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This analysis focused on six jurisdictions – France, Germany, Italy, the Netherlands, Spain and the UK.
The good news is that the analysis shows there is unlikely to be any impact on the performance of contractual obligations on existing trades – which includes payments, settlements, transfer of collateral and the exercise of pre-agreed options. That’s an important point: cross-border trades between EU 27 and UK entities won’t all of a sudden fall away after Brexit. However, certain events or actions that occur during the lifecycle of a transaction, and which are outside of contractual obligations, could be affected – although the exact impact differs country to country, based on the law of the applicable jurisdiction (EU 27 member state or UK).
Given the significant volume of derivatives trades between counterparties in the EU 27 and the UK– and the fact that these lifecycle events are common and required by regulations in some cases – it’s critical that firms in both the EU and the UK are able to carry out the full range of actions that have been agreed between. It’s clearly in everyone’s interest – whether they are located in Munich, Milan or Manchester – that performance of these lifecycle events on existing cross-border trades isn’t interrupted post-Brexit.
As a result, ISDA thinks it’s important that provisions are put in place that allow EU and UK counterparties to manage their transactions after Brexit. It would encourage policy-makers to consider all available options now, including coordinated legislative action, insertion of language into a separation agreement, or ultimately wording within the EU-UK withdrawal agreement that allows entities to continue to perform a wide range of lifecycle events. This isn’t about winners or losers. It’s about ensuring the safety and efficiency of this market post-Brexit for both EU and UK counterparties.