Communication to the European Parliament, the Council and the European Monetary Institute - Secondary legislation for the introduction of the euro and some provisions relating to the introduction of the euro
Date: 1996-10-16
Institutions: European Commission
Subjects: EU law, European Monetary System, euro, exchange rate, secondary legislation

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels,  16.10.1996 
COM(96) 499  final 

96/0249 (CNS) 
96/0250 (CNS) 

Communication to the European Parliament, the Council and 

the European Monetary Institute 

Secondary  legislation 

for  the  introduction  of  the  euro  and 

some  provisions  relating  to  the  introduction  of  the  euro 

Proposal for a 

COUNCIL REGULATION (EC) 

on some provisions relating to 
the introduction of the euro 

Proposal for a 

COUNCIL REGULATION  fEO 

on the introduction of the euro 

(presented by the Commission) 

Secondary legislation 

for the introduction of the euro and 

some provisions relating to the introduction of the euro 

(Communication  to the European  Parliament,  the Council  and 

the European  Monetary  Institute ) 

The  European  Council  of  December  1995  in  Madrid  adopted  a  scenario  for  the 
introduction  of  the single  currency  and  asked  for  the  technical  preparatory  work  for  a 
Council  Regulation  providing  the  legal  framework  for  the  use  of  the  euro  to  be 
completed  at  the  latest  by  the  end  of  1996.  In  this  perspective  the  Commission 
herewith  transmits  two  draft  proposals  for  Council  Regulations.  The  annexed  draft 
Regulations  have  been  prepared 
in  compliance  with  the  principles  for  such  a 
framework  as  laid  down  under  point  9 of the reference  scenario 

legal  framework  has  been  defined  following 

The 
intensive  consultations  with 
representatives  from  the private sector  and  has benefited  from  valuable  input  from  the 
European  Monetary  Institute. 

The  consultations  held  by  the  Commission  services  have  made  it  clear  that  the 
concrete  preparations  for  the  changeover  to  the  single  currency  in  the  private  as  well 
as  the  public  sector  call  for  a timely  clarification  of  the  legal  framework  for  the  euro 
well  in  advance  of  the  start  of  stage  three of  Economic and Monetary  Union.  For  some 
provisions,  especially  on  the  continuity  of  contracts  and  rounding,  the  legal  certainty 
required  for  timely  preparations  can  only  be  achieved  if  they  are  adopted  and  if  they 
enter  into force  long before  the start of stage three. 

Article  109  I  (4),  third  sentence,  which  allows  the  adoption  of  "other  measures 
necessary  for  the  rapid  introduction  of  ...  the  single  currency",  will  only  be  available 
as  a  legal  basis  in  early  1998,  when  it  has  been  decided  according  to  Article 
109 j (4), which  Member  States fulfill  the necessary  conditions  for  the adoption  of  the 
single  currency.  Therefore,  the  Commission  proposes,  in  accordance  with  the  under 
standing  reached  at  the  informal  Ecofin  in  Dublin  in  September  1996,  to  base  those 
provisions  for  which  there  is  an  urgent  need  for  legal  certainty  on  Article  235  of  the 
Treaty,  and  to  adopt  the  other  provisions  of  the  legal  framework  on  the  basis  of 
Article  109 1  (4) of the  Treaty. 

The  Commission  suggests  seeking  political  endorsement  of  the  two  draft  Regulations 
at the  meeting  of the European  Council  in Dublin  in December  1996. 

The following  draft  proposals  are annexed  to this  Communication: 

•  Council  Regulation  on  the  introduction  of  the  euro  (Article  109  I  (4)  of  the 
Treaty).  The objective  is to  define  monetary  law  provisions  for  the  Member  States 
without  a derogation.  The  Regulation  would  enter  into  force  on  1 January  1999.  It 
provides  for  the  substitution  of  the  euro  for  the  national  currencies.  During  a 
transitional  period  ending  on  31.12.2001  at  the  latest,  the  national  currencies  of 
participating  Member  States  are redefined  as sub-divisions  of  the  euro.  During  this 
period  the  euro  unit  and  the  national  currency  units  are  legally  equivalent  The 
draft  Regulation  includes  rules  for  the  use  of  the  national  currency  unit  and  the 
euro  in  its own  unit.  It  also  determines  rules  for  banknotes  and  coins  denominated 
in the euro which will  be put  into circulation  at the  latest on  31.12.2001 

The  consultation  of  the  European  Central  Bank  is  required  according  to  Article 
109  1  (4) of  the  Treaty,  but  can  be substituted  according  to  Article  109 f  (8)  of  the 
Treaty  by  the  consultation  of  the  European  Monetary  Institute  The  consultation  of 
the  European  Parliament  is not  formally  required  but  highly  desirable. 

•  Council  Regulation  on  some  provisions  relating  to  the  introduction  of  the  euro 
(Article  235  of  the  Treaty).  The  purpose  of  this  regulation  is  to  lay  down  those, 
provisions  relating  to the  introduction  of the euro  where  there  exists  an  urgent  need 
for  legal  certainty.  The  draft  Regulation  confirms  that  the  introduction  of  the  euro 
does  not  affect  the  continuity  of  contracts or other  legal  instruments.  Moreover  it  is 
confirmed 
in  its  composition  as  a  basket  of 
component  currencies  will  become  one  euro.  Finally  the  draft  determines  the 
degree  of  accuracy  at which  conversion  rates  will  be  fixed  on  1 January  1999  and 
establishes  rounding  rules  for  conversions  between  the  euro  and  the  national 
currency  units. 

that  from  1.1.1999  one  ECU 

The  European  Parliament  is  to  be  consulted  according  to  Article  235  of  the  Treaty. 
The  European  Monetary  Institute  is  to  be  consulted  according  to  Article  109  f  (6) 
of  the  Treaty. 

2. 

EXPLANATORY  MEMORANDUM 

l. 

INTRODUCTION  -  GENERAL  CONSIDERATIONS 

Principal  objectives  of the  proposals 

Now  that  preparations  for  EMU  have  turned  to  practical  questions,  operators 
have  increasingly  demanded  that  complete  legal  certainty  on  the  use  of  the  euro 
be  established  well  in advance of the start of stage three of  EMU. 

The  European  Council  of  December  1995  in  Madrid  recognised  this  need  for 
legal  certainty,  setting  forth  a  scenario  for  the  introduction  of  the  single 
currency,  and  stipulating  notably  that  a  Council  Regulation,  whose  technical 
preparatory  work  shall  be  completed  at  the  latest  by  the  end  of  1996,  will  enter 
into  force  on  1st  January  1999  and  provide  the  legal  framework  for  the  use  of 
the  euro.  The  European  Council  also  confirmed  the  principle  of  continuity  of 
contracts  and  the  conversion  at  a  rate  of  one  to  one  of  references  to  the  ECU 
basket  by  references  to the euro. 

The  Commission  is responding  to the need  for  legal  certainty  by  proposing  legal 
provisions  in this text that should  make up the  legal  framework  for  the  use of  the 
euro. 

