Opinion of the European Monetary Institute at the request of the Department of Finance of Ireland under Article 109f(6) of the Treaty establishing the European Community (the “Treaty”) and Article 5.3 of the Statute of the EMI concerning a draft bill enacting provisions relevant to the economic and monetary union (“the draft bill”) (CON/98/18)
Date: 1998-05-08
Institutions: European Monetary Institute
Subjects: Euribor, European System of Central Banks, Ireland, application of EU law, central bank, conversion rate, copyright, euro, money, payment system

OPINION OF THE EUROPEAN MONETARY INSTITUTE

8 May 1998

at the request of the Department of Finance of Ireland under Article 109f(6) of the Treaty
establishing the European Community (the “Treaty”) and Article 5.3 of the Statute of the

EMI concerning a draft bill enacting provisions relevant to the economic and monetary union

(“the draft bill”)

(CON/98/18)

1.

On 26 March 1998 the EMI received a request for an opinion on a draft bill enacting provisions

relevant to economic and monetary union from the Irish Department of Finance.

2.

The  EMI’s  competence  to  deliver  an  opinion  is  based  on  Article  1.1  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  bill  contains  provisions  concerning

currency legislation, means of payment and related matters.

3.

The  draft  bill  aims  at  making  adaptations  to  Irish  law  with  a  view  to  the  implementation  of

Ireland’s  national  changeover  plan  for  the  introduction  of  the  euro.  The  draft  bill  contains

provisions relating to the introduction of the euro currency system, the substitution of monetary

references  in  legal  instruments  (including  both  the  current  decimal  and  pre-decimalisation

currencies), conversions and rounding, legal tender and legal tender amounts, the withdrawal of

legal  tender  notes  and  coins,  the  application  of  copyright  laws  to  euro  notes  and  coins,

commemorative  coins,  and  the  redenomination  and  renominalisation  of  outstanding  debt  and

share capital.

4.

The  EMI  welcomes  the  initiative  of  the  Irish  Government  to  prepare  for  the  timely

implementation  of  the  measures  necessary  or  appropriate  for  the  changeover  to  the  single

currency.  The  draft  bill  is  viewed  as  a  supplement  to  the  draft  EU  Council  regulation  on  the

introduction  of  the  euro,  and  provides  for  its  coming  into  operation  by  ministerial  orders  on

different dates. The draft bill is divided into heads for a bill, and is accompanied by explanatory

notes.

5.

The  EMI  would  like  to  raise  the  following  detailed  comments  as  set  out  in  the  subsequent

paragraphs of this opinion.

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6.

In  its  March  1998  report  to  the  Council  pursuant  to  Article  109j  of  the  Treaty  examining  the

compatibility between each Member State’s national legislation and Articles 107 and 108 of the

Treaty,  the  EMI  noted  two  imperfections  in  Irish  law.  First,  the  Minister  for  Finance’s  ability

under section 134 of the Central Bank Act, 1989 to suspend certain business transactions in the

national interest needs clarification in order to avoid any possibility of government interference in

the Central Bank of Ireland’s ESCB-related operations. Second, the requirement under sections

10(1)  and  13(1)(b)  of  the  Central  Bank  Act,  1997  that  the  Minister  for  Finance’s  consent  be

obtained  before  the  Central  Bank  of  Ireland  may  refuse  to  approve  the  rules  of  a  payment

system  or  subsequently  revoke  such  approval  is  unrestricted  and  may  therefore  also  extend  to

the Central Bank of Ireland’s ESCB-related involvement in payment systems. Based on informal

discussions with the Department of Finance, the EMI understands that these imperfections will

be  addressed  in  the  context  of  the  current  legislative  changes.  The  EMI  welcomes  this

development.

7.

