restitution as a remedy in Westdeutsche Landesbank Girozentrale v Islington LBC  AC 669. The need for separate legal and equitable doctrines of tracing was discussed and doubted in Foskett v McKeown  1 AC 102 (HL), considered by Goode, Commercial Law, 495. The ability of a claimant to recover moneys from or to obtain restitutionary remedies against a third party who has received or dealt with money or property in which the claimant had an equitable interest has been the subject of significant judicial activity in recent years—see in particular Royal Brunei Airlines Sdn Bhd v Tan  2 AC 378; Bank of Credit and Commerce International (Overseas) Ltd v Akindele  AC 164. The decision in the Akindele case was recently criticized by the House of Lords in Criterion Properties plc v Stratford UK Properties LLC  UKHL 28. On the subject generally, see Chitty, ch 29. It is not proposed to pursue the subject here, partly because a very detailed discussion would be required in order to do justice to the subject matter. It does, however, seem to be clear that the modern remedies in tracing and restitution would apply equally to the funds received in physical form and to funds received by any other means. Thus, for the purposes of the present discussion, it is sufficient to note that the owner of money in a non-physical form enjoys the same legal protection as would be available to a holder of physical notes and coins under corresponding circumstances.
197 See Bills of Exchange Act 1882, s 89. On payment of banknotes see s 1(4) Currency and Bank Notes Act 1954.
198 Bills of Exchange Act 1882, s 84 and see the remarks of Lord Atkin in Banco de Portugal v Waterlow & Sons  AC 452, 490. See also Baxendale v Bennet (1878) 3 QBD 525.
199 See ss 20 and 21 of the 1882 Act and authorities such as Smith v Prosser  2 KB 735 and cf Cooke v US (1875) 91 US 389. The bank of issue is entitled to honour suspicious notes of this kind—see Banco de Portugal v Waterlow & Sons  AC 452; the case did not, however, decide whether the central bank was obliged to do so.
200 In this sense, see Gillet v Bank of England 6 (1889–1890) TLR 9. See also Mayor v Johnson (1813) 3 Camp 324: the owner of half a note cannot obtain payment without the other half, but Lord Ellenborough seemed to think that if the owner had lost both halves, then payment upon indemnity could be demanded.
201 This was decided by the Court of Appeal in Ontario in Bank of Canada v Bank of Montreal (1972) 30 DLR (3d) 24, 1972 OR 881 and the decision was affirmed by a four-to-four decision of the Supreme Court of Canada: (1977) 76 DLR (3d) 385; for detailed commentary, see Mann (1978) 2 Canadian Business LJ 471. The effect of this decision was subsequently reversed by an amendment to the Bank of Canada Act.
202 See Bills of Exchange Act 1882, s 24, which must apply equally to banknotes. Whilst payment in forged banknotes will thus usually be ineffective, this does not apply to a payment made in good faith to the bank of issue in its own notes, even though later found to be forged: Bank of the United States v Bank of the State of Georgia (1825) 10 Wheat (23 US) 333.
203 On this presumption, see the discussion at para 7.13.
204 Perhaps one can rely on the authority of MacKinnon LJ, who remarked that even though ‘Bank of England notes, if subjected to the unusual treatment of being read, will be found to be promises by a third party to pay’, nevertheless they are ‘the best form of payment in the world': Cross v London & Provincial Trust Ltd  1 KB 792, 803.
205 See Bills of Exchange Act 1882, ss 37 and 39.
206 Pending its reissue, a bank note retains the character of money—see R v West (1856) Deans & Bell 109; cf R v Ranson (1812) 2 Leach 1090.
207 See Hong Kong & Shanghai Bank v Lo Lee Shi  AC 181 where Lord Buckmaster said (at 182) that the notes issued by the appellant bank ‘are not legal currency, but owing to the high credit of the appellants, they are used as if they were’.
208 See the protection afforded to the holder by s 64 of the 1882 Act.
209 Leeds & County Bank Ltd v Walker (1883) 11 QBD 84. The reasoning of Denman J (at 90) is perhaps not altogether convincing; that banknotes are in many respects different from ordinary promissory notes, that they do not require endorsement, and that they constitute legal tender, is quite certain, but this hardly demonstrates that s 64 should be regarded as inapplicable. Doubts about this decision may be inferred from Lord Buckmaster's opinion in the Hong Kong & Shanghai Bank case (n 207).