The  provisions  are  included  in  two  separate  draft  Regulations  for  the  following 
reason: 

Article  109  1 (4),  third  sentence,  provides  for  the  taking  of  "other  measures 
necessary  for  the  rapid  introduction  of  ...  the  single  currency".  However,  this 
Article  will  only  be  available  as  a  legal  basis  in  early  1998  when  it  has  been 
decided  according  to  Article  109  j (4)  which  Member  States  fulfil  the  necessary 
conditions  for  the  adoption  of  the  single  currency.  Therefore,  those  provisions 
for  which  it  is  urgent  to  establish  legal  certainty  by  having  them  adopted  in  the 
near  future  are  based  on  Article  235  of  the  Treaty.  The  other  provisions  which 
define  the  monetary  law  of  the  participating  Member  States  are  based  on  Article 
109 1  (4) of  the  Treaty.  By  already  proposing  them  at this  stage,  the  Commission 
opens  the  possibility  for  a  political-agreement  on  them,  such  that  their  formal 
adoption  in  1998 will  be  a mere  formality. 

The  objectives  of  the  draft  Council'Regulation  on  some  provisions  relating 
to  the  introduction  of  the  euro  are: 

- 

to  confirm  that  with  effect  from  1st  January  1999  references  to  the  ECU  in 
contracts  and  other  legal  instruments  are  replaced  by  references  to  the  euro  at 
a rate of one  euro for  one  ECU; 

5 

- 

- 

to  confirm  the  continuity  of  contracts  which  are  denominated  in  national 
currencies  and  in ECU and which  extend  beyond  1 st January  1999; 

to  determine  the  degree  of  precision  at  which  conversion  rates  will  be 
irrevocably  fixed  on  1st January  1999; 

- 

to establish  rounding  rules. 

Moreover,  by  this  draft  Regulation  the  name  "euro"  is  introduced  into  EC 
legislation.  The  reference  to  the  decision  by  the  European  Council  on  the  name 
is included  in the recitals. 

Among the noteworthy  consequences  of the draft  Regulation  are the  following: 

-  confirmation  and  assurance  for  markets  that  contracts  will  remain  unaffected 

by  the  introduction  of the euro; 

-  affirmation  of  the  rights  and  obligations  deriving  from  contracts  which  are 

denominated  in the basket  ECU; 

- 

facilitation  of  the  technical  preparation  for  the  changeover  to  the  euro,  in 
particular  in the field  of  information  technology. 

The draft  Regulation  on  the introduction  of  the euro  has  the  following  main 
objectives: 

- 

to  determine the time-frame  for  the completion  of the changeover  to the  euro; 

- 

- 

- 

to  substitute 
1 st January  1999; 

the  euro 

for 

the  national  currencies  with  effect 

from 

to  establish  legally  enforceable  equivalence  between  the  euro  and  the  national 
currency  units  during the period  when  euro  banknotes  and  coins  are  not  yet  in 
circulation; 

to  ensure  that  during  this  transitional  period  private  economic  agents  will  be 
free  to  use the euro; but that  at the same time they  should  not  be obliged  to  do 
so; 

lo  establish  rules  relating  to  the  circulation  and  protection  of  banknotes  and 
coins. 

This  draft  Regulation  also  provides  economic  agents  with  increased  certainty 
about: 

- 

the time-frame  for  the completion  of the  changeover; 

- 

the  scope  for  the  use  of  the  euro  during  the  transitional  period  in  its  own 
denomination  and  in the form  of national  currency  units; 

W 

the exchange of  banknotes  and coins  denominated  in euro by  national  notes 
and coins at the end of the changeover process. 

r 

2.  COMMENTS ON THE ARTICLES OF COUNCIL REGULATION OK  | 
PROVISIONS  RELATING  TO THE INTRODUCTION  OF THE EURO 

J ON  SOME 

Article 1 

This Article provides definitions of various terms used in this draft regulation. 

The term "legal instruments" is meant to cover all  instruments which are of legal 
relevance and which refer to currencies,  currency  units or amounts of  currency 
units.  It  also  expressly  includes  payment  instruments,  like  cheques,  other than 
banknotes and coins. 

The  term  " national  currency  units" defines  the  units  of  the  currencies  of  the 
Member  States  without  a  derogation  which  are  still  in  use  in  the  transitional 
period. 

The  conversion  rates  can  only  be  adopted  on  1.1.1999,  in  accordance  with 
Art.  109 1 (4), first sentence of the Treaty (see Article 4). 

Article 2 

This Article has a declaratory value. It confirms  the replacement of references to 
the ECU as a basket  of  component  currencies  as referred  to  in Art.  109g of the 
Treaty and as defined  in Council  Regulation  (EC) No. 3.120/94,  by references to 
the euro at a rate of one to one. 

This  definition  is  unequivocally  used  in  EC  legislation.  As  for  the  use  of  the 
ECU  in  private  law,  a presumption  is  established  that  contracts  which  use  the 
ECU without clearly defining  it shall be assumed to refer to the ECU as defined 
by EC law. It may safely be assumed that in most cases the intention of parties to 
ECU  contracts was  to make reference  to the official  ECU  even  if  this was  not 
always  properly  reflected  in  the  wording  of  the  individual  contract.  The 
establishment  of the assumption follows  the approach taken  in the  Commission 
Recommendation  94/284/EC  concerning the legal  treatment of  the ECU  and of 
contracts  denominated  in  ECU  in  view  of  the  introduction  of  the  single 
European currency. Such a presumption fully  respects the freedom of contract in 
that  it  allows  the  parties  to  a  contract  to  agree  on  something  different,  thus 
"destroying" the presumption. 

(j 

This  Article  uses  the  name  "euro"  for  the  single  currency.  A  reference  to  the 
decision  of  the  European  Council  of  Madrid  on  the  name  has  been  included  in 
the  recitals. 

Paragraph  2  repeals  Council  Regulation  (EC)  No.  3320/94.  This  Regulation 
would  in  any  case,  because  of  the  Treaty  provisions  and  in  particular  Articles 
109 g and  109 1  (4), become  ineffective  at the start of  Stage 3. 

Article  3 

This  Article  serves  to  confirm  the  continuity  of  legal  instruments,  notably  of 
contracts.  It  has  a declaratory  purpose  only.  As  EMU  can  neither  be  qualified  as 
an  unforeseeable  event  nor  as  a  severe  disruption  of  circumstances, 
the 
introduction  of  the  euro  does  not justify  invoking  the  principle  of  frustration  or 
"Wegfall  der  Geschaftsgrundlage",  or 
l'imprévision"  or 
principles  with  similar  effects.  The  principle  of  continuity  was  already 
underlined  by 
the 
changeover. 

the  European  Council  of  Madrid 

the  scenario  for 

the  "théorie  de 

in 

The  "terms  of  a  legal  instrument"  include,  in  particular,  interest  rates  in  financial 
contracts  but  also  cover  all  other  terms. 

The  provision  applies  to  contracts  denominated  in  currencies  of  participating 
Member  States  and  in  ECU,  irrespective of whether  they  are set  up under  the  law 
of  participating  or  non-participating  Member  States. 

The  Article  refers  to  the  "introduction  of  the  euro",  a  term  used  in  Article  109 I 
(4)  of  the  Treaty;  it  is  broader  than  "substitution"  The  term  includes  the 
replacement  of  references  to  the  ECU  as  referred  to  in  Art.  2 of  this  Regulation 
by'references  to the  euro. 

The  last  sentence  confirms  that  the  generally  accepted  principle  of  freedom  of 
contracts  is  preserved. 

