by David Fox, Professor of Common Law, University of Edinburgh*
The Case of the Serbian Loans issued in France (1929) 56 J. Dr. Int’l 977 was one the earliest and most influential of the inter-war cases on the interpretation of gold clauses in long-term bond contracts. As a decision of the Permanent Court of International Justice in the Hague, its reasoning influenced decisions in the French, English and United States courts. It established that a payment clause stipulating for payment of gold coin would be interpreted as creating an obligation to pay legal tender money corresponding to the gold value of the money owed by the issuer of the bond.
Now that all world currencies have broken their link with gold, that point of law is unlikely ever to arise again. But the case has an enduring significance beyond the superseded point it stands for. The sparse legal record offers a glimpse into important historical events of the early twentieth century, and the way they impinged on the financial arrangements of the governments and investors of the time. We see financial deals being done by an emerging nation state and the imperial Great Powers of the era. Less comfortably, we see an example of the inevitable link between finance and war in a time when notions of “ethical investment” were still a century away from being articulated.