Exchange law / Bill of exchange law

The formal requirements of the bill of exchange, as well as the rules related to its issuance, actors, transfer, and enforcement of the promissory note claim, are regulated by bills of exchange laws and international bills of exchange conventions.

A bill of exchange is a negotiable instrument subject to strict formality, which contains a claim for money or a promise to pay. Bill of exchange law is the set of laws relating to the bill of exchange and its legal relations. 

Most countries regulate in some way the essential issues related to the exchange transaction. Many countries have their own bill of exchange laws, others regulate this instrument as part of their commercial law. 

Examples of the former include the British Bills of Exchange Act 1882 (BEA) or the German Wechselgesetz, and the latter the USA Uniform Commercial Code (UCC), Article 3 of which deals with bills of exchange between securities (so-called Negotiable Instruments).

The different national rules of individual countries were confusing in the international use of bill of exchange notes, so in the first half of the last century it became necessary to unify national promissory law procedures. This was done with the 1930 Geneva International Bills of Exchange Convention (Convention Providing a Uniform Law For Bills of Exchange and Promissory Notes, Geneva, 1930, The League of Nations).  

The convention was mostly joined by those countries which created their national bill of exchange law on the model of German bill of exchange law. A total of 27 countries, including only Austria, Belgium, Denmark, Finland, France, Greece, the Netherlands, Poland, Lithuania, Luxembourg, Hungary, Germany, Italy, Portugal, and Sweden among the EU member states. 

In 1988, within the framework of the UN, an attempt was made to formulate a globally acceptable bill of exchange convention (UNCITRAL Convention on International Bills of Exchange and International Promissory Notes), which has so far been ratified by only five states and signed by three more states. 

The promissory notes laws of individual states also aim to ensure that any promissory note lawsuits are concluded quickly, with a limited number of opportunities for opposition and dispute, and short deadlines. In practice, however, one must take into account that, unfortunately, a probate lawsuit can drag on.

The fact that very few countries have joined the Geneva Conventions is a warning in international business relations that, in addition to the law governing the contract, the law governing the bill of exchange linked to the payment method of the contract and the competent court must be clarified in advance with our business partners.

Since the law of bills of exchange is quite a specialized field, here is a good piece of advice: if you have not yet worked with a bill of exchange (either as an issuer, beneficiary, or drawee), it is worth seeking the advice of a competent international lawyer due to the subtleties of the law of bills of exchange and the differences between bills of exchange.