Aide memoire of the 11th meeting of the European Financial Markets Lawyers Group

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11th meeting of the European Financial Markets Lawyers Group

Tuesday, 3rd June 2003

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

Agenda

ITEM 1: Approval of the agenda and of the aide-mémoire of the last meeting

ITEM 2: Book-entry transfers and dematerialisation of securities

A presentation of a comparative analysis of the concept of dematerialisation in the EU will be given by Dr. Eduardo Cortés García, Professor of Commercial Law in the University of Madrid , who has published a book on this subject.

Documents: Revised report on the “Harmonisation of the legal framework for rights evidenced by book-entries in respect of certain financial instruments in the European Union”, Second report of the Giovannini group on EU clearing and settlement arrangements of April 2003

ITEM 3: The EFMLG's future activities and composition

Looking back on the EFMLG's past activities, it is intended to reflect on what has been achieved (or what has not been achieved) and what eventually could be changed as regards the way the EFMLG is operating, such as an increased establishment of sub-groups.

Document: Issues note on the activities of the EFMLG and its prospect

ITEM 4: Signing authorities for master agreements executed by EU incorporated
banks

The issue at stake is that banks execute many master agreements with both banks and non-banks for swap, repo and securities lending transactions on a continuous basis and that it is necessary, as a due diligence matter, to obtain evidence that the institution which is entering into the relevant master agreement is authorised to enter into such agreements generally, and that the person who has executed the master agreement on behalf of the institution is authorised to do so. Failure to obtain such evidence may render the agreement invalid. In practice, obtaining such evidence is very time-consuming because the law governing the valid authorisation and execution of a contract is the law of the place where the executing party is located. Sometimes, in-house bank lawyers have to obtain external legal advice in order to ensure that the agreement has been validly authorised and executed.

A verbal presentation of this topic will be made by Ms. Helen Moran. As this a new project, the EFMLG is asked to discuss this issue and consider whether to set up a sub-group to investigate the matter further with a view to issuing an EFMLG recommendation or report.

Document: questionnaire

ITEM 5: EFMLG/ACI project on short-term securities

The EFMLG will be briefed on the developments in the overall project, including the outcome and the follow-up work by the ACI following the ACI's meeting with market participants and interested parties on 11 March 2003 .

Document: ACI/EFMLG Working Group on Information Memorandum – Documents related to the information memorandum for short-term European paper (STEP).

ITEM 6: The EU Communication for a more coherent European contract law

ACI/EFMLG Working Group on Information Memorandum – Documents related to the information memorandum for short-term European paper (STEP).

Document: Commission Communication on a more coherent European Contract Law – an action plan (2003/C 63/01) of 15 March 2003

ITEM 7: Insolvency arrangements and contract enforceability

On 9 December 2002, the G-10 Secretariat at the Bank for International Settlements (BIS) published the Consultation Report on Insolvency Arrangements and Contract Enforceability (the Report) prepared by the G-10 Contact Group on the Legal and Institutional Underpinnings of the International Financial System. The Report considers the legal and institutional arrangements for resolving the insolvency of financial institutions and of non-financial institutions that conduct financial activities. A particular focus of the examination has been the resolution of institutions that conduct a wide range of activities on a large scale in many countries (cross-border aspects of insolvency). The Report indicates a need for further reflection and work to improve the situation in individual jurisdictions and for cross-border insolvencies. The Report was published for consultation (on the website of the BIS; the ECB has created a link to the Report on its website).

Documents: G-10 Consultation Report on Insolvency Arrangements and Contract Enforceability of September 2002

ITEM 8: Netting and Community law

Close-out netting provisions in bilateral master agreements for swap, derivative, foreign exchange, repurchase and securities lending transactions have received enhanced recognition by various European Community (EC) legal acts, including (a) Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings; (b) Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the reorganisation and winding up of credit institutions (the “Winding-up Directive”); and (c) Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on financial collateral arrangements (the “Collateral Directive”). This may have an important impact in the future EU Accession States. The EFMLG is invited to exchange views on the inter-play and proper interpretation of these instruments, having particular regard to the requirement that the Winding-up and Collateral Directives be implemented by Member States before 27 December 2003 and 5 May 2004, respectively, and also having regard to netting legislation in various EU Member States and the traditional relevance of national insolvency law to questions concerning the validity of close-out netting provisions.

Documents: Issues note on ‘Netting and Community law', Annex 1, Annex 2

ITEM 9: Collective action clauses and sovereign debt

The sub-group will report at the next meeting on progress made to date by the sub-group, as well as recent developments re CACs. Currently, the sub-group has not reached any conclusions whether the EFMLG should issue any recommendations with respect to this matter.

ITEM 10: Other issues

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