1.  Description of the legislation
    1.  Is there a moratorium on loans legislation implemented in your jurisdiction?
    2. If no: Are there any ongoing discussions regarding a potential introduction of such measures?
    3.  What is the name of the relevant legislation (the “Relevant Act”)?
    4.  What is the duration of the measures (period of moratorium)?
    5.  Does the legislation provide for an extension of the period of moratorium?
    6.  Is the moratorium mandatory, or can each borrower opt out should they wish to simply continue payments, or opt in if they want to be protected by the moratorium?
  2. Parties and agreements affected by the Relevant Act
    1. Is the moratorium available for both corporate and consumer loans?
    2. Who are the affected Lenders?
    3.  Does it make a difference whether loans are granted by a foreign entity and governed by foreign law?
  3. Impact on the loan agreements
    1.  Is there a cut-off date with respect to loan agreements to which the Relevant Act will apply (e.g. not applicable to loan agreements entered into after the cut-off date)?
    2.  Does the moratorium apply to principal only, or also to interest and/or fees?
    3. Will the maturity of the loan automatically be extended by the moratorium period?
    4.  Are repayments and interest which have become due and payable under the contract before the Relevant Act has come into force covered by the moratorium?
    5. Will lenders be able to terminate a loan due to an event of default other than non-payment (e.g. breach of financial covenants)?

jurisdiction

Monaco
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1. Description of the legislation

1.1 Is there a moratorium on loans legislation implemented in your jurisdiction?

No mandatory rules applicable to a moratorium of loans (strictly speaking) have been taken, but mandatory and temporary stay measures have been implemented which may affect loan agreements.

1.2 If no: Are there any ongoing discussions regarding a potential introduction of such measures?

Not applicable.

1.3 What is the name of the relevant legislation (the “Relevant Act”)?

A specific and temporary law has been adopted on 5 May 2020 by the National Council (Monaco Parliament) in order to face the extraordinary circumstances of the COVID-19 crisis. This legislation, published in the Official Journal of Monaco on 15 May 2020, is named “Act No. 1.488 dated 11 May 2020 prohibiting unfair dismissal, making homeworking mandatory for the enabling positions and providing for other measures to deal with the COVID-19 epidemic” (the “Relevant Act”).

Article 1 of the Relevant Act provides that certain contractual clauses (penalty clauses, acceleration/termination clauses, forfeiture clauses) due to a default of a counterparty (including a borrower) within a specified period of time will not take effect if such default has occurred during the three-month suspension period (the “Suspension Period”) defined by Article 3 of Act No. 1.485 of 9 April 2020 suspending administrative deadlines for dealing with the COVID-19 virus pandemic.
Contrary to France where the starting point has been set as 12 March 2020, the Suspension Period in Monaco started on 18 March 2020 and ends on 18 June 2020. 

If, at the end of the Suspension Period, the borrower has not properly performed the relevant breached obligation, the clauses shall immediately take effect at the end of the Suspension Period. 
Moreover, the course of penalty payments (“astreintes”), and the application of penalty clauses included in loan agreements and which took effect before the beginning of the Suspension Period (18 March 2020), shall be suspended during such period.

In a nutshell, the creditor’s prerogatives will therefore be “paralysed” from 18 March to 18 June 2020. However, the Relevant Act established a protection for the mechanism provided by Article 61-1 of the Commercial Code:

  • in the case of non-payment of guaranteed debt on the due date, the creditor would retain the option to execute/realise the pledge under the usual conditions; but also
  • an unsuccessful margin call would still allow the creditor, where contractually provided for, to terminate the agreement and require an early repayment from the borrower and thus, subsequently, to execute their pledge.  

1.4 What is the duration of the measures (period of moratorium)?

The Suspension Period started on 18 March 2020 and ends on 18 June 2020 (i.e. pursuant to Article 3 of Act No. 1.485 of 9 April 2020 suspending administrative deadlines for dealing with the COVID-19 virus pandemic, at the end of the two-month period, a one-month period of suspension shall be added).
These exceptional derogations would apply retroactively to 18 March 2020 for a period of three (3) months from that date.

1.5 Does the legislation provide for an extension of the period of moratorium?

On 18 June 2020 (i.e. the end of the Suspension Period), this period may be extended if need be.

1.6 Is the moratorium mandatory, or can each borrower opt out should they wish to simply continue payments, or opt in if they want to be protected by the moratorium?

Since it is not, strictly speaking, a moratorium, borrowers remain under contractual obligation to continue payments during the Suspension Period. 

2. Parties and agreements affected by the Relevant Act

2.1 Is the moratorium available for both corporate and consumer loans?

The mandatory stay measures provided by Article 1 of the Relevant Act apply to all kinds of contracts (corporate and consumer loans). 

However, the Relevant Act’s provisions shall not apply to public procurement of the Principality of Monaco, the city and public establishments.

2.2 Who are the affected Lenders?

All lenders. 

2.3 Does it make a difference whether loans are granted by a foreign entity and governed by foreign law?

Pursuant to Article 28 of the Monegasque International Private Law Code, the provisions of this Code do not affect the application of the overriding mandatory rules (“loi de police”) and security laws which, by reason of their object, imperatively govern the situation regardless of the law designated by the conflict rules.

However, it is not mentioned in the Relevant Act whether these mandatory stay measures may be considered as an overriding mandatory rule. Because of this uncertainty, a judicial debate may intervene on this point. 

3. Impact on the loan agreements

3.1 Is there a cut-off date with respect to loan agreements to which the Relevant Act will apply (e.g. not applicable to loan agreements entered into after the cut-off date)?

The Relevant Act applies to all loans for which a default occurs during the Suspension Period starting 18 March 2020.

3.2 Does the moratorium apply to principal only, or also to interest and/or fees?

Penalty and termination/acceleration clauses are suspended, whether the default of payment relates to principal, interest or fees.

3.3 Will the maturity of the loan automatically be extended by the moratorium period?

N/A

3.4 Are repayments and interest which have become due and payable under the contract before the Relevant Act has come into force covered by the moratorium?

The measures adopted in Monaco only refer to contractual defaults that occur during the Suspension Period. However, since the application of Article 61-1 of the Commercial Code is not paralysed by the Relevant Act, a creditor may execute/realise the pledge under the usual conditions if a repayment became due and payable before the Relevant Act. 

3.5 Will lenders be able to terminate a loan due to an event of default other than non-payment (e.g. breach of financial covenants)?

Mandatory stay measures apply to breaches of all kinds of obligation. However, pursuant to Article 61-1 of the Commercial Code, an unsuccessful margin call would still allow a creditor, where provided for in the contract, to terminate the agreement and require an early repayment from the debtor and thus, subsequently, to execute their pledge.