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Coronavirus – Force majeure in financial services – Sweden

  • Sweden
  • Banking and finance
  • Coronavirus - Country overview
  • Coronavirus - Force Majeure issues
  • Financial services



In the wake of COVID-19, force majeure can be invoked to obtain relief under certain contracts. In this briefing, we discuss if it is a good idea and certain considerations borrowers and financial services customers should make.

The impact of COVID-19 is developing fast across the globe and across industries. Things are changing daily. Just how long and severe the impact of the global spread of the coronavirus will be is unknown. The impact on a business is also very difficult to predict as is the extent to which steps being taken around the globe to ease the impact for many businesses. The Swedish government has inter alia announced another extensive aid program; some of them targets businesses in general whereas others targets specific businesses and markets.

Is it a good idea to invoke force majeure?

For this reason, the force majeure concept has been in the spotlight and addressed by many these days. But, is it always a good idea to invoke the impacts of COVID-19 on your business to obtain relief under a contract? Not an easy question to answer. In any event, before a borrower and other customers to financial services contracts argue that a force majeure event is at hand, the terms of its contractual arrangements with banks, creditors and other providers of financial services should be considered.

The meaning of force majeure varies in contracts and under substantive laws across the globe. Common features are however that the relevant event or events shall be unforeseen, outside the control of the contracting parties, a significant degree of impact and/or render the contractual performance impossible or at least significantly hindered. In summary, a true impediment to the contractual performance due to unforeseen external forces is generally required.

Coronavirus: force majeure and other contractual interfaces

It may be worth checking if loan documentation contains as events of default (i) the occurrence of a force majeure event over a certain time period under other contracts (e.g. supply agreements, construction contracts or concession agreements) or (ii) the suspension of performance by any contracting counterparty under other contracts. Such events of default are not commonly found in standard loan agreements but may be found in documentation for development and project financings.

Project financings might also be sensitive to debt service defaults if time is extended for a force majeure event under an underlying project document. Parties should consider the contractual links between their different contracts and the potential impact that the loan financings may have as a result.

Coronavirus and the MAC – Material Adverse Change clause

It is quite common for loan financings to contain an event of default on material adverse change, often referred to as the “MAC” clause. General terms and conditions, e.g. terms based on the Swedish Bankers Association, normally include a broadly worded acceleration right for the lender in such event. The actual wording of the MAC clause is needless to say important in the context of COVID-19 as there are many varieties of MAC clauses.

However, parties that announces or strongly argue that their business or financial positions has been materially adversely affected by impacts of COVID-19 or temporary changes of laws and regulations for reliefs under other contracts should be mindful that it may also serve as ground of a default under the terms of a financing agreement. A party should therefore consider that maintaining a strong position that a Force Majeure event has occurred in relation to one contract may bite that party in the tail under a financing agreement.

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