210 The alteration of the number is material: Suffel v Bank of England (1882) 9 QBD 555.
211 See Dicey, Morris & Collins, para 33–349.
212 Pratt v A-G (1874) LR 9 Ex 140. In Popham v Lady Aylesbury (1748) Amb 69, Lord Hardwicke held that banknotes passed under the provisions of a will disposing of a house ‘with all that should be in it at his death’, the reason being that banknotes are ready money, not bonds or securities which are only evidence of the moneys due. It is suggested that this decision is plainly correct, notwithstanding the doubts expressed in Stuart v Bute (1813) 11 Ves 657. See also Southcot v Watson (1745) 3 Atk 228, 232, where banknotes were held to be cash, and not securities within the meaning of the will.
213 See Bills of Exchange Act 1882, s 83(1).
214 This point has been discussed at para 1.55.
216 See The Brimnes  1 WLR 386; Tayeb v HSBC Bank  EWHC 1529 (Comm).
217 At least, this is the position so far as the private law of monetary obligations is concerned. Legislation designed to counteract money laundering may require the transferee to make inquiries in certain cases, but this regulatory requirement does not affect the general principle stated in the text.
218 The Chikuma  1 WLR 314.
219 This view is reinforced by the rule that having credited the relevant account, the bank can only reverse that entry—ie unilaterally cancel its own debt to the customer—under very limited circumstances. A particularly compelling example of this rule is offered by the decision in Tayeb v HSBC Bank  EWHC 1529 (Comm).
220 That is to say, the credit standing of his debtor under the original contract. He may of course be concerned about the credit standing of his bank, once it becomes his debtor in respect of the corresponding amount.
221 In broad terms, this would seem to be the effect of the decision in Lloyds Bank plc v Independent Insurance Co Ltd  Lloyd's Rep, Bank 1 (CA). The case is considered in The Law of Bank Payments, para 3–148. For a New York decision which considers the effect of Art 4A of the Uniform Commercial Code (relating to electronic fund transfers), see Sheenbonnet Ltd v American Express Bank 951 F Supp 403 (1995).
222 This follows from the rule that the law applicable to a bank account is the law of the country in which the relevant branch is situate, and the property, represented by the remitted funds, will be located in that country—see Joachimson v Swiss Bank Corp  3 KB 110 and other cases noted by Dicey, Morris & Collins, para 22–029.
223 It may be added that credit cards are a very convenient form of payment, but they do not constitute ‘money’ within the criteria described above. Apart from other considerations, the creditor does not receive immediate access to the funds concerned; he merely acquires the right to payment from the card issuer at a later date: Re Charge Card Services Ltd  Ch 497. In a sense, therefore, the use of a credit card involves the novation of a debt, rather than its payment; actual payment occurs at a later date. Furthermore, it would seem that interest-bearing securities would not be treated as ‘money’, even though they may have been issued by a State or by a central bank. If money is to operate as a medium of exchange, then it must have ‘a uniform and unchanging value, otherwise it becomes the subject of exchange, and not the medium’. Whilst this statement is derived from an old decision of the US Supreme Court the point remains valid; money must have a constant and unchanging value under the law of the State of issue, and the existence of an interest coupon necessarily deprives an instrument of this essential feature: see Craig v Missouri (1830) 4 Peters 410.
224  FCA 977 (Federal Court of Australia).
225 See the definition of ‘payment system’ in s 7 of the 1998 Act.
226 On the points about to be made, see paras 245–305 of the judgment.
227  1 Ch 150. The decision is considered at para 7.14.
228 See para 265 of the judgment.
229 The legal framework is now provided by Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions, OJ L 267, 10.10.2009, 7. The definition just referred to is to be found in Art 2(2) of the Directive. For the provisions which implemented this Directive in the United Kingdom, see the Electronic Money Regulations 2011 (SI 2011/99). The general scheme of the legislation is to ensure that issuers of e-money are regulated institutions, thus ensuring the integrity of this new form of payment, and perhaps, to ensure that the conduct of monetary policy is not prejudiced by the increased use of private forms of money. For a general discussion of the subject, see the Committee on Payment and Settlement Systems, Survey of Electronic Money Developments (Bank for International Settlements, 2001).
