Economic and financial section > Report of the Committee for the Study of International Loan Contracts

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conversion of fiduciary paper into gold. The weight of gold
stipulated in the contract would first be converted into units
of that basic currency with due reference to the legal definition
of the latter ; and the sums thus expressed in terms of that basic
currency would then be converted into the currency of payment,
at the sight rate of the basic currency on the market of the
payment currency on the day on which the calculation was made.
It is, however, not inconceivable that there might be a
monetary upheaval of such magnitude as would make it
impossible, on a given date, to find a currency both convertible
into gold, in accordance with its legal definition, and dealt in
freely on the market of the payment currency.
In such a case, the conversion from gold into such currency
might still be effected, by using the price of gold on a given free
market and the rate of the currency of payment on that same
market.
Although what has been said above may appear exceedingly
complex, the only result would be to render the material process
of conversion somewhat arduous, without raising serious diffi¬
culties in the execution of the operation.
32. Should any dispute arise between the parties concern¬
ing quotations, it might be agreed to refer the dispute either
to the financial or monetary authorities of the country in which
the market in question is situated (issue bank, or, failing such,
a bankers’ syndicate ; or, again, the leading bank, according
to volume of deposits, in the country) or to an international
organisation such as the Bank for International Settlements.
33. To eliminate superfluous proceedings, it might finally
be laid down that no action at law may be brought for the
purpose of contesting the method of conversion of the stipulated
weight of gold into the currency of payment, unless the plaintiff
is able to allege a loss exceeding a given proportion of the
payment which he considers legitimate — e.g., 1%.
34. Where the coverage has to be put down a long time
in advance, and especially in the case of monthly instalments,
it might be laid down that such coverage shall provisionally
be paid, in agreement with the supervisor, in a currency based
on gold, the amount being completed, if necessary, on the day
before payment becomes due, in order to permit payment in
full according to the terms of the contract.
35. The above methods of application, though put forward
on the assumption that the loan is offered on one market only,
can equally well be used when the loan which includes the gold
clause is offered on several markets and expressed in a number
of currencies.
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