On 19 January 2019 France passed Act 2019-75, which authorised the government to take measures to prepare for the United Kingdom's departure from the European Union without a deal by way of ministerial orders, particularly in the area of financial services.

Subsequently, on 6 February 2019 the government adopted Ministerial Order 2019-75. Among other things, the ministerial order aims to ensure that International Swaps and Derivatives Association (ISDA)-type master agreements on financial services continue to be used.

Current practice

In practice, parties to these master agreements generally opt for them to be governed by English law and therefore the jurisdiction of the English courts. However, in the event of a no-deal Brexit, judgments handed down by UK courts will no longer be recognised within the European judicial area. Parties will therefore have to obtain the enforcement of a UK court decision in each of the relevant jurisdictions. Thus, judgments will take longer to enforce than under the current system, under which a non-defaulting party to an English law financial contract that submits to the jurisdiction of the English courts can enforce the security that it holds swiftly and uniformly throughout the European Union in the event of a breach by the other party.

French master agreements

With this in mind, on 3 July 2018 the ISDA published French law master agreements in order to give market players an alternative to English law.(1)

At the same time, the Paris financial market and the government considered that the development of French law master agreements would boost the attractiveness of Paris as a financial hub, particularly in the event of a hard Brexit.(2) To this end, two areas for reform were identified.

Under French law, transactions eligible for close-out netting do not include:

  • spot foreign exchange transactions;
  • the sale, acquisition and delivery of precious metals; or
  • CO2 emission quota transactions.

Close-out netting was previously possible only for financial obligations resulting from transactions in financial instruments.

The ministerial order has remedied this shortcoming by extending Article L 211-36(I) of the Monetary and Financial Code to financial obligations resulting from transactions in greenhouse gas emission quotas, spot exchange transactions and transactions for the sale, acquisition or delivery of gold, silver, platinum, palladium or other precious metals, thereby making such transactions eligible for close-out netting.

The ministerial order also provides through Article L 211-40(2) of the Monetary and Financial Code that the French law principle enshrined in Article 1343-2 of the Civil Code that interest on outstanding interest accrues only for arrears that have been outstanding for at least one year does not prevent an ISDA-type financial master agreement from providing for interest to be compounded. Accordingly, parties to a derivatives contract will be able to charge compound interest in the event of non-payment, even for arrears that have been outstanding for less than one year.

Ministerial Order 2019-75 will come into force only if the United Kingdom withdraws from the European Union without a deal.

?For further information on this topic please contact Rhidian David or Agnes Braka-Calas at Hughes Hubbard & Reed by telephone (+33 1 44 05 80 00) or email ( or The Hughes Hubbard & Reed website can be accessed at


(1) ISDA Publishes French and Irish Law Master Agreements.

(2) Page 67 of Report 92 of 30 October 2018 on the draft law authorising the government to take measures by ministerial orders to prepare for the United Kingdom's withdrawal from the European Union.

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