1996 and 2002 ISDA Model Netting Act: From the First Experience of Harmonizing Laws to the Protection of Financial Collateral

Модельные законы Международной ассоциации по свопам и деривативам 1996 и 2002 гг.: от первого опыта гармонизации к защите положений о финансовом обеспечении

Klementiev, A. P. (Клементьев, А. П.) ()
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Klementiev, A. P. (Клементьев, А. П.): National Research University Higher School of Economics

Theoretical and applied law, 2025, issue 1, 64-76

Abstract: Introduction. The article focuses on the model legislation of the International Swaps and Derivatives Association, which has been publishing model laws for over-the-counter financial market participants for nearly three decades. The association has been extremely successful in this endeavor, with its model laws implemented in over 80 jurisdictions. Methodology and materials. The research methodology is a combination of methods employed to achieve the research objectives. The doctrinal method is used for the direct analysis of the content of standard contracts and model acts of the Model Law on International Swaps and Derivatives Association (ISDA). Through a historical approach, a general context is provided that accompanied the development of the model laws discussed in this publication. The statistical method is applied to describe the favorable economic effects resulting from the implementation of the ISDA model legislation. Research results and their discussion. The article provides a brief description of its activities, with a particular emphasis on its standard framework agreements and contractual terms widely spread in international commercial turnover. In particular the article dwells upon the procedure for termination of contractual obligations envisaged in standard agreements of the International Swaps and Derivatives Association and commonly known as close-out netting. The publication provides the grounds for international legal harmonization to achieve enforceability of contractual provisions encompassing close-out netting. It then examines the International Swaps and Derivatives Association model law published in 1996, which was primarily aimed at recognizing close-out netting provisions in all affected jurisdictions. Conclusions. The third part of the article is devoted to the 2002 model law, which provided muchneeded protection for collateral provisions. The article concludes with recommendations for amending domestic contractual standards governing derivative financial instruments to bring them in line with recommendations of International Swaps and Derivatives Association. The said reform may overall contribute to competitive strengths of domestic financial market.

Keywords: derivatives; derivative financial instruments; model act; loi-type; soft law; harmonization of laws; netting; ISDA (search for similar items in EconPapers)
Date: 2025
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