Law firms are still seeing activity from concerns around the stability of the European currency following the Greece and Italian debt crises.

Norton Rose partner Tessa Hoser says many Australian companies are seeking legal advice on how they can protect themselves, or limit exposure to losses, despite the new financial aid program. “Financial institutions’ clients and those in industries such as energy, transport and technology are all seeking legal certainty to protect themselves from any ongoing fallout from the problems in the Eurozone,” she said. “They want to know what measures they can put in place to protect their assets and limit cashflow threats.”

According to Hoser, companies that have contracts based in Euros or own assets in the Eurozone need to take stock. “There are some core legal issues around disruption to the Euro. They include the law governing the contract, where payment is to be made, where the goods or assets are located and whether a supplier or lender can enforce its rights in that country,” she said.

Allen Arthur Robinson partner Alan Maxton told ALB he saw a surge in activity from clients concerned about these issues late last year when the market was going through a surge of refinancing. “Because of the general concerns about the Euro, and the general liquidity concerns, there was a lot of refinancing in the market in the last few months of last year,” said Maxton. “When parties were putting in place those refinancings they took the opportunity to agree on what would happened if the Euro no longer existed.” 

Maxton says there was also concern about contracts or loans that related to assets in a European country, and what would happen if that country were forced out of the Euro. “They would have to reintroduce their own currency and they would need to convert the value of the Euro to that currency. This could result in a currency mismatch,” he said. “Some borrowers were considering their own position with existing facilities, to try and agree what a sensible framework would be if that ever happened.”

Since then he says there is less concern around the Euro, however, clients are still taking it into account with new contracts. “The rush to put in place new facilities happened last year, but as people enter into contracts I think it will become more standard to include those provision in contracts. Now that the issue has been raised clients will want to deal with it in advance.”