On 19 January 2019 France passed Law 2019-30, which authorised the government to make ministerial orders to prepare for the United Kingdom's departure from the European Union without a deal, particularly in the area of financial services.

On 6 February 2019 the government adopted Ministerial Order 2019-75, which aims to ensure that International Swap Derivatives Association (ISDA)-type master agreements on financial services continue to be used.

No-deal Brexit

If the United Kingdom leaves the European Union without a deal, UK financial institutions will become third-country entities that no longer benefit from the European passport which allows them to provide the same investment services in all other EU states that they are authorised to provide in the United Kingdom.

A no-deal Brexit and subsequent loss of the EU passport for UK financial institutions will affect investment services agreements – in particular, those that provide for two levels of contractual formalisation:

  • master agreements containing the general terms and conditions; and
  • confirmations relating to each transaction concluded under the master agreement, which embody the parties' agreement to enter into a transaction and the applicable legal and financial terms and conditions particular to that transaction.

This is the case for transactions involving derivatives, repurchase agreements or lending of securities using the ISDA master agreement.

Replicating master agreements

To enable an EU client to pursue its existing contractual relationships after a no-deal Brexit, the ministerial order offers a simplified method of replicating a master agreement with an EU entity that belongs to the same group of companies as the UK financial institution with whom that client had an existing contractual relationship. Accordingly, Article 3 of the ministerial order provides that a client that is established in an EU state and is a party to a master agreement governing transactions involving financial instruments that was entered into with a UK party before the United Kingdom's withdrawal from the European Union, is deemed to have accepted a financial institution's offer for a new master agreement if the following cumulative conditions are met:

  • The new master agreement's terms and conditions must be identical to those of the master agreement concluded with the UK financial institution, except for those on governing law and jurisdiction, which must provide for French law and the exclusive jurisdiction of the French courts.
  • The entity offering the new master agreement must belong to the same group of companies as the UK institution and its credit rating must at least be as good as that of the UK institution on the date that the offer is received.
  • The offer must be made to the client in writing in the form required by the master agreement entered into with the UK institution.
  • The offer must be accompanied by documentation highlighting any changes made to the new master agreement.
  • Within five working days from receipt of the offer, the recipient must enter into a transaction which is governed by the new master agreement.

Provided that all of these conditions are satisfied, the new master agreement will come into force without any further formality or express acceptance by the offer's recipient.

The replication of master agreements is possible only within 12 months of the ministerial order's provisions coming into force on the United Kingdom's withdrawal from the European Union without a deal.

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