Court of Justice Opinion of the European Union confirms legal tender status for euro banknotes and coins

calendar iconOct 1, 2020

In the “Opinion of the Advocate General (Giovanni) Pitruzella”, published by the Court of Justice of the European Union (CJEU) on September 29th, the status of banknotes and coins as legal tender as defined in Article 128(1) TFEU has been confirmed.

In addition, the Opinion underscores that monetary policy regarding “the creation and functioning of the single currency, a legislative dimension relating to that single currency, which comprises the definition and regulation of its status and legal tender” (143) is the EU’s exclusive competence. Only currency issued by a central bank is legal tender, a position also expressed by Cash Matters last year in its study Virtually Irreplaceable: Cash as Public Infrastructure: “[…] modern economies, including the Economic and Monetary Union, are based on ‘fiat money’. This is money that is declared legal tender and issued by a central bank […] Historically, the most important form of money has been the physical form of cash (banknotes and coins), the ultimate expression of the monetary sovereignty of the State” (79, 81)

“Historically, the most important form of money has been the physical form of cash (banknotes and coins), the ultimate expression of the monetary sovereignty of the State” (81)
"Advocate General Giovanni PitruzellaOpinion of the CJEU

At the same time, Member States can “adopt measures” that, if they do not “constitute rules on the legal tender status of the euro”, limit the use of cash for the "payment of […] obligations of a private or public nature.“ (119) These measures have to take into account, however, “the social inclusion element of cash for the vulnerable people.” (166)

The trigger for the CJEU’s preoccupation with cash and its status as legal tender is a lawsuit brought on by German journalist and author Norbert Häring. In 2016, Häring sued the Hessische Rundfunk (Hessia Broadcasting) because the institution refused to accept the payment of his radio and television licence fee in cash. The case went through several instances and ended up at the Bundesverwaltungsgericht (Federal Administrative Court) which referred it to the CJEU because European jurisdiction takes precedence over individual member state’s jurisdiction in matters relating to currency policy.

The meaning of cash as legal tender for EU citizens

The Opinion cites the Commission Recommendation 2010/191/EU of 22 March 2010 on the scope and effects of legal tender of euro banknotes and coins as a framework (10). In a nutshell. these are the defining criteria for legal tender as laid out in the Recommendation:

- mandatory acceptance everywhere, acceptance at full face value, power to discharge from payment obligations

- acceptance of payments in euro banknotes and coins, including high denomination banknotes, in retail transactions as a rule; the only exception being the “good faith principle” (for example the retailer has no change available)

- absence of surcharges imposed on the use of euro banknotes and coins, i.e no fees when using cash (11)

"There is “a direct link between cash and the exercise of fundamental rights does exist in cases where there is a social inclusion element of the use of cash” (135)
"Advocate General Giovanni PitruzellaOpinion of the CJEU

Potential limitations of cash usage by Member States

It is within each Member State’s sovereign right to pass regulations that limit cash as a mean of payments “for public reasons” and as long as they do not clash with the EU’s exclusive right on regulation regarding the legal tender status of the euro : “[…] any limitations on payments in notes and coins, established by Member States for public reasons, are not incompatible with the status of legal tender of euro banknotes and coins, provided that other lawful means of payment for the settlement of monetary debts are available.” (6, 111). “Individual freedom”, according to the Opinion can also be a reason that “may justify a waiver of the (non-absolute) mandatory acceptance by creditors of euro banknotes and coins” (116). And a third one that lies within the sovereignty of Member States is contractual freedom: “[…] the concept of legal tender in EU law, as regards banknotes and coins, entails a general obligation in principle of acceptance of cash by the creditor for the settlement of the monetary debt, but that this obligation is not absolute, as it may be waived in accordance with the contractual freedom of the parties.” (112)

No absolute right to payment in cash in all cases

In general, “ the Union does not provide for an absolute right to payment in cash in all cases” (133). This also because “proportionality” has to be taken into consideration, a major principle of EU law, which aims to only regulate what is absolutely necessary in order to achieve the stated objectives. The right to pay in cash is “subjective position […] which certainly does not feature in the catalogue of fundamental rights guaranteed by EU primary law. [The use of cash] is not generally necessary for the enjoyment of those fundamental rights, which can be achieved through the use of forms of money or means of payment other than cash.” (133, 134) Every EU citizen has the right to open a bank account and settle payments through transfers or credit and debit cards. However, “a direct link between cash and the exercise of fundamental rights does exist in cases where there is a social inclusion element of the use of cash.” (135)

Legal tender status not necessarily restricted to cash

Pitruzella also points out that this legal tender concept refers to the euro as the single currency, that “currency”, however, is not specified. “[…] The concept that appears to be the closest to the concept of currency is that of ‘funds’, […] indicating that they consist of ‘banknotes and coins, scriptural money or electronic money’”(76). “In any event, no matter what form it takes (physical, cash or non-physical), money – represented in the euro area by the single currency, the euro – exists and can, in all its forms, serve the abovementioned three functions [unit of account; means of payment (or exchange); store of value] including, for the purposes of the present case, as a means of payment.” (83) The Advocate General later mentions that it also lies within the EU’s power to assign the status of legal tender to “other forms of currency that are not necessarily physical.”(96)

“Measures restricting the use of cash as a means of payment should […] take into account the social inclusion element of cash as a means of payment for those vulnerable people” (137)
"Advocate General Giovanni PitruzellaOpinion of the CJEU

Cash is fundamental for social inclusion

Despite the above-mentioned exceptions and blurs when it comes to the mandatory acceptance of cash because of its status as legal tender, Pitruzella underlines that these exceptions should be few and far between because only cash guarantees social inclusion of the unbanked and underbanked in the European Union, “a significant number of vulnerable people who still do not have access to basic financial services”. (4) For these, “cash is the only form of accessible money and thus the only means of exercising their fundamental rights linked to the use of money. Measures restricting the use of cash as a means of payment should therefore take into account the social inclusion element of cash as a means of payment for those vulnerable people […]. This social inclusion element must also be taken into account when analysing the proportionality of those measures.” (137, 138)

Last Updated: Jan 17, 2024