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Lifting of currency restrictions : impact on aviation industry

Since the 1930s, French regulation has made it clear that parties to domestic contracts must make payments usingFrench currency. While there was an exception to this rule for international payments, the criteria for making international payments were unclear. This had a direct impact on the aviation industry.

In 2016 French contract law was restructured to render it more predictable and commercially attractive. The reformextended to the currency limitation rule, which was considered both restrictive and unclear. Following this, Ordinance2016-131 (dated 10 February 2016), which introduced a new Article 1343-3 into the Civil Code, reinstated previouscase law, but adjusted the currency limitation exception, replacing the concept of ‘international payments’ with that of’international contracts’. Under this new law, parties to international contracts could pay with foreign currencies.

However, this was still deemed too restrictive for the business sector – particularly the aviation sector. Under Frenchlaw, contracts must contain a foreign element in order to be considered an international contract. All domestictransactions thus had to be paid in euros.

The 2016 reform was subject to a recently passed implementing law (Law 2018-287 dated 20 April 2018), which entered into force on 1 October 2018. Under this law, the currency limitations do not apply to:

  • transactions of an international nature; or
  • transactions between professionals where payment in a foreign currency is common practice in the relevant industry.

The aviation industry was directly targeted by the reference to ‘common practice’. During parliamentary debates,Justice Minister Belloubet expressed the need for flexibility in currency rules for aviation transactions.

Accordingly, an agreement for the sale and purchase of an aircraft between a French seller and buyer which providesthat the purchase price must be paid in US dollars is now clearly permitted under the law.

For further information on this topic please contact Matthieu de Varax or Wissam Dahmani at Odi-se Avocats bytelephone (+33 1 7935 0750) or email (mdevarax@odise.com or wdahmani@odise.com). The Odi-se Avocats websitecan be accessed at www.odise.com.

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