Article  4 

This  Article  establishes  rules  on  the  conversion  rates.  According  to  the  first 
sentence  of  Article  109  1 (4)  the  rates  themselves  can  only  be  adopted  on 
1.1.1999. 

The  first  paragraph  provides  certainty  about  the  category  of  rates to  be  fixed  and 
about  the  number  of  significant  figures;  the  latter  expression  means  that  a  rate, 

? 

when  counted  from  the  left  and  starting  by  the  first  non-zero  figure,  has  six 
figures  (not  to  be  confused  with  the  number  of  decimal  points).  The  Council 
commits  itself to fixing  the rates with this  degree of  precision.  The  choice  of  six 
significant  figures  follows  the standards of the EMS. 

In  order  to  avoid  inaccuracies  in  conversions,  the  irrevocable  fixing  only 
includes  the  conversion  rate  between  the  euro  and  the  national  currency  units. 
The bilateral  rates between  the national  currency  units will  be derived  from  these 
conversion  rates. 

Paragraph  2  stipulates  that economic  agents  must  not  round the conversion  rates 
when  making  conversions. 

Paragraph  3 bans  the  use  of  inverse  rates because  this  would  imply  rounding  of 
the  rates  and  could  result  in  significant  inaccuracies  due  to  the  multiplicative 
effect  of the rounding,  notably  if large currency amounts are involved. 

Paragraph  4  provides  a  binding  algorithm  for  conversions  between  national 
currency  units,  given  that  those  bilateral  rates  will  not,  according  to  the 
definition  of "conversion  rates" in Article  1, be defined  directly. 

Article 5 

This  Article  defines  a  number  of  rounding  rules  for  conversions  of  monetary 
sums  between  euro  and  national  currency  units  as  well  as  between  national 
currency  units.  Monetary  sums  in  euro  shall  always  be  rounded  to  the  nearest 
cent.  Monetary  sums  in  national  currency  units  shall  be  rounded  to  the  nearest 
sub-unit  or  to  the  nearest  unit  of  the  national  currency  unit.  National  practices 
are  respected.  This  flexibility  allows  in  particular  for  the  continuation  of 
practices  in  some  countries  by  which  monetary  sums  are  rounded  to  units  other 
than  those  referred  to  in  the  Article  (for  example,  where  sums  are  rounded  to  a 
multiple of the currency unit). 

Article 6 

This  Article  determines the entry  into force.  The Regulation  will  enter  into  force 
the  day  after  its  publication  in  the  Official  Journal.  Article  2  will  have  effect 
only as from  1st January  1999. 

F 

3. 

C O M M E N TS  ON  T HE  ARTICLES  OF  T HE  C O U N C IL  R E G U L A T I ON  ON  THE 
INTRODUCTION  OF T HE  EURO 

Article  1 

The  first  Article defines  the terms  "participating  Member  States",  "legal  instruments", 
"conversion  rates",  "euro  unit",  "national  currency  units",  "transitional  period"  and 
"organised  markets". 

The  term  "participating  Member  States"  is  used  to  describe  the  Member  States 
without  a derogation.  Though  it  is understood  that  in  principle  all  EU  Member  States 
rules,  the  term 
participate 
"participating  Member  States"  is used  in  order  to  enhance  the  readability  of  the  draft 
regulation.  The  enumeration  of  the  participating  Member  States  will  facilitate  the 
recognition  of  "lex monetae"  in third  countries. 

in  the  third  stage  of  EMU  albeit  under  different 

The  term  "legal  instruments"  is  meant  to  cover  all  instruments  which  are  of  legal 
relevance  and  which  refer  to  currencies,  currency  units  or  amounts  of  currency  units. 
It  is  notably  meant  to  include  all  kinds  of  contracts,  either  written  or  oral,  tacitly 
concluded  contracts  and  contracts  implied  from  the conduct  of the  parties. 

According  to  Article  109 1  (4) of  the  Treaty,  the  conversion  rates  can  only  be  adopted 
on  1.1.1999.  Rules  for  the  adoption  of  the  conversion  rates  have  been  adopted  in 
Council  Regulation  [.  .]  on  some  provisions  relating  to  the  introduction  of  the  euro. 
To  avoid  problems  of  rounding,  only  conversion  rates  of  one  euro  expressed  in  terms 
of  each  of  the national  currencies of the Member  States  will  be defined.  Bilateral  rates 
will  have  to  be  derived  from  the  euro  rates;  a  binding  algorithm  for  this  purpose  is 
determined  in the  said  Council  Regulation.  No  inverse  rates  of  one  national  currency 
unit  in terms  of  euro units will  be  defined. 

During  the  transitional  period  there  exist  several  units  of  the  euro  as  the  currency  of 
the  participating  Member  States:  the  "euro  unit"  and  the  "national  currency  units". 
The term  "euro  unit"  is used  to distinguish  decimal  expressions  of the  euro  in units  of 
the  euro  itself  from  non-decimal  expressions  of  the  euro  in  the  national  currency 
units.  The  "national  currency  units"  refer  to  the  currencies  of  the  participating 
Member  States,  which  were  currencies  in  their  own  right  before  being  substituted  by 
the  euro 

The  end  of the transitional  period  will  have to be determined  later. 

The  definition  of  "organised  markets"  refers  to  the  Directive  93/22  EEC  on  the 
investment  services  in  the  securities  field.  It  includes  markets  for  the  regular 
exchange,  clearing  and  settlement  of  transferable  securities,  units  in  collective 
investment  undertakings,  money  market  instruments,  financial-futures  contracts, 

? 

forward 
instruments of  payment. 

interest  rate  agreements,  swaps,  options  on  financial 

instruments  and 

Article  2 

By  the  first  sentence  and  in  combination  with  Article  17,  as  from  1 st January  1999 
the  euro  is  introduced  as  the  currency  of  the  participating  Member  States.  The 
reference  to the Member  States  (and  not to the Monetary  Union)  serves  to  make  clear 
that  the  euro  is  the  currency  of  each  Member  State.  This  should  help  to  avoid 
ambiguity  as to the continuity  of  contracts,  in particular  at the  international  level. 

A distinction  is made between  the name of the currency  (euro) and  the  unit  of  account 
(one  euro)  in  which  all  currency  amounts  are  to  be  measured.  As  agreed  at  the 
informal  Ecofin  meeting  in  Verona  in  April  1996,  the  euro  is  divided  into  one 
hundred  "cent".  As  explained  in  the  recitals,  the  definition  of  the  name  "cent"  is  not 
meant  to  prevent  the  tolerance  of  the  use  of  variants  of  this  name  in  common  usage, 
without  calling  into  question  the  principle  that the  name of the  single  currency  and  its 
sub-units  can only be determined  at Community  level. 

