Russia / Ukraine conflict – what are the implications for your corporate finance operations?


Early on Thursday, February 24, 2022, it was reported that Russian forces had launched a military operation in Ukraine. Although announced, these developments mark a significant turning point in the conflict, with repercussions that will be felt in Europe and beyond.

So what impact could this have on your corporate finance operations and what should you consider within your existing finance arrangements? In this note, we consider sanctions, MAC/MAE clauses, force majeure, frustration, default events and other implications arising from the situation.

This briefing covers the situation as of February 28, 2021.


Various sanctions were initially announced by the UK, EU, US and others, as part of Russia’s recognition of the so-called Donetsk People’s Republic and Lugansk People’s Republic regions. in Ukraine. As the situation escalated, further coordinated and far-reaching sanctions were imposed against Russia and Belarus. Russia may well retaliate to these sanctions by imposing counter-sanctions or blocking its own measures.

Transactional impact and recommendations:

  • Due Diligence – Assess the company’s geographic ties, affiliates, counterparties, directors and other related parties. Lenders/banks can increasingly focus on the impact of this conflict on a company’s business in their due diligence procedures. Be prepared for this and factor it into the trading schedule.
  • Perform a risk analysis – Could additional sanctions affect your ability or that of your counterparties to perform contractual obligations?
  • Public Disclosures – Review your public disclosure, including risk factors, and determine if it needs to be updated to comply with legal or regulatory obligations. When carrying out this exercise, look beyond the specific impact of sanctions and consider broader potential impacts of the conflict, such as the increased risk of cyber-offensives/cyber-attacks.
  • Representations and Warranties – Lenders/banks may request changes to the sanctions representations and warranties in the contractual documentation to reflect the evolution of international sanctions. Do representations and warranties need to be adjusted, in light of due diligence and public disclosures? New funding agreements may include more detailed and nuanced penalty provisions than previous agreements.
  • Third Party Sanctions Confirmations – The wording of Sanctions Confirmations may be updated by regulators, exchanges and clearing systems, among others, to reflect the imposition of new international sanctions.
  • Allocation of risk – In a volatile market, parties will need to consider the allocation of risk between signing and closing, through force majeure clauses and MAC and MAE provisions (see more on this below). below). This will be particularly relevant when settlement takes place over a long period of time.
  • Use of profits – Ensure that profits are not used for activities and purposes prohibited by the sanctions; and assess the risk of potential blockages in the payment chain in advance, to ensure a smooth closing.

For more information on the sanctions stance, please see the sanctions section of the Freshfields Risk and Compliance blog.

In addition to taking stock of the potential impact of sanctions that have already been or are expected to be imposed, see our guide on how to prepare for possible sanctions against Russia.

MAC/MAE clauses

Material Adverse Change (Mac) / Material Adverse Effect (MFA) allow parties to terminate, stop or accelerate agreements following a MAC/EAM. They normally require a high threshold to be met before they can be invoked (they may be specifically worded that way or, for more general provisions, tend to be interpreted that way).

Transactional impact and recommendations:

  • A MAC provision relating to the activities and/or operations of a company, on standard market conditions, would generally only be triggered if a MAE on the activities of a company is caused (usually taking the group as a whole, and often with other qualifications).
  • Determining whether a MAC/MAE has occurred is highly subjective and, for relational and reputational reasons, is often considered a last resort. Lenders/banks have always preferred to rely on other contractual provisions that can be triggered by a financial deterioration in a company’s business, such as a breach of a financial covenant or a payment default.
  • Administrators may be required to confirm that no MAE has taken place, in particular in the context of a request to draw on an RCF or CAPEX facility. Due to the current conflict, companies in certain jurisdictions and sectors will need to think carefully about this and monitor the impact on liquidity.

force majeure

Force majeure clauses discharge part of the consequences of a breach of an obligation when this breach is due to the occurrence of an event beyond its control and may allow the termination of the contract without liability. Unlike the frustration position (see below), a force majeure clause can cover existing or foreseeable events. These are not usually found in loan documents, but are standard in modern bond and ISDA documentation (i.e. the 2002 ISDA Master Agreement rather than the 1992 version).

