Despite laws of negotiable instruments of most countries being unified in the Geneva system there are many issues of law of negotiable instruments and related matters that are solved differently. In many issues (for example, capacity relating to bills of exchange) individual countries have retained their own regulations. The uniform character of law of negotiable instruments is also eroded by a lot of exemptions that contracting parties could make use of. In addition, there may appear in bill relationships a foreign element from countries that have not adopted the Geneva regulation of bills of exchange. In these cases the respective conflict rules of the BECA will apply.
The BECA includes - in conformity with requirements of the third Geneva Convention for the Settlement of Certain Conflicts of Law in connection with Bills of Exchange and Promissory Notes - a very detailed list of eight conflict rules (Article I, Sections 91 - 97, BECA). According to them, it will be determined which of the respective legal orders should be used for bill relationships with a private law element. In accordance with the Convention and its name ("Convention destineé a régler certains conflits de lois") the BECA only provides for some issues of the law of negotiable instruments with a foreign element. It is necessary to deal with the respective loopholes pursuant to Act No 97/1963 Coll. on International Private and Procedural Law. In relation to this law BECA is a special regulation which has to be applied preferentially.
The first of the conflict rules relating to bills of exchange is Article I, Section 91, BECA, which regulates passive capacity of natural persons in relation to bills of exchange. According to this provision, a person's capacity to bind oneself by a bill of exchange is governed by the law of the state of which he is a national. There are two exceptions to this rule according to BECA:
Firstly, it is the case when the law of the state of which the respective person is a national refers to the law of another state. The law acknowledges such a reference - transmission - stating that in such a case the law of the state which is being referred to takes precedence.
In the second exception, the territorial principle takes precedence. He who lacks capacity to bind himself according to the above mentioned law will eventually be legally bound if he signs a bill of exchange in a state whose law provides for him being capable to bind himself by a bill of exchange. If a foreigner, who attains majority at 24 in his state, signs a bill of exchange at 19 in his state, he will not be bound by the bill. However, if he signs the bill in the Czech Republic he will be legally bound because, according to the Czech law, he would be of legal age. In this case, the law of the state of which the respective signer is a national is not taken into consideration but lex loci actus decides. What matters is the actual place not the information in the bill of exchange.
The Czech law of negotiable instruments has not made use of the stipulation pursuant to Article 2, Paragraph 3, of the Convention, which allows the contracting parties not to recognize as valid obligations from bills of exchange made by their members abroad which would otherwise be valid pursuant to lex loci actus. The states that made use of this licence (for example, Germany, Austria and Poland) introduced a certain exception to the exception in favor of their nationals and their law. If he who is not of legal age yet, pursuant to the law of his state, signs a bill of exchange in a state in which he would already be of legal age, he will not be bound by the bill. For example, the bill capacity of German nationals who have signed a bill of exchange abroad will be considered pursuant to the general German law. The German and Austrian regulations prevent from circumventing the legislation about legal capacity, i.e. situations when a minor signs a bill of exchange in a state where he would already be of legal age pursuant to the local law and thus binds himself. The Czech law does not have such a protective measure.
The form of declaration on a bill of exchange made by all participants is regulated by the law of the state in which the declaration has been made (Article I, Section 92, BECA, Paragraph 1, BECA). The law only mentions the form of the declaration. It does not include issues of capacity relating to bills of exchange, effects of declarations on bills of exchange, forms of protest, etc.
As for the form of declarations on bills of exchange, the rule of "locus regit actum" applies again and what matters is the actual place, not the place stated in the bill.
Within the states of the Geneva system this provision is of lesser importance as regulations of the Geneva law of negotiable instruments bills are basically unified as far as the form of acts relating to bills of exchange is concerned. Within the Geneva law one may only expect a surprise in three areas: some states could make use of Article 19, Stipulations (Annex II, Convention on Unified Law of Bills of Exchange) and, for example, substitute the stipulation relating the promissory note with a mere order-clause. The promissory note will then be valid according to the law of these states in spite of not bearing the designation as a bill of exchange provided it includes the information that it is drawn "to order". Another formal question that could be considered differently in individual states is the possibility of replacing the signature in the bill of exchange by an official declaration written in the bill (Article 2, Stipulations). The third formal difference could concern the guarantee relating to bills of exchange which may be (with the license included in Article 4, Stipulations) taken over on a separate document in some states (not only in the bill of exchange or in a duplicate as is the case in the Czech Republic) provided the document states the place where it was drawn.
For the case that the bill of exchange would include more declarations on bill of exchange the law expressly acknowledges the principle of separate declarations on bills of exchange. Pursuant to Section 92, Paragraph 3, BECA, if the declaration on bill of exchange is invalid according to the law of the state in which it was made but is in conformity with the law of the state in which a later declaration on bill of exchange was made, then the defective form of the former declaration does not affect validity of the latter one.
It is not always necessary to use the conflict rule of lex loci actus for determining the law applicable to the form. An exception to the principle of territoriality is included in Article I, Section 92, Paragraph 3, BECA, according to which a declaration on bill of exchange made abroad by a Czech citizen is valid in the Czech Republic even against other Czech citizens provided it conforms to the requirements of the Czech law. As for relationships among Czech citizens, the principle of personality of law applies and the place in which the declaration was made is not decisive.