230 Art 10 of the Directive.
231 Arts 4 and 5 of the Directive
232 Art 7 of the Directive.
233 Art 11 of the Directive.
234 Art 12 of the Directive.
235 For further discussion of this subject, including an analysis of the legal character of e-money and its monetary law consequences, see Crawford and Sookman, ‘Electronic Money: A North American Perspective’ and Kanda, ‘Electronic Money in Japan’ both in Giovanoli (ed) International Monetary Law: Issues for the New Millennium (Oxford University Press, 2000) chs 19 and 20; Effros, ‘Electronic Payment Systems Legal Aspects’ in Hom (ed), Legal Issues in Electronic Banking (Kluwer, 2002); Kreltszheim, ‘The Legal Nature of Electronic Money’ (2003) 14 Journal of Banking and Finance Law and Practice 161, 261.
236 See, in particular, Geva and Kianieff, ‘Re-imaging E-Money: Its Conceptual Unity with other Retail Payment Systems’ in Current Developments in Monetary and Financial Law, Vol 3 (International Monetary Fund, 2005) 669.
238 Section 1(14), Kreditwesengesetz.
239 See Art 2(2) of the Directive, reproduced at para 1.80.
240 See the preface to the first edition of this work.
241 Foreign money could be the ‘object’ of a transaction where it was purchased under the terms of a foreign exchange contract. In other words, a party could be obliged to ‘deliver’ a foreign currency under circumstances which were not equivalent to ‘payment’. The commodity theory was developed by Dr Mann, see the fifth edition of this work, 196–202. Whilst quoting various sources in support of the theory, Dr Mann did note that the validity of the distinction between payment and delivery of foreign money was ‘not unquestioned'—see the fifth edition, 196—and that although it had been accepted in a number of courts in the US, it had been rejected in Matter of Lendle (1929) 250 NY Supp 502, 166 NE 182. The notion that there may be a payment in sterling but only a delivery of foreign money was criticized by Lord Radcliffe in Re United Railways of Havana and Regla Warehouses Ltd  AC 1007 at 1059, where he observed that ‘to speak of such contracts [for the payment of foreign money] as being in English law contracts for the delivery of a commodity seems to me to be merely to confuse the issue and needlessly to suggest that for some reason best known to itself, our law regards a contract for the payment of a debt in a foreign money as if it were of a nature different to that which it obviously possessed’. Perhaps the best (albeit insufficient) argument for treating foreign money as a commodity is that it is not a measure of value in England and, hence, should not be regarded as money in this country: see, for example, the remarks of Dixon CJ in Caltex Ltd v Federal Commissioner of Taxation (1960) 106 CLR 205, at 220.
242  CLC 714. It is also right to point out that Dr Mann did state (fifth edition of this work, 195–6) that in the vast majority of cases, foreign money would fall to be regarded as ‘money’ and he approved of the statement of Brandon J to the effect that the term ‘money’ includes ‘money in foreign currency as well as in sterling’: The Halcyon The Great  1 WLR 515, 520. Dr Mann's comments on this subject were approved by the Federal Court of Australia in Conley & another v Deputy Commissioner of Taxation  FCA 110 and in Sturdy Components Pty Ltd v Burositzmobelfabrik Friedrich W Dauphin GmbH  NSWSC 595 (New South Wales Supreme Court).
243 ie to this extent, endorsing the substance of the decision in Moss v Hancock (para 1.10).
244 In Marrache v Ashton  AC 311, Lord Macmillan remarked (at 317) that since Spanish banknotes were not currency in Gibraltar ‘they must be regarded in Gibraltar as commodities’. Similarly in Moll v Royal Packet Navigation Ltd (1952) 52 SRNSW 187, the court held that an obligation to pay in a foreign currency was in law an obligation to deliver a foreign currency, with the result that a breach of the obligation gave rise to an action in damages, rather than in debt. In 1985, the Court of Appeals (2nd Cir) noted that, in an action ‘brought to recover sums expressed in foreign money the obligation—whether characterised as an unpaid debt or a breach of contract—is treated as a promise to deliver a commodity’: Vishipco Lines v Chase Manhattan Bank (1985) 754 F 2d 452, 458. Even as recently as 1996, the Court of Appeal said that foreign banknotes which had already been issued by a foreign central bank but which were held in England ‘are not to be regarded here as legal tender, but as commodities or objects of commerce’: A Ltd v B Bank  6 Bank LR 85 (CA). Statements of this kind were of uncertain validity when they were made, but in any event, they cannot now stand in the face of the Camdex decision.
