12 USC 5804 – Continuity of contract and safe harbor
(a) In general
A Board-selected benchmark replacement and the selection or use of a Board-selected benchmark replacement as a benchmark replacement under or with respect to a LIBOR contract, and any benchmark replacement conforming changes, shall constitute—
(1) a commercially reasonable replacement for and a commercially substantial equivalent to LIBOR;
(2) a reasonable, comparable, or analogous rate, index, or term for LIBOR;
(3) a replacement that is based on a methodology or information that is similar or comparable to LIBOR;
(4) substantial performance by any person of any right or obligation relating to or based on LIBOR; and
(5) a replacement that has historical fluctuations that are substantially similar to those of LIBOR for purposes of the Truth in Lending Act (15 U.S.C. 1601 note) 1 and regulations promulgated under that division.2
(b) No impairment
Terms Used In 12 USC 5804
- Amendment: A proposal to alter the text of a pending bill or other measure by striking out some of it, by inserting new language, or both. Before an amendment becomes part of the measure, thelegislature must agree to it.
- Contract: A legal written agreement that becomes binding when signed.
- Damages: Money paid by defendants to successful plaintiffs in civil cases to compensate the plaintiffs for their injuries.
- Equitable: Pertaining to civil suits in "equity" rather than in "law." In English legal history, the courts of "law" could order the payment of damages and could afford no other remedy. See damages. A separate court of "equity" could order someone to do something or to cease to do something. See, e.g., injunction. In American jurisprudence, the federal courts have both legal and equitable power, but the distinction is still an important one. For example, a trial by jury is normally available in "law" cases but not in "equity" cases. Source: U.S. Courts
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Truth in Lending Act: The Truth in Lending Act is a federal law that requires lenders to provide standardized information so that borrowers can compare loan terms. In general, lenders must provide information on Source: OCC
Neither the selection or use of a Board-selected benchmark replacement as a benchmark replacement nor the determination, implementation, or performance of benchmark replacement conforming changes under section 5803 of this title may—
(1) be deemed to impair or affect the right of any person to receive a payment, or to affect the amount or timing of such payment, under any LIBOR contract; or
(2) have the effect of—
(A) discharging or excusing performance under any LIBOR contract for any reason, claim, or defense (including any force majeure or other provision in any LIBOR contract);
(B) giving any person the right to unilaterally terminate or suspend performance under any LIBOR contract;
(C) constituting a breach of any LIBOR contract; or
(D) voiding or nullifying any LIBOR contract.
(c) Safe harbor
No person shall be subject to any claim or cause of action in law or equity or request for equitable relief, or have liability for damages, arising out of—
(1) the selection or use of a Board-selected benchmark replacement;
(2) the implementation of benchmark replacement conforming changes; or
(3) with respect to a LIBOR contract that is not a consumer loan, the determination of benchmark replacement conforming changes,
in each case after giving effect to the provisions of section 5803 of this title; provided, however, that in each case any person (including a calculating person) shall remain subject to the terms of a LIBOR contract that are not affected by this division and any existing legal, regulatory, or contractual obligations to correct servicing or other ministerial errors under or with respect to a LIBOR contract.
(d) Selection
The selection or use of a Board-selected benchmark replacement or the determination, implementation, or performance of benchmark replacement conforming changes under section 5803 of this title shall not be deemed to—
(1) be an amendment or modification of any LIBOR contract; or
(2) prejudice, impair, or affect the rights, interests, or obligations of any person under or with respect to any LIBOR contract.
(e) No negative inference
Except as provided in subsections (a), (b), or (c)(1) of section 5803 of this title, nothing in this chapter may be construed to create any negative inference or negative presumption regarding the validity or enforceability of—
(1) any benchmark replacement (including any method for calculating, determining, or implementing an adjustment to the benchmark replacement to account for any historical differences between LIBOR and the benchmark replacement) that is not a Board-selected benchmark replacement; or
(2) any changes, alterations, or modifications to or with respect to a LIBOR contract that are not benchmark replacement conforming changes.