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-A [[currency indemnity]] is a part of the [[boilerplate]] that is so deeply entrenched, — that passeth so much understanding — that generations of legal eagles have just abided by it, never asking what it is or why it is there. It just ''is''.  You will find them in ISDAs, loans, bonds, repacks. They are sprayed wordily over all kinds of financial instrument, comfy textual furniture to make it all seem serious and important.
+A [[currency indemnity]] is a part of the [[boilerplate]] that is so deeply entrenched, a piece of cod that passeth so much understanding, that generations of [[legal eagle]]s have just abided by it, never asking what it is or why it is there. The young JC was one such eagle.
-So if you are in a hurry, stop there: it is fine; leave it; carry on. You should not expect much by way of negotiation on a currency indemnity (among others, for the same reason, that no-one else knows what it is for).
+The currency indemnity just ''is''.  You will find in in the ISDA, in [[loan|loans]], [[Debt security|bonds]], [[Repack Anatomy|repacks]] — in fact sprayed wordily over almost any kind of financial instrument; a kind of comfy textual furniture to make it all seem serious and important.
+====In a nutshell: roll with it====
+So if you are in a hurry, stop there: a [[currency indemnity]] is fine; people don’t usually fiddle with it: leave it; carry on.
-For those with the time and deep natural curiosity, or who are vexed about the [[Indemnity|“i” word]], this is what it is all about.
+Do not expect much by way of negotiation (among others, for the same reason: no-one else knows any better than you do what one should negotiate in a [[currency indemnity]]).
+====For those who remain curious ====
+For those with the time and deep natural curiosity, or who are vexed about the [[Indemnity|“i” word]], we offer the following. Take it with a pinch of salt; after all, we wrote it with one.
-Say I borrow from you in in [[euro]]s. Being an OG in the international capital markets, my business will truck in incomings in all kinds of flakey currencies, but I still covenant, of course, to repay you in euros. That is my resting, fundamental contractual obligation.
+Let’s say I borrow from you, in [[euro]]s.
-Now, being an OG, I will of course have a sophisticated treasury function to watch lovingly over my assets, liabilities and obligations and cash position, and they will diligently execute such hedges and perform such currency conversions as I need to pay the principal and interest I owe you and any other of my creditors. It is their job to make sure I have sufficient euros to do it.
+Being an [[OG]] in the international capital markets, in the course of my business I will truck in all kinds of flakey currencies, [[payment in kind|payments in kind]] and weird securities — but I will still promise to repay my loan from you, in euros. That is my resting, fundamental contractual obligation. Euros.
-That much should not really be a surprise: I borrow in euros, I repay in euros. End of.
+Now, being an [[OG]], I will have a sophisticated treasury function to watch lovingly over my cashflows, and it will execute such hedges currency conversions and otherwise work whatever magic I need to meet my outgoings, including the principal and interest I owe you.
-All this goes out the window if I go ''[[titten hoch]]'', though. At this point my treasury team would find it hard to execute the necessary hedges and conversions, even if they ''weren’t'' wandering around, dazed, outside the building, woozily clutching [[Iron Mountain]] boxes full of gonks, deal toys, [[Tombstone|tombstones]], pilfered stationery and personal effects. But they will be. This is the whole of the law.
+This much should not really be a surprise: I borrow in euros, I repay in euros.
-Now the receivers and administrators will be in, busily calling in, converting and collecting my remaining assets, cash balances and figuring out how to best sort out creditors, of which you are one. These might not all be in euros, me being a capital markets OG and everything. So there is a disaster scenario in which a failed, or failing, debtor — me — has no euros and instead offers up cash in ''non-contractual'' currencies, by way of full or partial satisfaction of what I owe.
