The Butterworths Journal of International Banking and Financial Law has published the article ‘Between co-operation and collusion? Liability Management Exercises in Europe’ by Professor Suzanne Rab.
The article considers how UK and EU competition law principles might apply to US-style Liability Management Exercises or “co-operation agreements” between creditors and how any competition law risks might be managed.
Key points:
- Under UK and EU competition law, “co-operation agreements between creditors” may be expected to generally fall outside the scope of concerns regarding anti-competitive behaviour, as long as the primary purpose is to collectively negotiate with a debtor during a restructuring process and does not involve price fixing or market allocation among creditors, which would be considered anti-competitive.
- However, the recent rise in liability management exercises which rely on the majority of creditors within a class to bind a minority means that careful consideration should be given to ensure the agreement does not inadvertently restrict competition in a relevant economic market.
- The UK and EU competition authorities would assess the specific details of a creditor co-operation agreement against the scenarios absent the agreement, including the scope of the agreement, the level of co-ordination involved, and the potential and likely effect on competition within the relevant market.’
Click here to access the full article.