245 It should be said that Simon Brown LJ made very similar remarks, and Otton LJ agreed with both judgments. See also the discussion in Goode, Payment Obligations, para 1–05. The status of foreign money obligations as duties of payment (rather than delivery) is also recognized in Germany: Heermann, Geld-und Geldgeschafte (Mohr Siebeck, 2008), 31.
246  AC 443. The consequences of that decision are considered in Ch 8.
247 On this subject, see Ch 14.
248 For reasons given at para 1.64, the key area of distinction now lies in the field of taxation. The statement in the text was approved by the Federal Court of Australia in deciding that a foreign currency was ‘money’ for the purposes of relevant provisions of the Corporations Act and associated regulations: see In re Sonray Capital Markets Pty Ltd  FCA 75, at para 99.
249 For an unsuccessful attempt to introduce an exemption to this rule, see ‘The Euro and Sterling Choice Bill’, which is considered in Ch 2.
250 On the discharge or performance of monetary obligations generally, see Ch 7. As noted in Ch 2, the identification of legal tender remains a feature of all legislation which creates a monetary system, but the concept of legal tender is of ever-diminishing importance.
251 This is the position in New York—see Brown v Pereira (1918) 182 App Div 992; 176 NY Supp 215 (Supreme Court of New York).
252 Picker v London & County Banking Co (1887) 18 QB 515, 510, approved in Williams v Colonial Bank (1888) 38 CR D 388, 404, affirmed (1890) 15 AC 267.
253 See ss 738(4) and 739(1) of the 2006 Act and the discussion of the predecessor legislation in Re Scandinavian Bank plc  2 All ER 70.
254 Stamp Act 1891, s 122.
255 See Forgery and Counterfeiting Act 1981, s 27(i)(b) and Counterfeit (Currency) Convention Act 1935, s 1. In Australia, it was held that the words ‘currency, coinage and legal tender’ in s 51(xii) of the Australian Constitution include foreign money; with the result that it was within the powers of the Government to make regulations controlling the export of foreign money: see Watson v Lee (1979) 144 CLR 374, 396, approved in Leask v Commonwealth of Australia  HCA 29 (High Court of Australia). The practice of punishing the falsification of foreign money is well established and reflects an obligation arising under international law. In this context, see the interesting decision of the US Supreme Court in US v Arjona (1887) 120 US 479 and the general discussion on this subject in Ch 20.
256 The Halcyon The Great  1 WLR 515; Daewoo v Suncorp-Metway  NSWSC 35 (New South Wales Supreme Court).
257 In many cases, the relevant legislation will make the point clear. For a recent example, see Art 3 of the Financial Collateral Arrangements (No 2) Regulations 2003, SI 3226/2003, where ‘cash’ is defined to mean ‘money in any currency credited to an account, or a similar claim for repayment of money and includes money market deposits’. In contrast, the Supreme Court of Victoria declined registration of a mortgage to secure a US dollar obligation, on the grounds that (i) a mortgage could only be registered to secure payment of ‘money’, and (ii) as a foreign currency, US dollars fell to be treated as a commodity, rather than money: Bando Tading Co Ltd v Registrar of Titles  VR 353.
258 See, eg, Harrington v MacMorris (1813) 5 Taunt 228 and Ehrensperger v Anderson (1848) 3 Exch 148, where actions for money had and received were allowed to proceed even though the moneys concerned had been advanced in India in the local currency (and not in sterling). The contrary decision in McLachlan v Evans (1827) 1 Y & J 380 cannot stand.
259 Re Rickett, ex p Insecticide Activated Products Ltd v Official Receiver  1 All ER 737; Sturdy Components Pty Ltd v Burositzmobelfabrik GmbH Friedrich W Dauphin GmbH  NSWSC 595 (New South Wales Supreme Court) and Daewoo v Suncorp-Medway  NSWSC 35 (New South Wales Supreme Court). The last-mentioned case considers and largely dismisses the commodity theory of foreign money.
260 See Treseder-Griffin v Co-operative Insurance Society  2 QB 127 (CA). See also para 8.10.
261 Rhokana Corp Ltd v IRC  AC 380 (HL).
263  1 KB 788 (CA).
264 Landes Brothers v Simpson (1934) TC 62; Imperial Tobacco Co Ltd v Kelly  2 All ER 119. But a different view was taken in McKinlay v HT Jenkins & Sons (1926) 10 TC 372 and Davies v The Shell Company of China (1951) 32 TC 133. See Anon, ‘Taxation of Foreign Currency Transactions’ (1952) 61 Yale LJ 1181. See also Pattison v Marine Midland Ltd  1 AC 362, noted at para 7.79.