Transactional impact and recommendations:

Obligations :

  • A situation or event known at the time of the conclusion of a subscription contract, but which subsequently worsens, could potentially constitute a case of force majeure giving the managers the right to terminate the subscription contract between the signature and fence.
  • According to ICMA’s Force Majeure clause, such an event should constitute, in the opinion of the lead manager, “a change in national or international financial, political or economic conditions or in exchange rates or exchange controls”. and be likely to materially impair the success of the offering and distribution of the Bonds or of the trading of the Bonds in the secondary market.
  • Although it is unlikely to be exercised, issuers should consider the ramifications of the application of force majeure if they consider issuing bonds.


  • The force majeure right of termination in the ISDA 2002 Master Agreements may not be triggered until after giving effect to any other applicable provision, alternative or remedy provided, and only applies if the party seeking to availing oneself of the right of termination could not, after having used all reasonable efforts (but without any obligation to suffer material loss) to overcome the event in question.
  • The force majeure termination event can only be triggered when a payment or delivery in the context of a derivatives transaction is effectively prevented following the occurrence of the event concerned, or would have been prevented on the day on which the event is called. It does not depend on the solvency/solvency of the counterparties and the capacity, from a credit point of view, of the counterparty to honor its obligations.


A contract may be terminated for frustration if something happens after it is formed, which is not through the fault of either party, which renders it materially or commercially impossible to perform, or renders the obligation of a party radically different from that contracted when the contract was entered into.

The doctrine is narrow and it might not be available if the contract expressly or implicitly provides for the risk of events occurring. Whether a party can invoke frustration in the wake of the Russian-Ukrainian conflict may depend on the duration and intensity of the disruption.

Transactional impact and recommendations:

In a financing context, it is difficult to see the circumstances in which financing agreements would prove frustrated, but this could be relevant for contracts in the broader business of a company.

Event of default

Whether default events in financing agreements should be considered in light of the Russia/Ukraine dispute may depend on the wording included and the actual or potential impact of the dispute on each individual company within ‘a group.

Transactional impact and recommendations:

  • At the level of existing financing, review your cases of default (in particular cases of illegality, cessation of activity or expropriation if applicable), to see if there is a risk of triggering them. In some financing contracts (eg, the ISDA Master Agreement), relevant triggers of this type may be expressed as termination or similar events, rather than default events.
  • Assess the impact of this on other funding arrangements – is there a risk of cross default or cross acceleration?
  • Are there capillary triggers in local or ancillary funding that could run the risk of triggering cross-defaults in overall group funding?

Wider impact and other considerations

In addition to the main themes and provisions discussed above, there are a number of other considerations to keep in mind:

  • Refinancing and Maturity Profiles – If this crisis is likely to impact your current or impending funding, it may be helpful to open lines of communication with counterparties early to anticipate issues where possible and avoid costly delays.
  • Consents and Waivers – Evaluate early on the consent thresholds required for any waivers that may be required. Keep in mind that the time it takes to get waivers can vary from bank to bank, depending on how quickly they can convene credit committees and get internal approval.
  • Coverage – What termination trigger risks exist in your ISDAs that could be triggered by events in your group that could lead to a termination of coverage or an inability to enter into new coverage? Would this trip be provisioned in other financial arrangements?

The uncertainty surrounding this escalation of tensions could also lead to widespread financial market volatility (fluctuations in equity and bond markets, rising oil and gas prices and/or supply restrictions, fluctuations in commodity prices raw materials, rising inflation), which could have an impact on market access and pricing in financing transactions. Parties will need to be nimble and responsive as periods of stability lead to the opening of a market window.

We will continue to monitor developments closely and provide further updates as necessary. The position is changing rapidly and the impact on all businesses and institutions will invariably be specific and tailored. If you have specific questions, contact your usual Freshfields contact for more detailed advice.

Contributions received by Laura Clark Jonessenior partner and Alice Dawson LoynesSenior Knowledge Lawyer.


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