Article: German Federal Court Ruling Important for Future Contractual Netting Arrangements

17 June 2016 | The Swap Report Feed

In a decision of 9 June 2016, the German Federal Court of Justice (Bundesgerichtshof, “BGH”) has ruled that the determination of the close-out amount in a netting provision based on the German Master Agreement for Financial Derivatives Transactions (Rahmenvertrag für Finanztermingeschäfte or DRV) is not legally effective in the event of insolvency to the extent that it deviates from section 104 of the German Insolvency Code.

The reasoning of the decision has now been published and provides a number of answers to questions which are important for future contractual netting arrangements.

To read more about the decision, please click here.

Bill: This seems to challenge the expected effect of insolvency for OTC transactions in Germany, but at the very bottom of the short article the authors point out that the German courts may make an amendment to restore confidence in the German master agreements.

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