265 Taxation of Chargeable Gains Act 1922, s 21(1)(b).
266 See the opening comments in this para.
267 Compare the Privy Council decision to the effect that a reference in the Australian income tax legislation to ‘pounds’ referred to units of Australian currency and that a tax assessment had to be made in that currency even though the underlying income had been earned in British pounds: see Payne v Federal Commissioner of Taxation (1936) 55 CLR 158.
268 Treseder-Griffin v Co-operative Insurance Society  2 QB 127 (CA).
269 The identity of the currency concerned may of course have an impact on the rate of interest, but will not normally affect the right to it.
270 It should be noted that so far as the English courts are concerned, a sterling obligation must be performed by payment in sterling. Where a foreign currency obligation is payable in England, the debtor has the option to pay either in the stipulated currency or in sterling—see para 7.30.
271 Of course, transactions involving foreign currencies may raise specific conflict of law issues. But that is equally true of other factors which may affect a transaction, such as the place of payment or the residence of the parties. It should also be emphasized that the view expressed in the text is by no means universally held. For example, although the conclusions to be drawn from the Camdex decision are stated in similar terms in Brindle and Cox (eds), The Law of Bank Payments (Sweet & Maxwell, 3rd edn, 2004) para 2–009, the authors do doubt some of the reasons for the decision and maintain that foreign currency could helpfully be treated as a commodity in a variety of cases and for different purposes. In particular, they argue that:
272 See in particular ss 9 and 11(1) of the 1965 Act.
274 Vehicle Wash Systems Pty Ltd v Mark VII Equipment Inc  FCA 1473 (Federal Court of Australia), suggesting that the decisions in Jolly v Mainka (1933) 49 CLR 242 and Vishipco Line v Chase Manhattan Bank NA 754 F 2d 452 (1985) may require reconsideration. On these cases, see paras 2.59 and 18.41.
275 Laming Holding BV v Commissioner of Taxation  FCA 612 (Federal Court of Australia).
276 Sturdy Components Pty Ltd v Burositzmobelfabrik Friedrich W Dauphin GmbH  NSWSC 595. In relation to the problems caused by foreign currency claims in the insolvency sphere, see paras 8.23–8.29.
277 On the origin of the eurocurrency market, see Stigum, The Money Market (McGraw Hill, 3rd edn, 1989); Carreau and Juillard, Droit international économique, paras 1564–1582. As the writers point out, no work exists which seeks to provide a comprehensive legal analysis of the eurocurrency market. However, much valuable material and commentary is to be found in Robinson, Multinational Banking (Sijthoff, 1972). See also Carreau, ‘Deposit Contracts’ in International Contracts (materials reprinted from the proceedings at the Columbia Law School Symposium on International Contracts, Matthew Bender & Co, 1981).
278 See Smedresman and Lowenfeld, ‘Eurodollars, Multinational Banks and National Laws’ 64 NY University LR 733 (October 1989).
279 The US Supreme Court defined eurodollars as ‘United States dollars that have been deposited with a banking institution located outside the United States with a corresponding obligation on the part of the banking institution to repay the deposit in United States dollars’: Citibank NA v Wells Fargo Asia (1990) 495 US 660. The expression ‘eurocurrency’ results from the original growth of the eurodollar market in London, but the definition is of general application. A more complete definition is given by Carreau and Juillard, Droit international économique, para 1585:
un dépôt international de monnaie étrangère peut être simplement défini comme l’opération selon laquelle une personne (le déposant) place (dépose) pour une durée limitée (le terme) une somme d'argent, exprimée en une monnaie nationale donnée, dans une banque (le dépositaire) située en dehors du pays d'émission de celle-ci, à charge pour la banque de payer un intérêt et de restituer le principal à l’échéance convenue.
280 Reference will be made throughout to the eurodollar market since it is obviously the predominant one, but any currency can be a ‘eurocurrency’ if it is deposited with a bank outside the currency of issue. As will be noted, however, participation in the eurodollar market is confined to financial institutions.
281 On the points just made, see Pigott, ‘The Historical Development of Syndicated Eurocurrency Loan Agreements’ in Selected Legal Issues for Finance Lawyers (Lexis Nexis UK, 2003) 247. For discussion of the eurodollar market and the reasons for its growth in London, see Schenk, ‘The Origins of the Eurodollar Market in London 1955–1963’ (1998) 35(2) Explorations in Economic History 221.