The  EMI  notes  that,  unlike  changeover  legislative  initiatives  proposed  in  other  EU  Member

States  (and  indeed  outside  the  European  Union),  the  draft  bill  does  not  include  any  provisions

relating  to  the  continuity  of  price  sources  used  in  financial  market  transactions.  The  EMI

understands  that  participants  in  the  Dublin  interbank  market  will  discontinue  the  provision  of

reference rates for the calculation of DIBOR and will adopt EURIBOR as the standard for the

Dublin market. In a number of other Member States legislation has been proposed providing that

domestic  reference  rates  shall,  after  the  introduction  of  the  euro,  be  replaced  by  those  interest

rates that will correspond most closely to existing reference rates. In some cases the Ministries

of Finance are empowered to specify by order the successor rate, while in others EURIBOR is

identified in the legislation as the successor rate. The EMI favours the replacement of domestic

reference  rates  by  a  reference  rate  representing  the  entire  euro  area  and  believes  that

EURIBOR, in particular, will perform in relation to the euro the same function that is currently

performed  by  DIBOR  in  relation  to  the  Irish  pound.  Although  the  EMI  understands  that  the

replacement  of  references  to  DIBOR  by  references  to  EURIBOR  should  be  assured  in

accordance  with  general  legal  principles,  legislative  confirmation  of  this  would  be  helpful  in

ensuring a smooth changeover by the Dublin market.

8.

The EMI also notes that the draft bill does not include provisions relating to a number of other

matters  that  have  been  addressed  in  changeover  legislative  initiatives  proposed  in  other  EU

Member States (e.g., provisions relating to taxation, dual pricing, consumer protection, financial

markets,  social  welfare,  etc.).  The  EMI  assumes  that  the  effect  of  the  draft  bill  will  be

supplemented  with  additional  legislative  or  other  proposals,  perhaps  in  the  aftermath  of  the

establishment  of  Ireland’s  Currency  Changeover  Board  which  will  oversee  the  detailed

implementation of the changeover.

- 3 -

9.

(Head 7 of the draft bill)

9.1  The  draft  bill  proposes  to  substitute  section  24  of  the  Central  Bank  Act,  1989  with  new

wording. Section 24 of the Central Bank Act, 1989 currently provides that the monetary unit of

the State shall be the Irish pound which shall be issued in legal tender form. The draft bill would

amend  this  to  provide  that  the  currency  of  the  State  shall  be  the  euro  as  from  1  January  1999

and  that  the  Irish  pound  shall  be  a  denomination  of  the  euro  in  accordance  with  Council

Regulation (EC) No ***/98 on the introduction of the euro.

9.2  The  legislative  intention  of  the  draft  bill  appears  to  be  to  repeat  parts  of  the  draft  Council

Regulation on the introduction of the euro to be adopted under Article 109l (4), third sentence, of

the Treaty (OJ No.C 236/8, 2 August 1997) (the “euro regulation”). In particular, Article 2 of the

euro  regulation  will  provide  that  as  from  1  January  1999  the  currency  of  the  participating

Member States (which will be defined in Article 1 to include Ireland) shall be the euro. Article

6(1)  of  the  euro  regulation  will  provide  that  during  the  transitional  period  the  euro  shall  also  be

divided  into  the  national  currency  units  according  to  the  irrevocably  fixed  conversion  rates.  In

accordance  with  Article  1  of  the  euro  regulation,  the  national  currency  units  will,  of  course,

include the Irish pound unit since the Irish pound will continue to be defined as the monetary unit

of Ireland on the day before the start of the third stage. As stated in the preamble to the euro

regulation, during the transitional period the Irish pound unit will be defined as a sub-division of

the euro.

9.3 Article 6(1) of the euro regulation provides that the monetary law of Ireland shall continue to

apply “subject  to  the  provisions  of  this  Regulation”.  Provisions  of  Irish  monetary  law  that

overlap with provisions of the euro regulation will thus be inapplicable after 1 January 1999. The

Department of Finance may want to consider whether it is advisable to include in the draft bill

new provisions of Irish monetary law that will not have any legal effect or content.

