It is unequivocally stated in the Warsaw Convention (art. 22) that the monetary limitations upon the liability of the air carrier for death injury loss or damage are expressed in terms of “… the French franc consisting of 651/2 milligrams gold of millesimal fineness 900”.

However, apart from asserting that “these sums may be converted into any national currency in round figures” the treaty text affords no guidance as to how the conversion should be effected in any particular case. The 1955 Hague Protocol amendments did add the following additional words of limited guidance:

“Conversion of the sums into national currencies other than gold shall, in case of judicial proceedings, be made according to the gold value of such currencies at the date of judgment”.

Nevertheless even this qualification begged the question as to how the “gold value” yardstick was to be ascertained.

Further explanation was perhaps unnecessary in 1929—or even in 1955—since the gold franc described (and named after a French Prime Minister) was clearly a unit of account. Dealings in gold were regulated by an inter-governmental official rate and conversion into a given currency could readily be effected by reference to the gold standard. Commercial transactions in gold were either proscribed or strictly limited. There was in truth no market in gold. It was not a commodity available to private investors.

The Poincare franc was therefore adopted as the monetary unit for the purposes of the Convention as a unifying influence—intended to provide stable and consistent limits of liability not subject to the vagaries of fluctuating exchange rates as between national currencies.

In the late 1960s, however, many governments began to evolve a bifurcated approach to dealings in gold. While maintaining the official price for inter-governmental transactions a gold commodity market was permitted to develop in parallel. Increasingly the market price outpaced the official price. In 1973 the latter stood at U.S. $42.22 per ounce while the former reached U.S. $200. Eventually, in April, 1978, by means of the Jamaica Accords, the official price structure was swept away by the International Monetary Fund. In its place the IMF chose the Special Drawing Right (a weighted unit of account reflecting a spread of some 16 major world currencies—first introduced in 1967) as the basis for financial dealings between member States.