The most recent EU summit took place in late June, leading to an agreement among leaders to create a joint banking supervisory body for the Eurozone and implement a planned bailout fund for struggling banks.  While analysts have applauded these steps as key achievements toward steadying markets in both the short and long term, questions remain with respect to the future of the Eurozone and its impact on existing and new transactions for Canadian companies.

Preparing for the unknown future of the Euro requires an understanding of the factors that may affect your business. There are various potential outcomes to consider:  Will one or more member states pull out of the Euro?  If a member state pulls out of the Euro and adopts a new currency, how may this affect existing transactions?  Will obligations expressed as payable in the Euro be re-denominated into a new currency?  What can be done to secure and improve the situation for future transactions?

While the answers to these questions will depend on how events play out in the Eurozone, preparation is essential.  Understanding the range of circumstances under which a member state can pull out from the Euro (i.e., removal or consensual departure), the type of legislation that may be passed to deal with the issue, the terms of the transaction in question, and the courts whose jurisdiction the transaction falls under, are important safeguards to ensuring as much predictability and stability as possible.

European commission building; Brussels - Belgium