Feature

Validation of the Financial Collateral Arrangements Regulations post-Brexit: legal considerations

This article considers the implications of the unusual validating provisions in the Financial Services Bill (HL Bill 162), which retrospectively validate the Financial Collateral Arrangements (No 2) Regulations 2003 (SI 2003/3226) notwithstanding any lack of power to make the Regulations, in circumstances where the Regulations give effect to EU Directive 2002/47/EC. It examines the critical questions that would have arisen pre-Brexit, and those that now arise, in relation to whether such validating legislation is lawful and argues that such validation is likely to be effective post-Brexit.

Settlement Finality: some UK and EU perspectives

In this article, Paula Moffatt outlines how the Settlement Finality Regulations work, examines what they mean for transactions entered into in the run up to a system participant’s insolvency, and considers some of the issues raised in the European Commission’s consultation on the Settlement Finality Directive now that the UK is a third country.

Effects of credit guarantee schemes on secured transactions frameworks

The importance of a modern secured transactions framework for movable assets that effectively channels credit to the SME sector has been widely recognised. However, a modern secured transactions framework may not spur market-based collateralised lending if a public credit guarantee scheme disincentivises lenders and borrowers from engaging in it. Improperly designed schemes cause many market distortions, including slower growth, profitability and sustaining zombie companies. As Japan embarks on secured transactions reform, it needs to consider the role of its credit guarantee scheme in facilitating collateralised lending. The lessons this article outlines should be instrumental in other economies.

Civil remedies for abusive short selling

In this article Jonathan Dawid considers how victims of abusive short selling can seek legal redress against those responsible for their loss.

Take it on trust: “relevant funds” under The Payment and Electronic Money Institution Insolvency Regulations 2021

In this article, Timothy Sherwin considers the provisions concerning the return and stewardship of “relevant funds” under the new Payment and Electronic Money Institution Insolvency Regulations 2021. The article was written before the High Court’s judgment in In the matter of ipagoo LLP (in administration) [2021] EWHC 2163, which, in contrast to In Re Supercapital [2020] EWHC 1685 (Ch), determined that no statutory trust exists over safeguarded funds held under the Electronic Money Regulations 2011. The Ipagoo decision does not overrule Supercapital and relates to different legislation but the inconsistency in approach means that the existence of a statutory trust may not now be the correct legal position. (A case analysis on the ipagoo decision will follow in the October edition).

The European Commission’s targeted consultations on European Union settlement finality and financial collateral rules

The previous occasion on which we heard from the European Commission on the directives (an interpretative communication in March 2018)³ was somewhat of a non-event. In relation to key issues of interpretation, related to the question of which law governs the proprietary aspects of collateral transactions in book-entry securities, the Commission “clarified” that all the divergent approaches taken by member states were valid under the relevant directive provisions.⁴ In fact, despite their undoubted importance to the Commission’s longstanding aim of achieving integrated capital markets in Europe, relatively little has been said about the directives at EU-level, leaving it largely up to member states to define their scope and operation. In contrast, the consultations raised a number of important and interesting policy ideas. I will discuss a few of these below, as well as consider whether there are other material issues to be addressed in an eventual amendment to the directives in order to meet their objectives. I will argue that a review of the directives should prioritise the full resolution of the conflicts of laws that cross-border systems and financial collateral transactions present.

Do BNP v Trattamento and Fine Care v Natwest show the courts retreating from the principles established in First Tower Trustees?

Commodity finance: the complete security package

COVID-19 lockdowns have disrupted commodity transactions and consequential enhanced oversight of borrowers’ businesses has uncovered fraudulent activities. Of utmost importance to any lender in a commodity financing is that the commodity exists and has not been financed by another party. Against this backdrop, in this article, the authors describe a typical security package adopted by commodity financiers under an English law commodity financing.

The Digital Dispute Resolution Rules: the future of digital disputes

This article summarises some of the key points arising out of the newly published Digital Dispute Resolution Rules (Digital DR Rules). The advantages of adopting the Digital DR Rules are explored as well as considering how the rules might be incorporated into new and existing agreements.

The new 2021 ISDA Interest Rate Derivatives Definitions: the end of discretion?

The publication of the new 2021 ISDA Interest Rate Derivatives Definitions (2021 Definitions) marks the first comprehensive update of ISDA’s definitions booklet for interest rate products since the publication of the 2006 ISDA Definitions (2006 Definitions) in January 2007. It is a significant undertaking, making a very wide variety of changes to take account of, among other things, benchmark reform, the new regulatory environment for bank resolution, the introduction of collateral rules and central clearing. In addition, there will also be a new electronic ISDA user interface called MyLibrary which will be updated as changes are made to the definitions. This article analyses the changes to the cash settlement provisions.