On 3 July 2018 the International Swaps and Derivatives Association, Inc. (ISDA) announced the publication of Irish and French law governed versions of its 2002 ISDA Master Agreement. The ISDA Master Agreement is an industry standard agreement used to document derivatives trading in the international financial markets. The ability to choose Irish law adds to ISDA’s existing governing law options of English, New York and Japanese laws and is a response by ISDA to legal uncertainty arising from Brexit.
ISDA has noted that English law may become a third-country law after the UK withdraws from the EU, which means English court decisions would no longer be automatically recognised and enforced across the EU and European Economic Area (EEA). By trading under an Irish or French law Master Agreement, counterparties will retain certain protections that only apply to agreements governed by an EU / EEA member state law. For example, an Irish law governed ISDA Master Agreement will benefit from the automatic recognition of judgments under the Brussels 1 Recast Regulation and the recognition of bail-in under the Banking Recovery and Resolution Directive, and some EU national insolvency laws require contracts to be subject to EU / EEA law in order to qualify for safe harbor protections following a bankruptcy.
Katherine Tew Darras, ISDA’s General Counsel, said today:
“An English law Master Agreement won’t become any less valid in the EU post-Brexit, irrespective of the outcome of the Brexit negotiations. There will be good reasons for EU / EEA counterparties to continue using the English law Master Agreement, and there will be good reasons for them to start using the French and Irish law versions. This is all about providing choice to the market and allowing counterparties to choose the option that best suits their needs.”
Christian Donagh, who heads Matheson’s Derivatives, Collateral and Netting Group, welcomed the publication of the Irish law ISDA Master Agreement as the completion of a process that began a little over a year ago. Christian commented:
“We have worked closely with ISDA in drafting the Irish law ISDA Master Agreement and related collateral documents, and collaborated with various interested parties in Ireland as the project progressed. The option for counterparties to choose Irish law as a governing law for the ISDA Master Agreement is an opportunity for Irish law to play a key role in providing legal certainty to European derivatives markets. It became clear when drafting the Irish law documents that the similarities between English and Irish contract law meant that very few changes were needed to the current English law ISDA Master Agreement and related collateral documents. That very close similarity offers users of the Irish law documentation, regardless of the outcome of Brexit negotiations, the ability to continue to use familiar documentation and to resolve any disputes in an English language EU court.”
The Irish law governed 2002 Master Agreement is available on ISDA’s online library and bookstore.