Brexit for Derivatives? New Irish and French Law ISDA Master Agreements for the Derivatives Market

The International Swaps and Derivatives Association ("ISDA") has published two new ISDA Master Agreements in a Brexit prompted update for the European OTC Derivatives market.

What has happened?

On 28 June 2018, new Irish and French law governed versions of the widely used 2002 ISDA Master Agreements (the "French Agreement" and "Irish Agreement") were published.

The new agreements

The French Agreement and Irish Agreement represent civil and common law jurisdictions respectively among the countries that will remain within the European Union ("EU") post Brexit. In each case, the existing ISDA architecture is preserved and the expectation is that these master agreements will operate within the ISDA framework in the same way as the current English and New York law governed agreements. Updated Irish and French law netting opinions were issued at the same time and updated collateral agreements are expected to follow, with credit support documentation having been drafted and circulated to ISDA members for review.

Differences between the existing English law 2002 ISDA Master Agreement and the new Irish Agreement are limited to an updated Section 13 (Governing Law and Jurisdiction). Although also limited, the French Agreement includes wider changes and includes new arbitration provisions and condition precedent language as well as governing law and jurisdiction changes.

Context

Neither the publication of these alternative agreements nor the UK's leaving the EU is expected to impact on the ability of EU/EEA counterparties to use an existing English Law governed ISDA Master Agreement post Brexit. Nor are these developments expected to affect the validity of an English law judgment in England. Their publication does however provide counterparties, post Brexit, with more choice and represents the industry’s recognition of demand for alternative options.

How can Dechert help?

With a core derivatives team based in London and financial services teams located in both Dublin and Paris as well as throughout Europe, the Middle East, United States and Asia, Dechert is uniquely positioned to assist with any related questions.