The Bumpy Reform of EU Interest Rates and the Rule of Law

Abstract

This contribution estimates the legal risk of contract discontinuity posed by the transition to new interest rates benchmarks through a comparative study of four national doctrines of force majeure and contract frustration. A pluralistic landscape emerges. Whereas discharge is likely in the United Kingdom, the chances of discontinuity become rather remote in Italy. A middle way solution is found in France or Spain. The lack of harmonization stems from the separation between EU governance, which is regulatory in nature and whose aim is to remove barriers to trade within the internal market, and the traditional legal systems of Member States. Such dichotomy results in an unjustified distinction among market players depending on the jurisdiction they operate on, amounting to a contravention of the principle of generality, a key pillar of the rule of law. This article contends that the EU legislator should pass a legislative provision to ensure a smooth and just transition to new interest rates benchmarks. Force majeure, contract frustration, interest rates, €STR, comparative private laws, internal market, rule of law, principle of generality, law and finance, free markets