Material Adverse Effects: Insights From The High Court Of Justice

Uncertainty caused by macroeconomic risks such as the COVID-19 pandemic, severe weather events and geopolitical tensions has given rise to increased judicial consideration of contractual terms apportioning risk in the negotiation and execution of commercial transactions. A common mechanism for apportioning such risks in the context of M&A transactions are "Material Adverse Event" Or "Material Adverse Change" (MAE) clauses. Once the subject of minimal judicial consideration, the evolving body of jurisprudence on MAE clauses gained another chapter in the recent decision of the English High Court of Justice in BM Brazil & Ors v Sibanye BM Brazil & Anor (Sibanye), which dealt with termination of an M&A transaction involving certain Brazilian mines.