Case concerning various Serbian Loans Issued in France

The government of Serbia-Croatia-Slovenia concluded an agreement in Paris with several French Banks issuing bonds in ‘gold Francs’, because of movement in the price of currencies, there were problems with the service of the debt and France and the Serb government referred the case to the PCIJ regarding bases of the payment. Resolution (41p) Any contract, which is not a contract between states in their capacity as subjects of international law, is based on the municipal law of some country. The question as to what this law is forms the subject of that branch of law which is at the present day usually described as private international law or the theory of conflicts of laws [cf. Texaco]

(42p) The court which has before it a dispute involving the question as to the law which governs the contractual obligations at issue can determine what this law is only by reference to the actual nature of these obligations and to the circumstances attendant upon their creations, though it may also take into account the expressed or presumed intention of the parties. In court’s opinion this law is Serbian law and not French law… the loans in question are loans contracted by the state of Serbia under special laws which lays down the conditions relating to them, these laws are cited in the bonds and it appears that the validity of the obligations set out in the said bonds is indisputable Serbian law (44p) But the establishment of the fact that the obligations entered into do not provide for voluntary subjection to French law as regards the substance of the debt, does not prevent the currency in which payment must or may be made in France from being governed by French law. It is indeed a generally accepted principle that a State is entitled to regulate its own currency.