282 One, three, or six months would be typical maturities but the precise period would be subject to agreement between the institutions concerned.
283 The difficulty is well illustrated by a decision of the ECJ. The Kingdom of Belgium issued bearer bonds in the euromarket. In an effort to ensure that these were not used as a means of avoiding Belgian taxation, the terms of the bonds specifically prohibited their acquisition by residents of that country, but the Court held that this was an insufficient justification for a restraint on the free movement of capital: Case C-478/98 Commission v Belgium  ECR I-7857. See also Case C–242/03 Ministre des Finances v Weidert ECR I-7379.
284 It is appreciated that this analysis is not attractive from a legal perspective, but it perhaps reflects the financial realities of the position.
285 Once again, the increasing role of private law in the monetary field should be noted. For the suggestion made in the text, see, Carreau and Juillard, Droit international économique, para 1567, where the authors speak of ‘deux “monnaies” différentes, l’une publique et nationale qui est la monnaie support (ou sous-jacente) et l’autre privée et transnationale qui est la monnaie “dérivée”’. For further discussion on this subject, see Carreau, ‘Le système monétaire international privé (1998) 274 Rec 313.
286 Although see the situation which arose in Libyan Arab Foreign Bank v Bankers Trust Co  QB 728. The case is discussed at para 7.11.
287 On these and other points, see Carreau and Juillard, Droit international économique, paras 1586–1587.
288 See Carreau and Juillard, Droit international économique, paras 1586–1587. The position is the same in England—see Foley v Hill (1848) 2 HLC 28; Joachimson v Swiss Bank Corp  3 KB 110; Rowlandson v National Westminster Bank Ltd  1 WLR 803.
289 On the lex monetae principle generally, see Ch 13.
291 In part, this is because the settlement of dollar transactions involves sizeable overdrafts among participants on any given day, and these can only safely be undertaken in the context of the Federal Reserve's function as lender of last resort—see Smedresman and Lowenfeld, ‘Eurodollars, Multinational Banks and National Laws’ (October 1989) 64 NY University LR 733. Further, the effect of a wholesale eurodollar transaction is to transfer dollars from the reserve account of the Federal Reserve to the reserve account of another bank. Evidence to that effect was given by Dr Marcia Stigum in Libyan Arab Foreign Bank v Bankers Trust Co  QB 728 but was rejected by the Court.
292 The contract would usually be governed by a different system of law because, by definition, eurodollar deposits are held with banks outside the US, and such deposit contracts will usually be governed by the law of the place in which the account is held.
293 On the points made in this paragraph, see Carreau and Juillard, Droit international économique, paras 1603 and 1609. It must, however, be said that, where the contract creating the eurodollar deposit is governed by English law, the exposure to the lex monetae is limited because English law does not recognize the transfer through the US clearing system as the fundamental feature of performance—see Libyan Arab Foreign Bank v Bankers Trust Co  QB 728.
294 For the reasons discussed at para 1.57 in relation to bank deposits generally, it is submitted that eurodollars can be regarded as ‘money’ at least once the maturity date has arrived.
295 It must, however, be said that English law does not at present accept any distinction between eurodollars and other foreign currency claims, and thus affords no special status to eurocurrencies. This conclusion is a necessary consequence of the decision in Libyan Arab Foreign Bank v Bankers Trust Co  QB 728, where the court rejected the suggestion of an implied term depriving the creditor of the right to receive payment in cash. See also the discussion at 63–4 of the fifth edition of this work. It should be added for completeness that the US Supreme Court likewise had an opportunity to consider the eurodollar market in Citibank NA v Wells Fargo Asia (1990) 495 US 660. The court below apparently tended to the view that—wherever they were made—eurodollar deposit contracts should be governed by New York law, since they were ultimately to be settled there. This reflects the greater importance which US courts have tended to ascribe to the place of performance as a feature in identifying the governing law of the contract. The case was, however, principally concerned with the liability of the head office of a bank for deposits placed with its overseas branches. For an illuminating discussion of the earlier stages of this litigation, see Smedresman and Lowenfeld, ‘Eurodollars, Multinational Banks and National Laws’ (October 1989) 64 NY University LR 733.
296 It is submitted that this must be so, given that the creation of the euro is both a very recent and very important illustration of that theory. On the whole subject, see Chs 29 and 30, where the legal framework for the euro is considered.