4.4 Prospectus 111(such as within 30 days after the lender’s written notice to the borrower), the lender will
have a right to determine the new interest rate on the basis of its increased costs.
As a result of the drying-up of the interbank credit market in 2008, many European
banks could not refinance at EURIBOR. This increased their costs and made them invoke
the market disruption clause. In Germany, this raised questions about the applicability of
§ 315 BGB.^110
The purpose of the illegality clause is to ensure that the lender is relieved of its ob-
ligation to advance funds, if advancing the funds becomes illegal for the lender,
and the borrower is obliged to repay the loan in full, if the loan becomes illegal for
the lender.^111
Remedies available to the lender. The most important remedy available to the
lender in the event of default by the borrower is acceleration of the credit and ter-
mination of the agreement. The borrower will try to ensure that the agreement
provides for a grace period.^112
Governing law, submission to jurisdiction, and currency indemnity clauses.
Choice of law and choice of forum both influence legal risk (see Volume II). The
choice of the currency of account (Volume II) and the forum clause is often com-
plemented by a currency indemnity clause. According to the laws of the forum, a
monetary obligation might be discharged in local currency (Volume II) instead of
the currency of account. Without a currency indemnity clause, the borrower might
have an economic incentive to delay paying a judgment to take advantage of a de-
preciation in the value of the judgment currency in relation to the currency of ac-
count.^113
4.4 Prospectus............................................................................................
The issuing of loan securities will sometimes require the publication of a prospec-
tus that has been approved by the competent authority. Prospectus rules will be
discussed in the context of shareholders’ capital in more detail (section 5.9.3).
Some general remarks can nevertheless be made.
The Prospectus Directive provides that “Member States shall not allow any of-
fer of securities to be made to the public within their territories without prior pub-
lication of a prospectus”^114 and that “no prospectus shall be published until it has
been approved by the competent authority of the home Member State”.^115
The Prospectus Directive covers certain loan instruments. In order to ensure in-
vestor protection, the Prospectus Directive applies to equity securities and non-
(^110) See Nadejda Kysel, Bankenkrise trifft die Kunden, FAZ, 22 October 2008.
(^111) See Buchheit LC, op cit, p 49. For German law, see also § 275(1) BGB (Unmöglich-
keit); Diem A, op cit, § 16.
(^112) Diem A, op cit, § 22 number 65.
(^113) See Buchheit LC, op cit, p 113.
(^114) Article 3(1) of Directive 2003/71/EC (Prospectus Directive).
(^115) Article 13(1) of Directive 2003/71/EC (Prospectus Directive).