Linklaters drafts the new ISDA English law netting opinion

The International Swaps and Derivatives Association, Inc. (ISDA) has published a new English law netting opinion. The new opinion, which Linklaters was pleased to work on, extends the coverage to include the recently published 2022 ISDA Securities Financing Transactions (SFT) Definitions and SFT Schedule Provisions, on which Linklaters acted as drafting counsel. The conclusions reached in the new netting opinion remain consistent with previous versions.

The netting opinion forms part of a suite of opinions that ISDA makes available to its members. They address the enforceability of the termination, bilateral close-out netting and multibranch netting provisions of the 1992 and 2002 ISDA Master Agreements. The opinions are important as they provide comfort on whether netting is enforceable, which delivers regulatory benefits to the counterparties.

The extension of the opinion to cover SFTs is key in the use of the ISDA Master Agreement to document both derivatives and SFTs, which will result in expanded netting sets, helping firms to reduce credit risk and optimise their collateral use.

The new opinion was considered by the ISDA netting group and other interested parties prior to publication.

Simon Firth, Derivatives partner at Linklaters, said:

“We were delighted to draft the new English law netting opinion for ISDA, which is one of the cornerstone opinions in ISDA’s opinion library. It was a great opportunity to take a fresh look at this important area of law.”

Katherine Tew Darras, ISDA’s General Counsel, said:

“ISDA’s English law netting opinion has always been based on rigorous legal analysis, and we’re very pleased that Linklaters has been able to give the same expert guidance as we’ve had in the past as we expand coverage to new areas, including securities financing transactions and renewable energy certificates. The extension of the opinion to cover securities financing transactions is an important step, and will enable firms to enter into new SFT and derivatives trades under a single ISDA Master Agreement with the confidence of enforceable close-out netting. This will bring significant efficiencies and a reduction in credit risk for those institutions active in both markets.”

The opinion can be accessed here.