ARRC Proposes New York State Legislation For U.S. Dollar LIBOR Contracts

The Alternative Reference Rates Committee ("ARRC") proposed legislation for New York State, designed to provide clarity for legacy financial instruments and contracts that have no, or inadequate, fallback provisions addressing the cessation of LIBOR. The legislation is narrowly focused on legacy contracts and instruments whose fallback language is most likely to lead to disputes or unintended economic consequences.

Where a contract has no fallback provisions or falls back to a LIBOR-based rate (such as the last available LIBOR rate), the legislation would impose the ARRC's recommended replacement benchmark rate (or "SOFR") and spread. For contracts where one party is given discretion to choose a replacement benchmark, the legislation would provide a safe harbor for choosing the ARRC-recommended benchmark rate and spread. The legislation also would rescind legacy fallback provisions that require a party to conduct a poll for interbank lending rates. The