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PWGSC Contracts Placed in European Currencies Requiring Conversion to the EURO.
The European Economic Community (EEC) is moving towards a common currency. Where PWGSC has contracts placed in those currencies, there will be a requirementto amend those contracts from the original national currency to the new EURO.
The European Economic Community has established, for each participating currency, an irrevocably fixed conversion rate to be used for conversion either way between the EURO and the national currency units. These conversion rates are outlined below.
The various countries involved with the conversion to the EURO have established different dates for the official End of Legal Tender for the existing national currency units. These dates are outlined below.
REQUIRED ACTION
Sectors will be responsible for amending the Public Works and Government Services Canada (PWGSC) contracts placed in the stated national currencies units prior to the date in which the respective currencies are no longer legal tender.
The Sector should identify the contracts to which this notification pertains. A review of the contract terms and conditions may be required to determine if any other discussion or action is necessary.
Conversion
It should be noted that in all situations, to arrive at the converted EURO amounts, you divide the existing national currency amounts by the respective conversion rate (established by the European Economic Community).
| Example: | 1,500,000 DM ------------------ 1.95583 |
= 766,937.82 EUROs |
The balance of the foreign currency remaining outstanding, (i.e. that being not invoiced or paid at the official End of Legal Tender Date, for each national currency) should be established. It may be useful to state in the amendment document the full contract value in EUROs, to state the balance of the contract value that has been paid to date, in EUROs and, also to state the balance of the contract value that has not been invoiced nor paid, in EUROs.
An example is as follows:
| Contract | Amount | Currency |
|---|---|---|
| Contract Value (in original national currency)
Contract Value Paid to Date (in original national currency) Outstanding Balance of Unpaid Contract Value (in original national currency) |
1,500,000
700,000 800,000 |
Deutsche Mark (DM) (Germany) |
| Contract | Amount | Currency |
|---|---|---|
| Converted Contract Value, in EUROs,1 EURO = 1.95583 DM
Converted Contract Value Paid to Date, in EUROs, at 1 EURO = 1.95583 DM Converted Outstanding Balance of Unpaid Contract Value, in EUROs, at 1 EURO = 1.95583 DM |
766,937.82
357,904.31 409,033.50 |
EUROs |
| Country | National Currency | Conversion Rate | End of Legal Tender |
|---|---|---|---|
| Austria | Austrian Schilling | 13.7603 | 28 February 2002 |
| Belgium | Belgium Franc | 40.3399 | 28 February 2002 |
| France | French Franc | 6.55957 | 18 February 2002 |
| Finland | Finnish Mark | 5.94573 | 28 February 2002 |
| Germany | Deutsche Mark | 1.95583 | 31 December 2001 |
| Greece | Greek Drachma | 340.750 | 28 February 2002 |
| Netherlands | Dutch Guilder | 2.20371 | 28 January 2002 |
| Ireland | Irish Pound | 0.787564 | 9 February 2002 |
| Italy | Italian Lira | 1,936.27 | 28 February 2002 |
| Luxembourg | Luxembourg Franc | 40.3399 | 28 February 2002 |
| Portugal | Portuguese Escudo | 200.482 | 28 February 2002 |
| Spain | Spanish Peseta | 166.386 | 28 February 2002 |
Rounding Rules
The conversion of national currency units into EUROs is governed by precise legal rules so as to guarantee clarity and fairness. Each conversion rate to one EURO is expressed as six significant figures (e.g. 1 EURO = 40.3399 BEF) and these six figures should always be used when making conversions. They cannot be rounded or shortened.
If, after conversion into EUROs, the number at the third decimal place is less than 5, then the EURO figure must be rounded down e.g. 34.874 EUROs becomes 34.87. If the third decimal number is five or above, then it can be rounded up e.g. 34.875 becomes 34.88 EUROs.
Invoices/Claims Received But Not Paid By End of Legal Tender Date
In situations where an invoice or a claim has been received by PWGSC, on a specific contract, but due to processing times the invoice or claim has not been paid prior to the End of Legal Tender Dates, the amount payable must be converted to EUROs and payment must be made in EUROs. The conversion rates are outlined above.
Payments issued, in the original national currency units, on or before the End of Legal Tender Dates will be accepted by financial institutions for a six month period after the date of issue.
Contracts with Foreign Exchange Adjustment Clauses
There may be PWGSC contracts that contain as a provision of the terms of payment, a clause to account for changes in foreign exchange over the life of the contract. In these cases, the terms of the contract should be reviewed to determine whether an amendment to the Foreign Exchange provision is required.
There may be cases where European National Currencies are involved and there may be a requirement to amend the clause to reflect the conversion from the national currency units to the EURO.
If this is the case, it will be necessary to establish the amount of the foreign exchange provision that is not invoiced, claimed or paid to date. This amount will need to be converted to EUROs from the national currency unit, using the procedure explained above, which will then become the basis upon which the foreign exchange clause will operate. There may be a requirement to amend the reference to the exchange rate conversion factor, to reflect the EURO, i.e. the EURO as per the Globe and Mail Newspaper, National Edition, etc.