Article  3 

By  providing  for  the substitution  of the former  national  currencies  by  the  euro  at  the 
conversion  rates,  this  Article  establishes  the  "recurrent  link"  between  each  of  the 
former  currencies  and  the  new  currency.  It  therefore  ensures  the  continuity  of 
the  principle  of 
contracts  and  other 
nominalism.  The  substitution  of  the  former  national  currencies  of  the  participating 
Member  States  takes  place on  1st January  1999.  The  transitional  provisions  defining 
the status  and  use  of  the  national  currency  units  do  not  affect  this  substitution  in  the 
leual  sense. 

in  accordance  with 

instruments 

legal 

Article  4 

This  Article  determines  the  unit  of  account  of  the  ESCB  which  is  neither  specified 
in the Treaty  nor the ESCB  Protocol 

It  is to  be  noted  that  the  present  provision,  as  it  only  enters  into  force  on  1st January 
1999,  does  not  define  the  unit  of  account  for  the  period  between  the  establishment  of 
the  ECB  and  the  start  of  stage  3.  If  the  decision  were  taken  to  use  the  basket  ECU, 
which  is  the  unit  of  account  of  the  European  Monetary  Institute,  the  present  draft 
Regulation  would  ensure  that  the  unit  of  account  would  be the  euro  as  from  1.1.1999. 
the present  Article would  then  be  declaratory. 

/o 

Article  5 

Article  5 limits the applicability  of  Articles  6-9  to the transitional  period. 

Article  6 

Article  6  introduces  the  concept  of  a  national  currency  unit  which  is  defined  in 
Article  1.  By  way  of  the  first  sentence  of  paragraph  1,  further  divisions  of  the 
single  currency  unit,  the  euro,  (further  to  that  of  Article  2,  which  is  permanent) 
are  introduced  temporarily.  By  this  sentence,  the  EC  legislator  makes  use  of  his 
competence  to  introduce  as  many  divisions  of  the  single  currency  as  he  likes,  in 
any  fraction  of  the  single  currency  unit  and  under  any  name.  This  operation  may 
involve  conversion  factors  which  are  lower  than  1.  The  national  sub-divisions 
remain  in  force. 

The  Article  opens  the  possibility  to  use  the  single  currency  not  only  under  its  own 
name,  but  also  under  the  denominations  and  in  the  units  of  the  former  national 
currencies  which  become  expressions  of  the  euro. 

The  third  sentence  ensures  that  those  provisions  of  the  national  monetary  law 
which  are  compatible  with  the  present  Regulation  continue  to  apply  during  the 
transitional  period.  This  essentially  concerns  provisions  which  relate  to  banknotes 
and  coins. 

Paragraph  2  makes  clear  that  it  makes  no  difference  to  the  legal  value  whether  in  a 
legal  instrument  the  national  currency  unit  or  the  euro  unit  itself  is  referred  to.  By 
virtue  of  this  provision  contracts  denominated  in  either  the  euro  unit  or  the  national 
currency  units  are equally  valid. 

The  same holds  for  legislative  provisions  and  other  legal  instruments. 

Article 7 

This  Article  deals  exclusively  with  legal  instruments  which  were  established  before 
1.1.1999.  Without  such  a  provision  it  would,  for  example,  be  uncertain  whether  a 
claim  in  a  national  currency  on  31.12.1998  would  have  to  be  considered  on 
1.1.1999  as  a euro  claim  expressed  in the  euro  unit  itself  or  a  euro  claim  expressed 
in that  national  currency  unit. 

According  to  this  Article,  a  contract  imposing  an  obligation  to  pay,  for  example, 
100 FF  will  on  1.1.1999  become  an  obligation  to  pay  the  corresponding  amount  of 
euros  (this follows  from  Article  3), but  denominated  in  100 FF, which  will  be  a sub-

// 

unit  of  the  euro.  It  is  only  after  the  transitional  period  that  references  in  legal 
instruments  to  national  currency  units  are  by  virtue  of  Article  14  to  be  read  as 
references  to the euro  unit (and thus  as obligations  to be fulfilled  in the  euro  unit). 

The  Article  maintains  the status  quo of  denominations,  it does  not  prevent  parties  to 
a contract  from  agreeing to  change  its denomination,  or the  legislator  from  changing 
the  currency  denomination  in  a  law.  Neither  will  it  have  any  standstill  effect  on 
legislation  in  general. 

Article 8 

This  Article  strikes  the  balance  between  the  principle  of  "no  compulsion"  and  the 
principle  of  "no  prohibition"  as  laid  down  in  the  reference  scenario  decided  by  the 
European  Council  of Madrid.  The first paragraph  stipulates  that  the  denomination  of 
a  legal  instrument  -  either  the  euro  unit  or  the  national  currency  unit  -  shall  be 
It  ensures  that  the  currency  unit  which  is  stipulated  under  the  relevant 
respected. 
legal  instrument  (e.g.  a  contract  or  a  law)  shall  be  the  one  to  be  used  in  the 
performance  of  all  acts  (statements  of  accounts,  invoices,  payments,  etc.)  to  be 
carried  out  under  that 
that, 
notwithstanding  the  provisions  of  the  following  paragraphs,  economic  agents  will 
only  have  to  use  the  unit  -  either  euro  or  national  currency  -  to  which  they  have 
agreed. 

instrument.  Thereby,  paragraph  1  ensures 

legal 

Likewise,  paragraph  1 ensures  that  laws  stipulating  the  use  of  one  unit,  e.g.  for  the 
publishing  of  accounts,  shall  be  applied  according  to  the  denomination  stated  in 
them. 

Paragraph  1  does  not,  of  course,  prevent  a  debtor,  in  cases  where  a  cashless 
payment  has  not been  explicitly  agreed,  from  discharging  a debt  denominated  in  the 
euro  unit  by  paying  with  banknotes  or  coins  denominated  in  the  national  currency 
unit which  is  legal  tender  in the place of  performance. 

Paragraph  2  leaves  it  to  the  parties  to  agree  on  the  use  of  a  different  denomination 
than  that of  the  legal  instrument  underlying their  contractual  relationship. 

The  third  paragraph  serves  to  enhance  the  fungibility  between  the  euro  and  the 
national  currency  units  for  payments  by  crediting  an  account.  It gives  the  debtor  the 
choice  of  paying  his  debt  in  the  euro  unit  or  the  national  currency  unit  which  is 
stipulated  in  the  contract.  This  provision  also  makes  clear  that  a  bank  receiving  a 
payment  to  the  euro  account  is  entitled  to  make  the  necessary  conversion  for 
crediting  an  account  in the respective  national  currency  unit,  and  vice  versa,  without 
asking  for  the  consent  of  the  beneficiary.  The  provision  is  limited  to  domestic 
payments  in  the euro or the  respective  national  currency  unit. 

The  fourth  paragraph  enables  Member  States  to  take  measures  to  enhance  the  use  of 
the  euro  unit  in  two  specific  cases,  even  if  these  measures  may  imply  an  obligation 
for  certain  economic  agents  to  use  the  euro  unit.  The  first  indent  covers  public  and 

/Z 

private debt. Excluded  from  the application of this provision  is non-securitized  debt 
like  bank  accounts,  loans,  etc.  The  second  indent  covers  organized  markets  as 
defined  in Article 1. 

By  virtue  of  the  fifth  paragraph,  the  list  of  exceptions  from  the  principle  of  no 
compulsion  is  closed.  The  drafting  makes  use  of  paragraph  12  of  the  reference 
scenario  adopted  by  the  European  Council  of  Madrid,  where  it  is  said  that  the 
"time-frame  (for  the  generalization  of  the  use  of  the  euro  for  public  sector 
operations)  will  be  laid  down  in  Community  legislation  and  might  leave  some 
freedom  to individual Member States." 

