Feature

Effects of credit guarantee schemes on secured transactions frameworks

The importance of a modern secured transactions framework for movable assets that effectively channels credit to the SME sector has been widely recognised. However, a modern secured transactions framework may not spur market-based collateralised lending if a public credit guarantee scheme disincentivises lenders and borrowers from engaging in it. Improperly designed schemes cause many market distortions, including slower growth, profitability and sustaining zombie companies. As Japan embarks on secured transactions reform, it needs to consider the role of its credit guarantee scheme in facilitating collateralised lending. The lessons this article outlines should be instrumental in other economies.

Do BNP v Trattamento and Fine Care v Natwest show the courts retreating from the principles established in First Tower Trustees?

Civil remedies for abusive short selling

In this article Jonathan Dawid considers how victims of abusive short selling can seek legal redress against those responsible for their loss.

Take it on trust: “relevant funds” under The Payment and Electronic Money Institution Insolvency Regulations 2021

In this article, Timothy Sherwin considers the provisions concerning the return and stewardship of “relevant funds” under the new Payment and Electronic Money Institution Insolvency Regulations 2021. The article was written before the High Court’s judgment in In the matter of ipagoo LLP (in administration) [2021] EWHC 2163, which, in contrast to In Re Supercapital [2020] EWHC 1685 (Ch), determined that no statutory trust exists over safeguarded funds held under the Electronic Money Regulations 2011. The Ipagoo decision does not overrule Supercapital and relates to different legislation but the inconsistency in approach means that the existence of a statutory trust may not now be the correct legal position. (A case analysis on the ipagoo decision will follow in the October edition).

The European Commission’s targeted consultations on European Union settlement finality and financial collateral rules

The previous occasion on which we heard from the European Commission on the directives (an interpretative communication in March 2018)³ was somewhat of a non-event. In relation to key issues of interpretation, related to the question of which law governs the proprietary aspects of collateral transactions in book-entry securities, the Commission “clarified” that all the divergent approaches taken by member states were valid under the relevant directive provisions.⁴ In fact, despite their undoubted importance to the Commission’s longstanding aim of achieving integrated capital markets in Europe, relatively little has been said about the directives at EU-level, leaving it largely up to member states to define their scope and operation. In contrast, the consultations raised a number of important and interesting policy ideas. I will discuss a few of these below, as well as consider whether there are other material issues to be addressed in an eventual amendment to the directives in order to meet their objectives. I will argue that a review of the directives should prioritise the full resolution of the conflicts of laws that cross-border systems and financial collateral transactions present.

When COVID-19 infects finance contracts: frustration, force majeure and illegality

COVID-19 will often cause borrowers to breach their loan-to-value covenants or payment or other obligations. Certain risks making performance impossible or more burdensome will be provided for in the express terms, but something as specific as a pandemic such as COVID-19 will not. The borrower will naturally look for legal routes to suspend or otherwise evade its ongoing payment obligations. This article considers that situation.

ESG integration and Social Taxonomy developments in the EU Sustainable Finance Framework

This article considers recent Social Taxonomy developments under the EU Sustainable Finance Framework and what the introduction of a Social Taxonomy could mean for financial market participants and financial products.

Equivalence and market access in a post-Brexit world

At the end of March 2021, the UK and EU agreed a Memorandum of Understanding which provides a framework for ongoing regulatory co-operation and dialogue on financial services in the post-Brexit environment. However, it does not significantly alter the new reality for firms doing cross-border business between the UK and EU, where UK firms face a patchwork of national regimes for market access into the EU, coupled with a limited set of equivalence determinations.

Brexit and dispute resolution clauses: the options for finance parties

The extended debate about the impact of Brexit on the popularity of English law and English jurisdiction clauses in international commercial contracts intensified as the Brexit transition period came to an end at 11pm on 31 December 2020. The UK-EU’s new trade deal, struck on 24 December 2020, did not cover arrangements on civil justice and so, from 1 January 2021, amongst other changes in this area, the UK is now no longer bound by two core instruments in the field of private international law: the Recast Brussels Regulation and the Lugano Convention.¹ These instruments concern the allocation of jurisdiction and the enforcement of judgments in the EU and, in relation to the Lugano Convention, in Switzerland, Iceland and Norway. In a further development, on 1 January 2021, the UK formally re-joined another international convention dealing with the allocation of jurisdiction and the enforcement of judgments, the 2005 Hague Convention on Choice of Court Agreements (the Hague Convention), as an independent sovereign state.

Settlement Finality: some UK and EU perspectives

In this article, Paula Moffatt outlines how the Settlement Finality Regulations work, examines what they mean for transactions entered into in the run up to a system participant’s insolvency, and considers some of the issues raised in the European Commission’s consultation on the Settlement Finality Directive now that the UK is a third country.