9.4  As  stated  in  the  EMI  opinion  to  the  Irish  Department  of  Finance  dated  29  October,  1997,

national implementation of regulations is not usually necessary and is indeed impermissible where

the  Community  nature  of  a  legal  rule  is  concealed  from  those  subject  to  it  (Case  34/73  [1973]

E.C.R.  981).  National  implementation  of  regulations  is  impermissible  where  it  jeopardises  the

simultaneous and uniform application of those regulations in the whole of the Community (Case

39/72 [1973] E.C.R. 101). Legislative duplication of a Community regulation is inconsistent with

Community law except in special circumstances where national laws incorporate some elements

of Community regulations for the sake of coherence and in order to make them comprehensible

to the persons to whom they apply (Case 272/83 [1985] E.C.R. 1057).

- 4 -

9.5 While the EMI accepts the need for legal clarity in the totality of legislation which amounts to

the monetary law of a participating Member State and recognises the practice and need to refer

in national legislation to the lawful currency of the State, it respectfully suggests that no attempt

should be made to repeat or reflect the detailed wording of the euro regulation, which will have

direct effect in all participating Member States. While acknowledging that the legislative tradition

of  other  Member  States  allows  for  the  wholesale  replacement  of  a  discrete  body  of  monetary

law  by  the  euro  regulation,  and  that  Irish  monetary  law  does  not  readily  lend  itself  to  such  a

replacement, the EMI believes that the provisions of the euro regulation as set forth in paragraph

9.2  above  are  sufficiently  coherent  and  comprehensive  to  render  it  unnecessary  to  repeat  or

reflect such provisions in Irish law.

10.

(Head 8 of the draft bill)

10.1 The draft bill introduces a provision that on and after 1 January 2002, any reference to an

amount  of  money  in  the  Irish  pound  (both  decimal  currency  and  pre-decimalisation  currency)

contained in a legal instrument shall be read as referring to an amount in euro according to the

conversion  rate.  The  reference  to  the  decimal  currency  and  the  pre-decimalisation  currency

refers to the introduction in Ireland in February 1971 of the current decimal currency based on

the Irish pound comprising one hundred (100) pennies.

10.2  The  EMI  believes  that,  insofar  as  concerns  references  to  an  amount  of  money  in  the

current decimal currency, this provision is duplicative of Article 14 of the euro regulation, which

provides that 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. For the reasons set forth in paragraphs 9.3, 9.4 and

9.5  above,  the  EMI  suggests  that  no  attempt  should  be  made  to  repeat  or  reflect  the  detailed

wording of the euro regulation, which will have direct effect in all participating Member States.

10.3  Insofar  as  concerns  references  to  an  amount  of  money  in  the  pre-1971  (i.e.,  pre-

decimalisation) currency, the explanatory notes to the draft bill state that provision must be made

for  the  continuity  of  legal  instruments  denominated  in  the  pre-decimalisation  currency  because

Article 14 of the euro regulation provides only for the substitution by the euro of references to

national currency units  “as those units are defined on the day before the start of the third

stage of Economic and Monetary Union.” Assuming that the proposed amendment to section

2(2) of the Decimal Currency Act, 1969 contained in Head 7 of the draft bill does not take effect

until 1 January 1999, the Irish pound and the new penny consisting of one-hundredth part of an

Irish pound shall, on the day before the start of the third stage, be  the only legal denominations

or  units  of  money  in  Irish  currency.  Given  that  the  old  pre-decimalisation  currency  no  longer

exists  in  Ireland,  the  pre-decimalisation  units  are  now  defined  under  Irish  law  in  terms  of  the

- 5 -

current  decimal  currency.  On  the  day  before  the  start  of  the  third  stage  references  in  legal

instruments to the pre-decimal currency are therefore defined as references to the new decimal

currency  in  accordance  with  the  provisions  of  the  Decimal  Currency  Act,  1970.  The  EMI

believes  that  Article  14  of  the  euro  regulation  applies  with  equal  force  to  references  in  legal

instruments to amounts of money in the pre-decimalisation currency, as well as amounts in the

current  decimal  currency.  In  this  regard,  the  EMI  notes  that  other  Member  States  have  not

sought to legislate for continuity between pre-existing national currencies and the euro. The EMI

is unconvinced of the need for the additional provisions in the draft bill relating to the pre-1971

currency.