The sixth  paragraph  confirms  for  legislative provisions on netting, etc. that the euro 
unit and national currency units are to be considered as the same monetary unit. 

Article 9 

This  Article  confirms  that  national  banknotes  and  coins  remain  legal  tender  in  the 
transitional  period.  Their  legal  tender  status  is confined  to the territory  where they 
were  legal  tender  before  the start of the third  stage. It ends  at the  latest  six  months 
after  the end of the transitional  period (see Article  15). 

Article 10 

This  Article  reflects  the provisions  of Article  105 a of the  Treaty.  The  formulation 
"put  into  circulation"  does  not  prejudge  the  decision  of  who  will  be  the  issuer  of 
banknotes  (the  ECB  or  national  central  banks).  The  euro  banknotes  are  the  only 
ones  which  are  legal  tender  in  all  participating  Member  States,  in  contrast  to  the 
national  banknotes. 

Article 11 

This  paragraph  addresses  the rules for  coins. As the Treaty  is silent  about the legal 
tender  status  of  coins,  the  Article  gives  such  status  to  them.  The  limit  to  the 
liberatory  power  of  coins  is  set  to  be  50  coins  irrespective  of  the  face-value  of 
individual  denominations. The Article does not address the rights of Member  States 
with respect to the issuance of coins for numismatic or commemorative purposes. 

13 

Article  12 

This  Article  provides  for  protection  of  banknotes  and  coins  against  counterfeiting 
and  falsification.  The  provision  refrains  from  setting  standards  directly,  but  obliges 
Member  States  to  ensure  adequate  sanctions.  This  does  not  exclude  common  steps 
from  being taken  in the future,  be  it under the  first  or the third  pillar of the  Union. 

Article  13 

This  Article  enumerates  a  number  of  provisions  which  apply  only  as  from  the  end 
of  the  transitional  period,  either  for  a  limited  period  of  time  or  for  an  indefinite 
period. 

Article  14 

After  the  end  of  the  transitional  period,  the  national  currency  units  cease  to  exist. 
The  Article  confirms  that  from  this  date  onwards,  references  in  legal  instruments 
which  existed  at the  end  of the transitional  period  to these  currency  units  have  to  be 
read  as  references  to  the  euro  unit.  This  follows  from  Articles  2  and  3.  The  Article 
clarifies  that  a  physical  "redenomination"  in  the  sense  of  a  redrafting  of  legal 
instruments  which  still  refer  to  the  former  national  currency  units  is  not  necessary 
for  its  validity.  There  may,  however,  be  other  reasons  which  make  such  a  physical 
redenomination  desirable  or  even  indispensible  in  certain  cases.  References  to  the 
national  currency  units  in  laws  etc.  will  have  to  be  formally  adjusted  within  a 
reasonable  time-span  by  the  national  legislator. 

After  the  transitional  period,  the  former  national  currency  units  can  no  longer 
validly  be  used  for  setting  up  contracts,  etc.  since  any  reference  to  a former  national 
currency  unit  in  a  new  contract  would  be  a  reference  to  a  term  which  is  no  longer 
recognized  by  monetary  law. 

Article  15 

This  Article  aims  at  facilitating  the  exchange  of  new  banknotes  and  coins  for  old 
ones  at  the  end  of  the  transitional  period.  National  notes  and  coins  may  continue  to 
circulate  as  legal  tender  for  six  months  at  the  most  after  the  transitional  period.  In 
order  to  provide  flexibility,  a  Member  States  may  shorten  this  period  according  to 
the speed  at which  the changeover  can be accomplished  on  its  territory. 

h 

Article 16 

This Article leaves to the Member States the competence to determine for how  long 
after  the transitional  period  they will  continue to accept  banknotes  and  coins  in the 
national  currency  unit  issued  by  them.  Depending  on  national  rules  and  practices, 
these  periods  may  differ.  Member  States  may  choose  to  accept  notes  and  coins  in 
the national  currency units for an indefinite  period of time. 

/i 

Proposal for a 

Council Regulation on some provisions relating to 

the introduction of the euro 

(PRESENTED  BY THE COMMISSION) 

/<* 

Proposal for a 
Council Regulation  [  ] 
on some provisions relating to 
the introduction of the euro 

96/0249  (CNS) 

The Council  of the European  Union, 

Having  regard to the Treaty  establishing  the European  Community,  and  in particular 

Article 235  thereof, 

Having  regard to the proposal  of the  Commission, 

Having  regard  to the opinion  of the European  Parliament, 

Having  regard to the opinion  of the European  Monetary  Institute, 

(1)  Whereas  the  European  Council  has  confirmed  at  its  meeting  held  in  Madrid  on  15/16 

December  1995 that  the third  stage  of  Economic and  Monetary  Union  will  start  on  1.1.1999 

as 

laid  down 

in  Article  109  j 

(4)  of 

the  Treaty;  whereas 

in  accordance  with 

Article  109  k  of  the  Treaty  the  Member  States  which  will  adopt  the  euro  as  the  single 

currency  are the Member  States without a  derogation; 

(2)  Whereas  it  also  decided  that  the  name  given  to  the  European  currency  shall  be  the 

"euro";  whereas  the  specific  name  "euro"  will  be  used  instead  of  the  generic  term  "ECU" 

used  by  the  Treaty  to refer  to  the  European  currency  unit;  whereas  the  euro  as the  currency 

of the  Member  States  without  a derogation  will  be  divided  into  one  hundred  sub-units  with 

the name  "cent"; 

(3)  Whereas  a  Council  regulation,  defining  the  legal  framework  for  the  use  of  the  euro 

should  be  adopted  on  the  basis  of  Article  109  1  (4),  third  sentence  of  the  Treaty  as  soon  as 

Ihc  Member  States  without  a derogation  are  known;  whereas  the  Council  when  acting  at  the 

starting  date  of  the  third  stage  according  to  Article  109  1 (4),  first  sentence  of  the  Treaty, 

shall  adopt  the irrevocably  fixed  conversion  rates; 

(4)  Whereas  it  is  necessary  for  the  smooth  operation  of  the  common  market  and  the 

changeover  to  the  single  currency  to  provide  legal  certainty  for  market  participants  in  all 

Member  States  on  some  provisions  relating  to  the  introduction  of  the  euro  well  before  the 

entry  into the third  stage; 

fr 

(5) Whereas Article  109 1 (4), third  sentence, which allows the taking by the Council,  acting 

with  the  unanimity  of  Member  States  without  a  derogation,  of  "other  measures  necessary 

for  the rapid  introduction of... the single currency" is only  available  as a legal  basis  when  it 

has  been  decided,  according  to  Article  109 j  (4), which  Member  States  fulfil  the  necessary 

conditions  for  the  adoption  of  the  single  currency;  whereas  it  is  therefore  necessary  to  use 

Article  235  as  a  legal  basis  for  those  provisions  where  there  is  an  urgent  need  for  legal 

certainty; 

(6)  Whereas the  ECU  as referred  to in Article  109 g of the Treaty  and  as defined  in  Council 

Regulation  (EC) No. 3320/94'  will  cease to be defined  as a basket  of component  currencies 

on  1 January  1999  and  the  euro  will  become  a  currency  in  its  own  right;  whereas  the 

decision  of  the  Council  regarding  the  adoption  of  the  conversion  rates  shall  not  by  itself 

modify  the external  value of the  ECU;  whereas  this means  that  one  ECU  in  its  composition 

as  a  basket  of  component  currencies  will  become  one  euro;  whereas  Council  Regulation 

