Postfach 10 20 31,  D-60020 Frankfurt,  Tel: +49 (69) 27 227 - 0,  Fax: +49 (69) 27 227 - 227OPINION OF THE EUROPEAN MONETARY INSTITUTE
CON/98/11
At the request of the Portuguese Ministry of Finance, under Article 109f (6) of the Treaty establishing
the European Community (the “Treaty”) and Article 5.3 of the Statute of the European Monetary
Institute (EMI), on a draft Decree-Law (the “draft law”) on certain rules concerning the changeover
process for the introduction of the euro in Portugal.
1.On 10 February 1998 the EMI received a request for an opinion on the draft law from the
Portuguese Ministry of Finance. An Explanatory Memorandum was also submitted to the EMI.
On 17 February 1998 the EMI received from the consulting authority an English version of the
draft law, and the present opinion is based on that English translation.
2.The EMI’ s competence to deliver an opinion is based on Article 1.1, first indent, of the Council
Decision (93/717/EC) of 22 November 1993 on the consultation of the EMI by the authorities of
the Member States on draft legislative provisions, as the draft law deals, inter alia, with currency
legislation.
3.  The draft law aims to make the necessary adaptations to Portuguese legislation, in particular with
a view to the national implementation of the regulatory framework for the introduction of the euro.
The draft law refers to rounding rules, the legal regime for coinage in Stage Three, the exclusion
of the euro from the legal category of “foreign currency”, accountancy rules, replacement of
reference interest rates, redenomination of public and private debt, taxation and budget.
 
4.  The EMI welcomes the initiative of the Portuguese Government to prepare for the introduction of
the euro, so as to ensure the timely implementation of the measures necessary or convenient for
the changeover. The draft law is foreseen as a supplement to the draft EU Council regulation on
the introduction of the euro, and provides for its entry into vigour the day of adoption by Portugal
of the single currency (except Articles 2 and 3(1)(2), concerning the $50 coin, which are effective
upon enactment). The EMI also welcomes that the draft law has given consideration to the views
of the EMI in its reports on legal convergence.
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5.Specific comments are the following:
(a) The EMI welcomes the legal provisions depriving of legal significance any di fferences arising
out of rounding rules in conversions between escudos and euros, and enabling the Ministry of
Finance to enact secondary regulations as necessity might dictate.
(b) The rules on accountancy adequately reflect the guiding principle of “no  prohibition - no
compulsion”. The EMI notes that the draft law does consider neither adaptations in the legislation
in the field of company law nor rules for re-denomination of company shares; it does enter neither
the domain of re-denomination of quotations in equity markets nor of the rules applying to
commercial registries, both of which would normally be a logical complement to any re-
denomination of the unit used for corporate accounting and official reporting purposes. It is noted,
however, that the Preamble already considers the draft law as a “first phase in the process of
legislative preparation of the Portuguese legal system for the introduction of the euro”, and
implicitly announces further legislative acts.
(c) The discount rate of the Bank of  Portugal will be replaced by an interest rate to be fixed by the
Government following consultation with the Bank of Portugal. Other reference interest rates are
to be replaced by “financially equivalent”, and the Ministry of Finance is given statutory powers to
specify such substitute rates. The EMI welcomes the envisaged system as consistent with general
principles of Law and permitting avoidance of legal uncertainties and of litigation risks. Explicit
references to the EURIBOR and to EONIA might be made by the Ministry of Finance once the
preparatory work for these reference rates is finalised. That explicit reference is highly
recommended  : the EMI has always favoured a reference rate able to represent the whole euro
area, to replace the local rates  ; EU RIBOR, in particular, meets the features necessary to have a
function in the third stage corresponding to that performed at this moment by the LISBOR in
relation to the Escudo.
(d) The EMI welcomes the regime envisaged for re-denomination and re-conventi oning of public
debt. The method chosen for that re-denomination, based on individual holdings, and rounding to
the euro cent, is similar to the method envisaged by many Member States (i.e. Germany, Austria,
Belgium; France and The Netherlands envisage rounding to the euro unit). The enabling authority
given to the Public Debt Agency (Instituto de Gestão do Crédito Público) is a useful device to
solve specific problems that may arise.
(e) With reference to the re-denomination of private debt, the draft Article 16 paragraph 2 submits
to Portuguese law the re-denomination of debt issued under Portuguese law but “ denominated in
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the currency of another Member State ... having decided to re-denominate its debt ”. The
solution given by the draft law to a problem of international private law is correct. Re-
denomination of debt securities during the transitional period has bee construed as a right given by
the monetary law of the Community, Article 8(4) of the draft EU Council regulation on the
introduction of the euro, to one of the contractual parties, the issuer/borrower; therefore, it is a
right introduced in the law of the contract and the modalities of its exercise pertains to the lex
contractus - Portuguese law. No Member State has, so far, introduced legislation taking an
approach which may contradict the solution given in the draft law.
(f) The EMI notes that some of the items that other Member States have considered appropriate
to be legislated in relation to the re-denomination of debt securities are not addressed in the draft
law : (i) legal measures to change the tradable nominal amounts of bonds so as to avoid decimals
(so-called re-nominalisation), (ii) allocation to the issuer/borrower of the costs of redenomination,
and (iii) a short time limit for judicial challenges of re-denomination measures. However, it is
expected further legislative provisions in the context of the introduction of the euro where these
matters might be taken into consideration.
The EMI has no objection to this opinion being made public.
6 April 1998