Aide memoire of the 6th meeting of the European Financial Markets Lawyers Group

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6th meeting of the European Financial Markets Lawyers Group

Tuesday, 3 July 2001

Room CI, 36th floor, at the ECB in Frankfurt

Agenda

ITEM 1: Composition, approval of the agenda and of the aide-mémoire of the last meeting

ITEM 2: Repurchase transactions in EU countries

At the last meeting, a questionnaire on repos in European countries (prepared by Pierre Fiset) was approved and a time limit agreed for it to be answered. The questionnaire was designed to assess the existing variances in the legal definitions of repurchase transactions, which could potentially pose a problem for the full integration of the EU financial markets.

Documents: Preliminary summary of the answers, prepared by Pierre Fiset; answers received from the members of the EFMLG to the questionnaire [not available]

ITEM 3: Force majeure

At the last meeting, it was decided to split the issue of force majeure into four specific strands and to pursue those topics separately.

Document: discussion paper; memorandum regarding proposed definition of 'force majeure event'

a) In relation to computer breakdowns , the group will be asked to consider how to further pursue this issue, since Mr Ian Jameson, who had volunteered to act as rapporteur on this topic, has resigned from the group. Computer breakdowns ultimately amount to an allocation of risks, which may be agreed by contract. The group may consider whether (i) convergence of contractual practices is possible and warranted, and (ii) the EFMLG could issue a market recommendation in this regard.

Document: An issues note, prepared by the ECB Legal Services

c) As regards termination and close-out of trades under master agreements where there is no default, Mr David Bloom will present an issues paper, which will reflect on whether a general recommendation, inclusive of a definition of what should be treated as constituting ‘force majeure' could be elaborated. The debate currently held within the FMLG of the Federal Reserve Bank in New York and the wording suggested by ISDA for its own master agreement could give some indications to that end. Moreover, the group might also wish to take into account the discussions that currently take place within the Global Documentations Steering Committee in New York on the same issues.

Document: An issues paper prepared by David Bloom[not available]

d) The multibranch issue (political ring fencing) and its treatment under various national laws will be further assessed on the basis of a short issues note prepared by Mr Richard Firth and Mr Ulrich Bosch. The group will be asked to consider whether there is a need for a legal act of the European Commission in that field.

Document: An issues note prepared by Mr Richard Firth and Mr Ulrich Bosch

ITEM 4: Dematerialisation

Two questionnaires were agreed at the last meeting and time limits set for them to be answered, with the aim of getting a full picture of the existing differences between the respective national legal frameworks for the issuance of securities, both generally and in a dematerialised form. Moreover, information was requested on the way that securities are held and transferred inside the European Union and what the nature of the investor's interest is. Based on the answers received from the EFMLG members, Mr Frederic Nizard will present a first overview on the findings that could be distilled from the answers.

Documents: First tentative overview on the answers, prepared by Mr Frederic Nizard; the answers received from the members of the EFMLG on the questionnaires will be available at the next meeting.

ITEM 5: The use of the European Master Agreement

The European Master Agreement represents the first multi-product, multi-lingual and multi-jurisdictional market standard agreement available in the EU, whose emergence has been influenced by the introduction of the euro. The group is asked to consider what impact this new type of documentation may have on market activities, and, in particular, to assess whether this new type of documentation poses advantages or disadvantages compared to existing market documentation. The members of the EFMLG are asked in particular to report on the prospective use of the EMA in their respective jurisdiction.

Documents: Issues note regarding the European Master Agreement, prepared by the ECB Legal Services; draft comparison of the EMA with the 2000 version of the Global Master Repurchase Agreement, prepared by the ECB Legal Services

ITEM 6: Legal issues of relevance to the European Financial Markets

The final item is dedicated, as in the past meetings, to legal issues of relevance to the European financial markets, in order to exchange and share views as market participants, including:

a) e-banking/e-trading

The issue of e-banking and, in particular, e-trading, has become of growing relevance for the financial markets of today. An increasing amount of legislative efforts are being conducted both on a national and on a Community level, in order to provide a sound legal background for these new areas of activities. The members are asked to report their views on aspects which are not yet (or not yet adequately) covered by this legislation and are asked to identify whether there are specific issues of concern for the legal robustness of these kinds of e-business when conducted in the European Union.

Document: An overview of legal initiatives relating to e-banking and e-trading in the EU, prepared by ECB Legal Services

b) Collateral arrangements

On 27 March 2001 , the Commission formally proposed a Directive on financial collateral arrangements, which currently is discussed in a working group of the Council. Simultaneously the Hague Conference is preparing an international convention on the law applicable to dispositions of securities held through intermediaries. A short status presentation will be given by Mr Klaus Löber. The members of the EFMLG are asked to give their views on the current draft of the Directive.

Document: Proposal for an EC Directive on financial collateral arrangements

ITEM 7: Other matters and follow-up

•  Organisation of the EFMLG

a) The chairman will summarise his perception of the activities of the EFMLG in the last eighteen months. The members of the group are asked whether they consider the current structure of the group, and the frequency of the meetings, as well as the kind of activities conducted as being satisfactory. In particular, it will be put to the consideration of the group whether the establishment of specialised sub-groups, dedicated to specific tasks might be a suitable addition to the meetings held in general composition three to four times a year.

b) Website for the EFMLG

The chairman will report on the current status of the preparations to set up a website for the EFMLG.

c) Other possible topics for the EFMLG

Again, the members of the group are asked to identify topics, where legal matters create barriers against a further integrated and harmonised European financial market. In the light of this, the members are asked to give suggestions for possible issues for discussion in advance of the meeting.

Two suggested items are:

•  External rating agencies in Europe ;

•  The Financial Law Panel project on assessment of legal risk in the context of Operational Risks for capital ratio purposes. Mr Martin Thomas will present this new project and invite the EFMLG to participate in its development.

d) Follow-up

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