There is no precedent for a country leaving the Eurozone, and speculation continues as to how the crisis will unfold, and what the consequences would be of an exit of a member. There is uncertainty around various scenarios, not least because there is no existing legal mechanism in the EU Treaties for any country unilaterally exiting the Euro or the EU (other than pursuant to a 2-year process), and also because state insolvency is an unregulated area of law. 

The outcomes that could follow a member state leaving the Eurozone include:

  • Legal effect of a unilateral withdrawal from the EU or the Euro in breach of treaty obligations
  • Impact of redenomination of a member state’s currency on Euro payment obligations
  • Practical implications of redenomination on Euro-configured integrated and automated trading systems
  • Consequences of switched currency devaluation on LTVs and associated enforcement issues
  • Choice of law and jurisdictional issues if a member state passes defensive exit legislation (such as introducing exchange controls and/or claims moratoria)
  • Potential defaults under CDS and other structured products triggered by various potential Eurozone developments
  • Implications for foreign law and local law bonds issued by the exiting member state
  • Review of standard form contracts and key contracts with suppliers/licensors of software and other systems
  • Application of private law doctrines of frustration, impossibility of performance and statutory illegality
  • Availability of public international law remedies under applicable BITs or the Energy Charter for energy related matters
  • Sovereign immunity issues
  • Credit rating downgrades