+But all this goes out the window if — heaven forfend, and all that — I go ''[[titten hoch]]''. At this point my treasury team would find it hard to execute the necessary hedges and conversions, even if they ''weren’t'' wandering around outside the building, woozily clutching [[Iron Mountain]] boxes full of gonks, deal toys, [[Tombstone|tombstones]], pilfered stationery and personal effects. But, alas and alack, they ''will'' be. ''This is the whole of the law.''
-No, that isn’t what the contract preferred, but it is a fact of life, so the contract ''allows'' it. That is what the [[currency indemnity]] does. It gudgingly, grants that this sort of thing can happen and puts some parameters around what goes down in such a case. This will boil down to the following:
+Now the receivers and administrators will busily be calling in, converting and collecting and liquidating my remaining assets, cash balances and generally figuring out how to best sort out my creditors, of which you are but one.  There is a disaster scenario in which a failed, or failing, debtor — me — has no euros and instead offers up cash in ''non-contractual'' currencies, by way of full or partial satisfaction of what I owe. This isn’t Local courts which administer my insolvency might oblige them to do this.
+No, that isn’t what the contract preferred, but it is a fact of life, so the contract ''allows'' it. That is what the [[currency indemnity]] does. It gudgingly, grants that this sort of thing can happen and puts some parameters around what goes down in such a case.
+====Components of a normal currency indemnity====
+This will boil down to the following:
 '''Limited discharge''': A non-contractual currency will only discharge the debt to the value in the contractual currency that the creditor achieves by converting it into the contractual currency in the market on reasonable terms.
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 '''Reimburse excess''': If there is an excess — happy days, right? — the creditor should promptly return it. Ie the non-currency payment is only am unconditional payment to the extent of the debt. This is quite a complicated ontological concept which it is best not to think about, so call this an absolute payment with a contingent reimbursement right.
-'''Court judgments''': the above goes even if the payment is the result of an award in a court. (Local courts have a habit of awarding damages in their own local currency and refusing to use foreign currencies, especially those with aspirations to extraterritorial domination like USD and, well, euro).
+'''Court judgments''': If you are imprudent to litigate with a capital markets OG in its own jurisdiction, and you are awarded damages in a non-contractual currency (the [[JC]] is no litigator but is given to understand local courts can do this sort of thing, whether the victor likes it or not), then the same issue arises, and it is treated the same way.
+'''Separate indemnities''':  Just to bring home the point, if accepting the non-contractual currency ''does'' somehow operate to undermine or waive the primary obligation to pay in full in the contractual currency, then the obligations created by the currency indemnity clause stand as separate indemnity payments. (This, by the way, is “[[indemnity]]” in its narrow sense, as “a unilateral obligation to pay a defined sum of money not by way of recompense or damages for some other failure, but just because you have agreed to pay it” and not in its “Help! Help! We are all going to die under a [[Cardozo indeterminacy|Cardozan]] excess of indeterminate liability” sense.) This is probably most important in the context of judgment debts, where the debtor might (rightly) complain that it had no choice but to pay in the local currency, and therefore try to argue that that local currency judgment, if paid in full, should discharge the debt ad to hell with the vagaries of the foreign exchange markets. The currency ''indemnity'' should put, er, paid to that argument by constructing an entirely independent obligation to pay the balance.
-'''Separate indemnities''':  Just to bring home the point, if accepting the non-contractual currency ''does'' somehow operate to undermine or waive the primary obligation to pay in full in the contractual currency, then the obligations created by the currency indemnity clause stand as separate indemnity payments. (This, by the way, is “[[indemnity]]” in its narrow sense, as “a unilateral obligation to pay a defined sum of money not by way of recompense or damages for some other failure, but just because you have agreed to pay it” and not in its “Help! Help! We are all going to die under a [[Cardozo indeterminacy|Cardozan]] excess of indeterminate liability” sense.)
+'''No requirement to actually convert''': You may see a rider, as in the ISDA, that one should not have to ''actually'' convert the currency you received at a loss to prove a loss: it is okay to keep your money in the tendered currency and not crystallise the position.