11.

(Heads 9 and 10 of the draft bill)

11.1 The draft bill introduces provisions that conversions either way between the euro unit and

the  Irish  pound  unit  and  rounding  that  takes  place  after  a  conversion  shall  comply  with  the

provisions set out in Council Regulation (EC) No 1103/97 of 17 June 1997 on certain provisions

relating to the introduction of the euro. For the reasons set forth in paragraphs 9.3, 9.4 and 9.5

above,  the  EMI  suggests  that  no  attempt  should  be  made  to  repeat  or  reflect  the  detailed

wording of this regulation, which has direct effect in Ireland.

11.2  The  draft  bill  further  provides  that  where  conversions  are  to  be  made  from  the  pre-

decimalisation  currency  to  the  euro  unit,  amounts  will  first  be  converted,  in  accordance  with

sections 4 and 13 of the Decimal Currency Act, 1970, into the Irish pound unit, and then into the

euro unit. Also, it is provided that the rounding provisions of Council Regulation (EC) No 1103/97

shall  apply  where  the  original  amount  to  be  converted  was  expressed  in  the  pre-decimalisation

currency. For much the same reasons outlined in paragraph 10.3 above, the EMI is unconvinced

of the need for the additional provisions in the draft bill relating to the pre-1971 currency.

11.3  The  EMI  notes  with  interest  the  introduction  of  a  provision  empowering  the  Minister  for

Finance to make regulations regarding rounding.  The  EMI  requests  that  it  be  consulted  by  the

Department  of  Finance  with  respect  to  any  ministerial  orders  containing  draft  legislative

provisions relating to rounding.

12.

(Head 11 of the draft bill)

12.1 Under Article 8(1) of the euro regulation it is provided that, unless parties agree otherwise

and without prejudice to paragraphs 3 and 4, during the transitional period acts to be performed

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

in that unit. The EMI thus notes that, notwithstanding section 25 of the Central Bank Act, 1989,

under Irish law contracts may be made, executed, entered into and done in the euro unit during

- 6 -

the  transitional  period  in  accordance  with  the  euro  regulation  even  though  notes  and  coins

denominated in the euro unit will not be available. Insofar as section 25 of the Central Bank Act,

1989  requires  clarification,  such  clarification  should  be  explicitly  linked  to  Article  8  of  the  euro

regulation. In addition, reference should be made to the  euro unit rather than the  euro  (which

term includes both the euro unit and national currency units).

12.2 The EMI believes that the provision stipulating that in the transitional period the Irish pound

unit will satisfy a requirement in contracts that payment be made in legal tender is unnecessary

in view of Article 9 of the euro regulation, which provides that banknotes and coins denominated

in  a  national  currency  unit  shall  retain  their  status  as  legal  tender  within  their  territorial  limits

during  the  transitional  period.  Thus,  all  payments  required  to  be  made  in  legal  tender  in  Ireland

during the transitional period must be discharged in the Irish pound unit. For the reasons set forth

in paragraphs 9.3, 9.4 and 9.5 above, the EMI suggests that no attempt should be made to repeat

or reflect the detailed wording of the euro regulation, which has direct effect in Ireland.

13.

(Heads 12, 13 and 14 of the draft bill)

The EMI welcomes the provisions contained in these heads as they contribute to a clarification

of Irish monetary law.

14.

(Head 15 of the draft bill)

The  EMI  welcomes  this  provision.  It  would  be  preferable  that  the  provision  be  drafted

consistently  with  the  wording  of  Article  11  of  the  euro  regulation  to  refer  to  “coins

denominated in euro or in cents” (as opposed to “coins in euro denominations”).

15.

(Heads 16, 17, 19, 20, 21 and 22 of the draft bill)

The EMI welcomes the provisions contained in these heads as they contribute to a clarification

of Irish monetary law.

