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Regulatory Watch

ISDA Readies for Brexit with French, Irish Master Agreements

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July 06, 2018

ISDA adds more choices for corporates using ISDAs to settle derivatives contract disputes

Fri Reg and Accting - Law BooksThe International Swaps and Derivatives Association this week prepared for Brexit with the publication of French and Irish versions of its ISDA Master Agreement. Currently companies can choose to use English, New York or Japanese law to settle international derivative disputes.

“The new Master Agreements are intended to provide options for those institutions that would prefer to continue trading under a European Union (EU) member-state law with EU court jurisdiction clauses once the UK leaves the EU,” ISDA said in a release.

“These agreements may be useful for two domestic parties (e.g., a French bank trading with a French corporate) who wish to resolve disputes in local courts under local law, but otherwise [they] likely will not have much application,” said Marc Marc A. Horwitz, an attorney for DLA Piper.

Currently English law is the go-to course of action when any dispute arises in the EU. But after the UK withdraws from the EU, ISDA felt that English law would “no longer be automatically recognized and enforced across the EU and European Economic Area (EEA).” It thus wanted to be prepared. But according to Mr. Horwitz, English law will stay relevant. “Neither [the French or Irish laws] is likely to supplant New York and English law as the predominant governing laws of ISDA Master Agreements,” he said.

ISDA said French and Irish law were chosen “in order to represent both civil law and common law systems. Both legal frameworks also support the feasibility of ISDA protocols, which allow multiple agreements between adhering parties to be modified in an efficient and scalable way.”

ISDA chief executive Scott O’Malia added in a statement that Brexit has been a big focus for the Association, “and while we can't predict its outcome with certainty, we can prepare for some of the possible outcomes. The launch of the new master agreement is intended to provide additional options to users, so they can trade under whatever agreement best meets their needs.”

For a good primer on what you should know about ISDA agreements, read Checklist: What You Should Know About ISDAs.

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