Eurozone Bulletin: Do I need a contingency plan?
16 December 2011
The gravity and possible consequences of the different scenarios being openly discussed by politicians, businesses and regulators inside the eurozone and elsewhere mean that the potential impact of the eurozone crisis cannot be ignored. During any time of crisis, businesses should develop contingency plans to explore and prepare for events which, whilst perhaps unlikely, may significantly impact them.
This bulletin focuses on the identification of potential exposures a business may have if a eurozone member were to exit the eurozone and/or the EU and the practical steps that may be used to manage and minimise the potential impact of eurozone exposure.
Your key questions answered:
- What are the possible outcomes of the eurozone crisis?
- Is there a legal framework for a eurozone exit?
- What are the exit routes for a eurozone member state?
- How would a eurozone exit occur?
- Can a state change its currency overnight?
- How might euro denominated accounts and contracts be affected by an exit?
- In the event of an exit, would euro denominated contracts with a connection to the exiting member state continue to be valid and binding?
- What is the continuity of contracts principle?
- How do you determine redenomination risk?
- Would all euro denominated bonds issued by an exiting member state be expected to be redenominated into any new national currency?
- What is the principle of lex monetae?
- Would additional terms need to be implied into a redenominated contract?
- When would the redenomination of euro obligations occur and at what rate?
- Would the unilateral exit of a eurozone member state from the eurozone impact the redenomination risk analysis?
- Would enforcement in an exiting member state be impacted?
- Do I need a contingency plan?
- How might I be exposed?
- How can I manage my risk of exposure?
For further information please contact your regular Linklaters contact or click here for a list of Linklaters lawyers in various jurisdictions who will be able to help with your eurozone related queries.
