The federal appropriations bill that passed the U.S. House and Senate in March 2022 included a provision that finally codified what will happen with contracts reliant on the London interbank offered rate, or LIBOR. The law finds that:

• LIBOR is used as a benchmark rate in more than $200,000,000,000,000 worth of contracts worldwide.
• A significant number of existing contracts that reference LIBOR do not provide for the use of a clearly defined or practicable replacement benchmark rate when LIBOR is discontinued.
• The cessation of LIBOR could result in disruptive litigation related to existing contracts that do not … clearly define … [a] replacement benchmark rate.

And it stipulates that, in general, on the LIBOR replacement date, all contracts that are not consumer loans and that use LIBOR as a reference rate—and do not provide either a specific fallback benchmark rate or a specific person responsible for determining the replacement rate—will switch from LIBOR to a benchmark selected by the Federal Reserve Board of Governors. That Fed-selected replacement rate is the secured overnight financing rate (SOFR) with respect to LIBOR contracts that are not consumer loans.