The effects of binding declarations of the acceptor of a bill of exchange and the maker of a promissory note are regulated by the law of the state in which these instruments are payable (Article I, Section 93, Paragraph 1, BECA). The effects of other declarations on bill of exchange are regulated by the law of the state in which they were made (Article I, Section 93, Paragraph 2, BECA). Both provisions are of general nature and apply if other provisions of the BECA (see hereinafter) do not state otherwise.
The effects of these declarations include primarily the range and the content of liability of the respective drawee and payee, prerequisites of their enforceability and performance and reasons for their termination.
Pursuant to Article I, Section 94, BECA, the limits of time for exercise of right of recourse are regulated by the law of the place where the bill of exercise was drawn. The regulation of limits of time for exercise of right of recourse must be strictly distinguished from limits of time for protest which are regulated separately by Section 97, BECA, and where the conflicting criterion is the place in which it is necessary make the protest. At the same time it is necessary to distinguish them from limits of time for exercise of rights to bill of exchange against direct debtors which are regulated by Section 93, Paragraph 1, BECA (see the previous section hereinabove).
The issue of whether the possessor of a bill of exchange acquires a debt which gives rise to its drawing is determined by the law of the place in which the bill of exchange has been drawn. It is the case of the so-called remittance (provision in French) which is unknown to the Czech law of negotiable instruments and which is expressly declined by the Anglo-American law (conf. UCC Se 3 - 408: "A check or other draft does not itself operate as an assignment of funds in the hands of the drawee available for its payment, and the drawee is not liable on the instrument until the drawee accepts it"). In the countries of the French system of law of negotiable instruments it is a traditional institute. It is regulated, for example, in Article 116 of the French Code de commerce, but it can also be found in legal orders of a number of other countries.
Pursuant to these regulations, the owner of a bill of exchange acquires a debt which gives rise to drawing a bill of exchange. Put simply, it is a legal cessation of the right which establishes the drawer's claim against the drawee to accept the bill of right. This right of the drawer's may result, for example, from special agreements between the drawer and the drawee about the acceptance of the bill of exchange. The transition of provision protects the possessor in the case of the drawer being declared bankrupt. If the claim were included in the bankrupt's assets, we could hardly expect the drawee to comply with the drawer's order and to bind himself towards the possessor of the bill by accepting it. However, as provision passes to the possessor of the bill by operation of law (Article 116, Paragraph 3, Code de commerce), it gets out of the reach of the trustee in bankruptcy and the drawee is then of course motivated to acceptance even in relation to the possessor of the bill of exchange. Therefore provision provides the assignee of a non-accepted bill of exchange (regardless of whether it is the drawee or other assignees) with an additional certainty that the bill of exchange will really be accepted by the drawee.
If Article I, Section 95, BECA, establishes as decisive the law of the place where the bill of exchange was drawn it may debatable whether it is the place of drawing recorded in the bill of exchange or the actual place of drawing. I tend to agree with the opinion that the place recorded in the bill of exchange is decisive. In addition to other reasons, it is necessary to say so with regard to certainty of assignees of the bill of exchange. They should recognize directly from the document (from the record of the place of drawing) whether they may acquire the debt which gave rise to the bill of exchange being drawn.
In doing so, the regime of the obligation relating to the bill cannot be broken as it is governed by the same determining criterion of the law of the place of drawing (pursuant to Article I, Section 93 BECA, see hereinabove the explanation about effects of obligatory statements of the drawee).
The question whether acceptance may be restricted to part of the sum (in the Czech regulation, comp. Article I, Section 26, Paragraph 1 BECA) or whether the possessor is bound to accept also partial payment (comp. Article I, Section 39, Paragraph 2, BECA) is governed by the law of the country in which the bill of exchange is payable.
Pursuant to Article I, Section 97, BECA, "the form of protest and the limits of time for protest, as well as the form for the exercise or preservation of rights concerning bills of exchange or promissory notes, are regulated by the laws of the country in which the protest must be drawn up or the measures in question taken".
In addition to the protest, the preservation or exercise of rights concerning bills of exchange is also achieved by presentment of the bill of exchange to acceptance (or intervention acceptance) or presentment to payment (or intervention payment). However, the BECA provision cited hereinabove concerns only the form of these acts. In protests, it concerns such matters as, for example, determining the bodies relating to protest, essential elements of protest instruments, protest stipulations in the bill of exchange, etc. The law of the country where it is necessary to protest a bill of exchange also governs the time of limits for protest.
However, the question whether to act at all will be considered according to the conflict criterion for effects of obligations relating to bills of exchange (comp. Article I, Section 93, BECA).
The last conflict rule of the Czech regulation of bills of exchange is Article I, Section 98, BECA, concerning measures to be taken if a bill of exchange was lost or stolen. The connecting factor is here the law of the place where the bill of exchange is payable (lex loci solutionis). It means that the measures the possessor should take in case of loss or theft of the bill of exchange are governed by the law of the country where the bill of exchange is payable. The law does not specify the form of these measures. Usually, it is a motion for discharging or a similar procedure.