16.

(Head 18 of the draft bill)

The  EMI  notes  that  the  calling  in  of  coins  by  the  Minister  is  not  subject  to  approval  by  the

European Central Bank under Article 105a(2) of the Treaty, but rather “subject to approval by

the ECB of the volume of issue.” This point should be clarified in the draft bill.

17.

(Head 23 of the draft bill)

- 7 -

The EMI agrees that the copyright in all legal tender notes denominated in the euro unit issued

by or under the authority of the ECB will belong to the ECB. It may therefore be appropriate to

amend section 57 of the Copyright Act, 1963 so as to clarify that the relevant provisions shall be

without prejudice to the copyright of the ECB in such legal tender notes, rather than to declare

the ECB’s copyright. The EMI assumes that it is only intended to make provision with respect to

the copyright for legal tender notes denominated in the euro unit, as distinct from  “legal tender

notes denominated in euro”, which would of course embrace legal tender notes denominated

in both the euro unit and the Irish pound unit (as a sub-division of the euro).

18. Head 24 of the draft bill)

The EMI welcomes the provisions contained in this head.

19.

(Head 25 of the draft bill)

This provision states that as and from  1  January  2002,  a  reference  in  a  legal  instrument  to  the

currency of a participating Member State other than Ireland is to be read as a reference to the

euro  currency  at  the  conversion  rate.  The  EMI  believes  that  this  provision  is  duplicative  of

Article 14 of the euro regulation, which provides that 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.

20.

(Head 26 of the draft bill)

20.1  The  EMI  notes  that  the  issue  of  commemorative  coins  by  Member  States  has  been  the

subject  of  ongoing  discussion  in  the  Monetary  Committee.  It  has  been  suggested  that  the

conferring  of  legal  tender  status  on  commemorative  coins  may  be  a  competence  of  the  EU

Council under Article 109l(4) of the Treaty. Assuming that commemorative coins issued by the

Minister under this section shall have legal tender status, such coins are subject to Article 105a

(2)  of  the  Treaty  whereby  Member  States  may  issue  coins  subject  to  approval  by  the  ECB  of

the volume of issue. Clarification of this point in the draft bill is necessary.

20.2 The EMI accepts that the Minister for Finance may determine the denominations, designs,

dimensions, weights and composition of such commemorative coins. In this regard the EMI notes

that  Article  105a  (2),  second  sentence,  of  the  Treaty  provides  that  the  Council  may,  acting  in

accordance with the procedure referred to in Article 189c and after consulting the ECB, adopt

measures  to  harmonise  the  denominations  and  technical  specifications  of  all  coins  intended  for

- 8 -

circulation to the extent necessary to permit their smooth circulation within the Community. The

EMI  agrees  that  Article  105a  (2),  second  sentence,  does  not  prejudice  the  Minister’s  ability  to

establish  the  technical  specifications  of  Irish  commemorative  coins  since  such  coins,

notwithstanding  their  legal  tender  status,  are  not  generally  used  for  payment  purposes  and

therefore are not intended for circulation within the meaning of Article 105a (2). In addition, the

harmonisation  of  the  denominations  and  technical  specifications  of  commemorative  coins  is  not

necessary to permit their smooth circulation within the Community within the meaning of Article

105a  (2).  Indeed,  the  Minister  for  Finance  should  ensure  that  the  technical  specifications  of

commemorative coins are sufficiently different from coins intended for circulation throughout the

euro  area  so  as  to  avoid  any  possible  confusion  between  commemorative  coins  and  coins  that

will be used in everyday payment transactions.

20.3  The  EMI  notes  with  interest  the  provision  in  section  4  of  Head  26  that  a  tender  of  a

commemorative coin shall be legal tender in the State. The EMI notes that Article 11 of the euro

regulation provides that the participating Member States shall issue coins denominated in euro or

in  cents  and  complying  with  the  denominations  and  technical  specifications  which  the  Council

may  lay  down  in  accordance  with  the  second  sentence  of  Article  105a  (2)  of  the  Treaty,  and

that these coins shall be the only coins which have the status of legal tender in all these Member

States. Since the commemorative coins provided by the Minister do not need to comply with the

denominations and technical specifications laid down by the Council in accordance with Article

105a (2), it has been suggested that such commemorative coins need not have the status of legal

tender outside Ireland.