(EC)  No.  3320/94  therefore  becomes  obsolete  and  should  be  repealed;  whereas  for 

references  in  legal  instruments  to  the  ECU  under  private  law,  parties  shall  be  presumed  to 

have agreed  to refer  to the  ECU  as  referred  to  in  Article  109 g of the  Treaty  and  as  defined 

in  Council  Regulation  (EC)  No.  3320/94;  whereas  the  provisions  on  continuity  can  only 

fulfil  their objective  to provide  legal  certainty  to the markets  if they  enter  into  force  as  soon 

as  possible; 

(7)  Whereas  it  is  a  generally  accepted  principle  of  law  that  the  continuity  of  legal 

instruments  is  not  affected  by  the  introduction  of  a  new  currency;  whereas  the  principle  of 

freedom  of  contract  has  to  be  respected;  whereas  in  order  to  reinforce  legal  certainty  and 

clarity  it  is  appropriate  explicitly  to  confirm  that  the  principle  of  continuity  of  legal 

instruments  and  in particular  of contracts  shall apply  between  the  former  national  currencies 

and  the  euro  and  between  the  ECU  as  referred  to  in  Article  109  g  of  the  Treaty  and  as 

defined  in  Council  Regulation  (EC)  No.  3320/94  and  the  euro;  whereas  this  implies  in 

particular  that  in the case  of  fixed  interest  rate instruments  the  introduction  of the  euro  does 

not alter the nominal  interest  rate payable by the  debtor; 

(8)  Whereas  the  explicit  confirmation  of  the  principle  of  continuity  will  also  contribute  to 

the recognition  of continuity  of contracts  in the jurisdiction  of third  countries; 

1 Council Regulation (EC) No 3320/94 of 22 December  1994 on the consolidation  of the existing Community 
legislation  on the definition  of the ecu following the entry into force of the Treaty on European  Union (OJ No 
L350, 31.12.1994, p.27). 

/Ù 

(9)  Whereas  the  term  "contract"  used  for  the  definition  of  legal  instruments  is  meant  to 

include  inter  alia  written  and  oral  contracts,  tacitly  concluded  contracts  and  contracts 

implied  from  the  conduct  of the parties; 

(10)  Whereas  the  Council  when  acting  according  to  Article  109  1  (4),  first  sentence  of  the 

Treaty  shall  define  the  conversion  rates  of  the  euro  in  terms  of  each  of  the  national 

currencies  of  the  Member  States  without  a  derogation;  whereas  these  conversion  rates 

should  be  used  for  any  conversion  between  the  euro  and  the  national  currency  units  or 

between  the  national  currency  units; whereas  for  any  conversion  between  national  currency 

units a  fixed  algorithm  should  be  used; 

(11)  Whereas  the  introduction  of  the  euro  requires  the  rounding  of  monetary  amounts; 

whereas  an  early  indication  of  rules  for  rounding  is  essential  to  allow  a  timely  preparation 

and  a smooth  transition  to Economic and  Monetary  Union; 

(12)  Whereas  in  order  to  achieve  a  high  degree  of  accuracy  in  conversion  operations,  the 

conversion  rates  should  be  defined  with  six  significant  figures;  whereas  a  rate  with  six 

significant  figures  means  a  rate  which,  counted  from  the  left  and  starting  by  the  first  non 

zero  figure,  has six  figures; 

(13)  Whereas  according  to  Article  109  f  (6)  of  the  Treaty  the  EMI  has  to  be  consulted 

regarding  any  proposed  Community  act  within  its field of competence. 

HAS  ADOPTED  THIS  REGULATION: 

Article 1 

?or the purpose  of this  regulation: 

"legal  instruments"  shall  mean  legislative  provisions,  acts  of  administration,  judicial 

decisions,  contracts,  unilateral  legal  acts,  payment  instruments  other  than  banknotes 

and  coins, and  other  instruments  with  legal  effect; 

"conversion  rates"  shall  mean  the  irrevocably  fixed  conversion  rates  adopted  by  the 

Council  according  to Article  109 1  (4) first sentence  of the  Treaty; 

^ 

/i 

"national  currency  units"  shall  mean the  units  of  the  currencies  of  Member  States 
without a derogation, as those units are defined  in their respective monetary law on 
the day before the start of the third stage; 

"euro  unit"  shall  mean the  unit  of  the  single  currency  as  adopted  by  the  Member 
States without a derogation on 1.1.1999; 

Article 2 

(1) As from 1.1.1999 every reference in a legal instrument to the ECU, as referred to in 
Article  109 g of the Treaty and as defined in Council Regulation (EC) No.  3320/94, is 
replaced by a reference to the euro at a rate of one euro to one ECU. References  in a 
legal instrument to the ECU without such a definition shall be presumed to be references 
to the ECU as referred to in Article 109 g EC and as defined in Council Regulation (EC) 
No. 3320/94. 

(2) As from 1.1.1999 Council Regulation (EC) No. 3320/94 is repealed. 

Article 3 

The introduction  of the  euro  shall  not  have the  effect  of  altering  any term  of  a legal 
instrument  or of discharging  or excusing  performance  under any legal  instrument,  nor 
give a party the right unilaterally to alter or terminate a legal instrument. This provision 
is subject to anything which parties may have agreed. 

Article 4 

(1) The conversion rates shall be adopted as one euro expressed in terms of each of the 
national currencies of the Member States without  a derogation.  They shall be adopted 
with six significant  figures. 

(2) The conversion rates shall not be rounded or truncated when making conversions. 

/ 

iO 

(3)  The conversion  rates shall  he used  for conversions cither way between  the euro unit 
and the national currency units. Inverse rates derived from  the conversion rates shall not 
be used. 

(4)  Monetary  sums  to be converted  from  one  national  currency  unit  into  another  shall 
first be converted  into a monetary  sum  expressed  in the  euro  unit,  rounded  to  at  least 
three decimals, and then be converted into the other national currency unit. 

Article 5 

Monetary  sums  to  be  paid  or  accounted  for  when  a  rounding  takes  place  after  a 
conversion  into the euro unit according to Article 4 shall be rounded  up or down to the 
nearest cent. Monetary sums converted  into a national currency unit shall be rounded up 
or  down  to  the  nearest  sub-unit  or  in  the  absence  of  a  sub-unit  to  the  nearest  unit,  or 
according  to  national  practices  to  a  multiple  or  fraction  of  the  sub-unit  or  unit  of  the 
national  currency  unit. If the application  of the conversion  rate  gives a result  which  is 
exactly half-way, the sum shall be rounded up. 

Article 6 

This  Regulation  shall  enter  into  force  on  the  day  after  publication  in  the  Official 

Journal. 

