Bethlehem Steel Co. v. Zurich General Accident & Liability Ins. Co.

Background

A group of bonds sold originally in the United States to a group of bankers was also offered abroad. The current holders are foreign corporations, and some of those bonds were bought in foreign countries. The holders did not buy the bonds or ask for foreign-currency payment until after the effective date of the Joint Resolution of June 5, 1933. A lower court held that the Resolution did not apply, and the foreign holders sued in U.S. courts to enforce the bonds’ optional foreign-currency terms.

Reasoning

The central question was whether Congress’s June 5, 1933 Joint Resolution applied to these dollar-denominated bonds and made their multiple-currency provisions unenforceable in U.S. courts. The Court concluded the bonds are obligations payable in U.S. money and that Congress lawfully declared multiple-currency provisions against public policy here. The Court said there was no treaty claim before it, held that courts cannot enforce those foreign-currency clauses irrespective of where the contracts were made, and ruled coupons must be discharged dollar for dollar in current U.S. legal tender. The decision reverses the lower court.

Real world impact

Foreign corporate holders who bought or elected payment after the Resolution’s effective date cannot force payment in foreign currency in U.S. courts. Issuers and holders must treat the bonds as payable in U.S. dollars, with coupons paid in current legal tender. The ruling limits the ability to rely on multiple-currency contract clauses when enforcing dollar obligations in this country.

Dissents or concurrances

The Chief Justice, and Justices McReynolds, Butler, and Stone would have affirmed the lower courts’ judgments; their reasons are set out in Justice Stone’s opinion in the related cases Nos. 384 and 495.