21.

(Head 27 of the draft bill)

21.1  The  EMI  welcomes  the  introduction  of  the  provisions  in  Head  27  that  are  designed  to

facilitate in a flexible manner the redenomination and renominalisation of outstanding debt issued

by  Ireland  and  of  borrowings  under  facility  agreements  to  which  a  State  body  is  a  party.  The

EMI  notes  that  the  method  of  redenomination  to  be  applied  to  debt  issued  under  Irish  law  and

denominated in Irish pounds will be established by ministerial order. The EMI welcomes the fact

that the method of redenomination used by private issuers must conform to the governing law of

the debt.

21.2  Article  8(4)  of  the  euro  regulation,  pursuant  to  which  the  provisions  of  Head  27  will  be

enacted,  authorises  each  participating  Member  State  to  take  measures  during  the  transitional

period which may be necessary in order to redenominate in  “the  euro  unit”  outstanding  debt

denominated in that Member State’s  “national  currency  unit”.  As  stated  in  the  preamble  to

the euro regulation, the euro unit and the national currency units are units of the same currency,

the euro. All references in the provisions of Head 27 to the redenomination  “in euro” or  “into

- 9 -

euro” should therefore be replaced by references to the redenomination  “in the euro unit”  or

“into the euro unit”,  and  all  references  to  the  redenomination  of  debt  denominated  “in  Irish

pounds” should be replaced by references to the redenomination of debt denominated  “in  the

Irish pound unit”.

21.3 The second sentence of section 2 provides that if an issuer wishes to redenominate  “such

debt instruments” (i.e., instruments issued under Irish law and denominated in Irish pounds) in a

manner not laid down in the ministerial order, the method of redenomination shall conform to the

law governing the debt instruments in question. The EMI assumes that this provision intends to

refer  to  all  instruments  denominated  in  Irish  pounds,  regardless  of  the  law  under  which  such

instruments are issued.

21.4 Section 4 empowers the Minister for Finance to renominalise all or part of outstanding debt

issued by or on behalf of Ireland. The EMI assumes that this provision is intended to apply to the

renominalisation of debt upon its redenomination in the euro unit. The EMI also assumes that the

terms  ‘redenominate’  and  ‘renominalise’  are  intended  to  derive  their  distinctive  meanings  from

Article 1 of the euro regulation, which provides that ‘redenominate’ shall mean changing the unit

in which the amount of outstanding debt is stated from a national currency unit to the euro unit,

but which does not have through the act of redenomination the effect of altering any other term

of the debt. In view of the narrow meaning ascribed to redenomination, the EMI believes that it

would  be  useful  to  include  provisions  in  Head  27  regarding  the  methods  of  renominalisation

which private issuers of debt denominated in the Irish pound unit should follow.

21.5  The  EMI  requests  that  it  be  consulted  by  the  Department  of  Finance  with  respect  to  any

ministerial  orders  containing  draft  legislative  provisions  relating  to  the  redenomination  of  debt

instruments governed by Irish law.

22.

(Heads 28 and 29 of the draft bill)

The  EMI  welcomes  the  decision  to  introduce  provisions  simplifying  the  procedures  for  the

redenomination  and  renominalisation  of  share  capital.  The  EMI  agrees  that  the  existing

procedure for such redenomination and renominalisation is too cumbersome, and welcomes the

flexible  approach  followed  which  also  seeks  to  protect  the  interests  of  shareholders.  The  EMI

believes that the provisions of Heads 27, 28 and 29 will contribute to the integration of the capital

markets in the euro area in the third stage.

23.

The EMI has no objection to this opinion being made public.

8 May 1998.