This  Regulation  shall  be  binding  in  its entirety  and  directly  applicable  in all  Member 

States. 

jf  oil 

PROPOSAL FOR A 

COUNCIL REGULATION ON THE 

INTRODUCTION OF THE EURO 

(PRESENTED BY THE COMMISSION) 

R2 

Proposal for a 
Council Regulation  f  ] 
on the introduction  of the euro 

96/0250 (CNS) 

The Council  of the European  Union, 

1 laving  regard  to the Treaty  establishing  the  European  Community,  and  in  particular 

Article  109 1  (4) third  sentence  thereof, 

Having regard  to the proposal  from  the  Commission, 

Having regard  to the opinion  of the European  Central  Bank, 

Having regard  to the opinion  of the European  Parliament 

( 1 )  Whereas  this  regulation  defines  monetary  law  provisions  of  the  Member  States  which 

have  adopted  the  euro;  whereas  provisions  on  continuity  of  contracts,  the  replacement  of 

references  to  the  ECU  in  legal  instruments  by  references  to  the  euro  and  rounding  have 

already  been  laid  down  in  Council  Regulation 

|...];  whereas  measures  pertaining  to  other 

areas  of  law  will,  if necessary,  have to be considered  such  as those  concerning  double  price 

displays, conversion  fees; 

(2)  Whereas  the  European  Council  has  decided  at  its  meeting  held  in  Madrid  on  15/16 

December  1995 that  the  name  given to  the  European  currency  shall  be  the  "euro";  whereas 

the  specific  name  "euro" will  be used  instead  of the  generic  term  "ECU"  used  by  the  Treaty 

to  refer  to  the  European  currency  unit;  whereas  the  euro  as  the  currency  of  the  Member 

States  without  a  derogation  shall  be  divided  into  one  hundred  sub-units  with  the  name 

"cent";  whereas  the  definition  of  the  name  "cent"  does  not  prevent  the  use  of  variants  of 

this term  in common  usage  in the Member  States; 

(3)  Whereas  the  Council  when  acting  according  to  Article  109  1  (4),  third  sentence  of  the 

Treaty  shall  take the  measures  necessary  for  the rapid  introduction  of the euro other  than  the 

adoption  of the conversion  rates; 

<& 

(4)  Whereas  whenever  under  Article  109  k  (2)  of  the  Treaty  a  Member  State  becomes  a 

Member  State  without  a  derogation,  the  Council  shall  according  to  Article  109  1  (5)  of  the 

Treaty  take the other measures  necessary  for  the rapid  introduction  of the euro  as the  single 

currency  of this Member  State; 

(5) Whereas according to Article  109 I (4) of the Treaty  the Council  shall  at the starting  date 

of  the  third  stage  adopt  the  conversion  rates  at  which  the  currencies  of  the  participating 

Member  States will  be irrevocably  fixed  and at which  irrevocably  fixed  rate the euro will  be 

substituted  for these currencies; 

(6)  Whereas  given  the  absence  of  exchange  rate  risk  either  between  the  euro  unit  and  the 

national  currency  units or between  these national  currency  units,  legislative provisions  shall 

be interpreted  accordingly; 

(7)  Whereas  the  term  "contract"  used  for  the  definition  of  legal  instruments  is  meant  to 

include  inter  alia  written  and  oral  contracts,  tacitly  concluded  contracts  and  contracts 

implied  from  the conduct  of the parties; 

(8)  Whereas  in  order  to  prepare  a  smooth  changeover  to  the  euro  a  transitional  period  is 

needed  between  the  substitution  of  the  euro  for  the  currencies  of  the  participating  Member 

States  and  the  introduction  of  euro  banknotes  and  coins;  whereas  during  this  period  the 

national  currency  units  will  be defined  as sub-divisions  of the euro; whereas  thereby  a  legal 

equivalence  is established  between  the euro unit and the  national  currency  units; 

(9)  Whereas  the  euro  shall  be  the  unit  of  account  of  the  European  Central  Bank  (ECB)  and 

of  the  central  banks  of  the  participating  Member  States;  whereas  this  does  not  prevent 

national  central  banks  from  keeping  accounts  in  their  national  currency  unit  during  the 

transitional  period,  in particular  for their  staff  and  for public  administrations; 

(10) Whereas  during  the transitional  period  legal  instruments  can  be drawn  up validly  in  the 

euro  unit  or  in  the  national  currency  unit;  whereas,  unless  agreed  otherwise,  economic 

agents  have  to  respect  the denomination  of a legal  instrument  in the  performance  of all  acts 

to  be  carried  out  under  that  instrument;  whereas  in  order  to  ensure  the  smooth  functioning 

of  the  payments  systems  exceptions  from  this  general  rule  are  necessary;  whereas  in  order 

to  allow,  where  necessary,  the  redenomination  of  outstanding  debt  in  the  euro  unit  and  the 

change  of  the  unit  of  account  of  the  operating  procedures  of  organized  markets,  Member 

States should be able to take appropriate  measures; 

J v 

A 

(11) Whereas in transactions with the public sector participating  Member States may allow 
the use of the euro unit but can only impose it on the basis of Community  legislation; 

(12) Whereas according  to Article  105a of the Treaty  the Council  may  adopt  measures to 
harmonise the denominations and technical specifications  of all coins; 

(13) Whereas banknotes and coins need adequate protection against  counterfeiting. 

(14)  Whereas  banknotes  and  coins  denominated  in  the  national  currency  units  lose  their 
status of legal tender at the latest six months after the end of the transitional period; whereas 
for  practical  reasons  it  might  be  appropriate  to  introduce  the  euro  banknotes  and  coins 
already a short time before the end of the transitional period; 

(15)  Whereas  as  from  the  end  of  the  transitional  period  references  in  legal  instruments 
existing  at the end  of the transitional  period  will  have to be read  as references  to the euro 
according to the respective conversion  rates; whereas a physical  redenomination  of existing 
legal  instruments  is  therefore  not  necessary  to  achieve  this  result;  whereas  the  rounding 
rules  defined  in  Council  Regulation  |...|  shall  also  apply  to the  conversions  to  be  made at 
the  end  of  the  transitional  period  or  after  the  transitional  period;  whereas  for  reasons  of 
clarity  it  may  be  desirable  that  the  physical  redenomination  will  take  place  as  soon  as 
appropriate;  whereas  from  the  end  of  the  transitional  period  the  former  national  currency 
units can no longer validly be used for the setting up of new legal instruments; 

HAS ADOPTED THIS REGULATION: 

Parti 

DEFINITIONS 

Article  1 

For the purpose of this regulation: 

-  "participating Member States" shall mean (Countries A, B ...) 

-  "legal  instruments"  shall  mean legislative provisions, acts of administration, judicial 
decisions, contracts, unilateral  legal  acts, payment  instruments  other  than  banknotes 
and coins, and other instruments with legal  effect. 

dS 

-  "conversion rates" shall  mean the irrevocably fixed conversion rates adopted  by the 

Council according to Article 109 1 (4) first sentence of the Treaty. 

-  "euro unit" shall mean the currency unit as defined in the second sentence of Article 2. 

-  "national  currency  units"  shall  mean  the  units  of  the  currencies  of  participating 
Member States as those units are defined in their respective monetary law on the day 
before the start of the third stage. 

-  "transitional  period"  shall  mean  the  period  beginning  on  1.1.1999  and  ending  on 

31.12.2001 at the latest. 

-  "organized  markets"  shall  mean  markets  for  the  regular  exchange,  clearing  and 
settlement  of  any  of  the  instruments  listed  in  section  B  of  the  annex  to  Directive 
93/22/EEC  on  the  investment  services  in  the  securities  field  and  shall  include 
systems for the regular exchange, clearing and settlement of instruments of payment. 

