It is very common, not only for finance documents but also other cross-border commercial contracts
which require interest to be paid by one party to the other, to use LIBOR as the benchmark interest
rate. There are a number of LIBOR settings, both in terms of currently and period, and all of them
are due to end by 2023.
All LIBOR settings will either cease to be provided by any administrator or no longer be
• Immediately after 31 December 2021 in the case of all sterling, euro, Swiss franc and
Japanese yen settings and the 1-week and 2-month US dollar settings; and
• Immediately after 30 June 2023 in the case of remaining US dollar settings.
The Financial Conduct Authority (FCA) issued an announcement in March 2021 in which they stated:
“The Bank of England and the FCA have made it clear over a number of years that the lack of an
active underlying market makes LIBOR unsustainable and unsuitable for the widespread reliance that
had been placed upon it”.
For contracts being negotiated now, an alternative to LIBOR will need to be considered. The bigger
problem is what will happen in the case of contracts which already include LIBOR as the benchmark
for the interest rate to be applied. Well-drafted contracts will contain provision for a fall-back
interest rate. Financial authorities have recognised this problem and are considering publishing
“synthetic” LIBOR rates. The FCA is proposing to consult on continuing sterling LIBOR settings and
Japanese Yen LIBOR settings. Depending on the wording of the contract, these “synthetic” LIBOR
rates could be used in contracts where the interest rate is benchmarked to LIBOR.
Based in London, Budd Legal is a niche law firm specialising in energy and infrastructure projects. Registered in the UK and experienced in international projects, we work with originators, developers and buyers of large-scale projects, including conventional and renewable energy. We also work on transactions in natural resources and oil and gas.
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