Invoice rules: Supreme Court freezes currency valu...

Invoice rules: Supreme Court freezes currency value for legal fee payments

Nyashadzashe Ndoro

The Supreme Court of Zimbabwe has ruled that a party cannot be reimbursed in foreign currency or its equivalent at the prevailing rate on the date of payment if they chose to pay legal fees in foreign currency instead of the local currency on the invoice date.

This comes as a Zimbabwean company, Falcon Gold, won a court case and was supposed to be reimbursed for legal fees they paid in US dollars. They argued they should get the US dollars back or the equivalent in local currency at the current exchange rate.

The court disagreed, arguing that the debt was fixed in local currency on the invoice date, even though it was originally stated in US dollars, implying that the company cannot benefit from any changes in the exchange rate.

Falcon Gold challenged this decision, arguing that amendments to the law allowed them to pay their counsel in foreign currency and be reimbursed in that currency or at the prevailing interbank rate on the date of payment. However, the Supreme Court disagreed.

The court, citing the principle of currency nominalism, found that the debt became crystallised in local currency on the invoice date when the legal fees were due. The court explained that even if the local currency had appreciated against the foreign currency by the date of payment, the paying party would not have been able to benefit by paying a lower amount in local currency.

“In keeping with the principle of currency nominalism, the amount due to the applicant, which the second respondent was obliged to pay was frozen or crystallised in the fee note issued on the invoice date. The numeric nominal value of the local currency on the invoice date could not be altered by changing it into a foreign currency and then demanding its subsequent value relative to the foreign currency at a later date.

“The fairness in the principle of nominalism is demonstrated in the following manner. An appreciation in the value of the local currency against the foreign currency on the date of payment of the bill of costs would not benefit the second respondent by allowing it to elect to pay the foreign currency value in the computable lower local currency amount,” the court noted.

This decision upholds the principle that monetary debts are to be paid according to their nominal value in local currency, regardless of fluctuations in the exchange rate.