Part II 

SUBSTITUTION OF THE EURO FOR THE CURRENCIES OF THE 
PARTICIPATING  MEMBER STATES 

Article 2 

The currency  of  the participating  Member States  shall  be  the euro.  The  currency  unit 
shall be one euro. One euro shall be divided into one hundred cent. 

Article 3 

The euro shall be substituted for the currencies of the participating Member States at the 
conversion rates. 

I Council  Directive 93/22/EEC of  10 May  1993 on investment  services in the securities field  (OJ No L  141, 
I 1.6.1993, p.27). 

& 

Article 4 

The euro  shall  be the unit of account  of the European  Central  Bank  (ECB)  and of the 
central banks of the participating Member States. 

Part III 

TRANSITIONAL  PROVISIONS 

Article 5 

Articles 6-9 apply during the transitional period. 

Article 6 

(1)  The  euro  shall  also  be  divided  into  the  national  currency  units  according  to  the 
conversion  rates.  Any  sub-division  thereof  shall  be  maintained.  Subject  to  the 
provisions of this Regulation the monetary  law of the participating  Member States shall 
continue to apply. 

(2)  Where  in  a  legal  instrument  reference  is  made  to  a  national  currency  unit,  this 
reference  shall be as valid as if reference were made to the euro unit. 

Article 7 

The substitution  of the euro  for the currencies of the participating  Member  States shall 
not  in  itself  have  the  effect  of  altering  the  denomination  of  legal  instruments  in 
existence on the date of substitution. 

ft 

«r 

Article  8 

( I )  Acts  to  be  performed  under  legal  instruments  stipulating  the  use  of  a  national 

currency  unit  shall  be  performed  in  that  national  currency  unit.  Acts  to  be  performed 

under  legal  instruments  stipulating  the  use  of  the  euro  unit  shall  be  performed  in  this 

unit. 

(2)  The  provisions  of  paragraph  1  are  subject  to  anything  which  parties  may  have 

agreed. 

(3)  Notwithstanding  the  provisions  of  paragraph  1,  any  amount  denominated  either  in 

the euro  unit  or  in the' national  currency  unit  of  a given  participating  Member  State  and 

payable  within  that  Member  State  by  crediting  an  account  of  the  creditor,  can  be  paid 

by  the  debtor  either  in  the  euro  unit  or  in  that  national  currency  unit.  The  amount  may 

be  credited  to  the  account  of  the  creditor  in  the  denomination  of  his  account,  with  any 

conversion  being effected  at the conversion  rates. 

(4)  Notwithstanding  the  provisions  of  paragraph  1,  each  participating  Member  State 

may  take  measures  which  may  be necessary  in order  to: 

redenominate  in the  euro  unit  outstanding  debt  denominated  in  national  currency 

units; this provision  shall apply  to bonds and  securitized  debt. 

allow  organized  markets  to  change  the  unit  of  account  of  their  operating 

procedures  from  a national  currency  unit  to the euro  unit. 

(5)  Other  provisions  than  those  of  paragraph  4  imposing  the  use  of  the  euro  unit  may 

only  be  adopted  by  the  participating  Member  States  according  to  any  time-frame  laid 

down  by  Community  legislation. 

(6)  National  legal  provisions  which  permit  or  impose  netting,  set-off  or  techniques  with 

similar  effects  shall  apply  to  monetary  obligations,  irrespective  of  their  currency 

denomination,  if  that  denomination  is  in  euro  or  in  a  national  currency  unit,  with  any 

conversion  being effected  at the conversion  rates. 

M 

«<r 

Article 9 

Banknotes  and  coins  denominated  in a national  currency  unit  shall  retain  their  status  as 

legal  tender  within  the territorial  limits as of the last day  before  the third  stage. 

Part JV 

EURO  BANKNOTES  AND  COINS 

Article  10 

As  from  1 January  2002  at the  latest,  the  ECB  and  the central  banks  of the  participating 

Member  States 

shall  put 

into  circulation  banknotes  denominated 

in  euro. 

Notwithstanding  Article  15, these banknotes  shall  be the only  banknotes  which  have  the 

status of legal tender  in all these  Member  States. 

Article  11 

As  from  1 January  2002  at  the  latest,  the  participating  Member  States  shall  issue  coins 

denominated  in  euro  or  in  cent  and  complying  with  the  denominations  and  technical 

specifications  which  the  Council  may  lay  down  in  accordance  with  Article  105  a  (2) 

second.sentence of the  Treaty. Notwithstanding  Article  15, these  coins  shall  be  the  only 

coins  which  have  the  status  of  legal  tender  in  all  these  Member  States.  Except  for  the 

issuing  authority  and  for 

those  persons  specifically  designated  by  the  national 

legislation  of  the  issuing  Member  State,  no  party  shall  be  obliged  to  accept  more  than 

fifty coins  in any  single  payment. 

Article  12 

Participating  Member  States  shall  ensure  adequate  sanctions  against  counterfeiting  and 

falsification  of banknotes and  coins. 

d°l 

SI 

PartV 

FINAL PROVISIONS 

Article 13 

Articles  14-16 apply as from the end of the transitional period. 

Article 14 

Where  in  legal  instruments  existing  at  the  end  of  the  transitional  period  reference  is 
made to the national  currency  units, these references  shall  be read  as references  to the 
euro  unit  according  to  the  respective  conversion  rates and  calculated  according  to  the 
rounding rules laid down in Council Regulation [...]. 

Article 15 

Banknotes  and  coins  denominated  in  a  national  currency  unit  as  referred  to  in 
Article  6  (1)  shall  remain  legal  tender  in  their  respective  territorial  limits  until  six 
months after  the end of the transitional period at the latest; this period  may be shortened 
by national law. 

Article 16 

In accordance with the laws or practices of participating  Member  States, the  respective 
issuers of banknotes  and coins shall  continue to accept,  against  euro  at the  conversion 
rate, the banknotes and coins previously issued by them. 

6b 

Part VI 

ENTRY INTO FORCE 

Article 17 

This Regulation shall enter into force on 1st January  1999. 

This  Regulation  shall  be  binding  in  its entirety  and  directly  applicable  in  all  Member 
States. 

V. 

2./ 

I  ! 

Annexe financière 

The present proposals do not have any impact on the budget of the European 
Community. 

3i 

Annexe Petites et Moyennes  Entreprises 

The two draft  Regulations  will  have a direct effect  on  all  citizens  and all  sectors  of 
the  economy.  It  will  be  of  particular  significance  to  the  banking  sector  and  to 
distributive trades, where citizens will encounter the immediate commercial  effects  of 
the changes. 

The  importance  of  adjustments  to  the  new  situation  which  will  be  required  of 
enterprises will  vary.  Small and medium sized enterprises may find  adjustment costs 
proportionately  higher  if  the  transition  is  not  planned  sufficiently  in  advance.  The 
Commission is working closely with these sectors to identify  more precisely potential 
problems. 

33 

ISSN 0254-1475 

COM(96) 499  final 

EN 

09  10  01 

Catalogue number  : CB-CO-96-524-EN-C 

ISBN 92-78-10378-0 

Office for Official Publications of the European Commumties 

L-2985 Luxembourg 

3^1