- Recitals (3), (5), (9), (14) and (19) of the FCD.
- Regulation 3(1) of the 2003 Regulations as amended.
- COM(2006) 838 final.
- Para 4.1 of the Evaluation Report.
- Ibid, para 4.1.2. See also European Central Bank publication “The Implementation of Monetary Policy in the Euro Area”, February 2011, para 6.2.2.
- Para 4.13 of the Evaluation Report.
- Art 4(1) of Directive 2006/48/EC.
- If the claim is transferred by novation, it may be sufficient that the new lender is a credit institution. Conversely, if the loan is transferred by novation to an entity that is not a credit institution, it may not qualify as a credit claim even if the original lender was a credit institution.
- Para (b) of the definition of “financial instruments” in Regulation 3(1) of the 2003 Regulations.
- Art 2(6)(b) of the Amending Directive amending Art 3(3) of the FCD.
- Look Chan Ho, “The Financial Collateral Directive's Practice in England” [2011] JIBLR no 4, 151, 166.
- Rules 2.85 and 4.90 Insolvency Rules 1986 (”IR 1986“); National Westminster Bank Ltd v Halesowen Presswork and Assem blies Ltd [1972] AC 785 HL.
- Regulation 3(2) of the 2003 Regulations as amended. This is described as a “partial” definition because it only indicates what “possession” includes, not what it is.
- As amended by the Amending Directive.
- [2010] EWHC 1772 (Ch).
- At para 63.
- At paras 48–51.
- At para 54. English law does not always cope well with technology-driven developments in the financial markets. For example, English law struggles with the notion of a pledge of an intangible (eg an interest in intermediated securities) pre cisely because of the possessory component of the concept of a pledge.
- The statement is challenged in the FMLC paper referred to below (para 46), in a paper by the City of London Law Soci ety's Financial Law Committee dated 22 October 2010, an edited version of which was published in JIBFL of January 2011 and in Look Chan Ho, supra n 11, 163.
- FMLC paper, December 2010, Issue 87-Control, Gray v G-T-P Group Limited.
- Ibid, para 4.8.
- Ibid, paras 6.5 and 6.6.
- The partial definition does not extend to credit claims and the proviso does not therefore need to refer to the collection of credit claims until further notice.
- cf Arthur D Little Limited (in administration) v Abeco Finance LLC [2002] 2 BCLC 799 in which it was held that a mortgage of shares may be characterised as fixed security even in a case in which the mortgagor is given the freedom to exercise the voting rights and to receive dividends.
- FMLC paper, supra n 20, para 6.6.
- Para 62 of judgment.
- Ibid, paras 60–62.
- Para 58 of the judgment.
- Re Spectrum Plus Limited (In Liquidation) [2005] UKHL 41; [2005] 2 AC 680.
- In fact, counsel could have given the example of a charge which is only characterised as floating because the collateral-provider is given rights to substitute financial collateral or withdraw excess financial collateral.
- S 754 CA 2006 and ss 40 and 175 IA 1986. For a list of claims that are preferential, see Schedule 6 to the IA 1986.
- S 176A IA 1986.
- Paras 99(3) and 99(4) of Schedule B1 to the IA 1986.
- S 176ZA of the IA 1986.
- Para 3 of Schedule B1 to the IA 1986.
- S 176ZA IA 1986 was not in force at the time that the 2003 Regulations were made or came into force, but a similar rule was thought at that time to apply: see Re Barleycorn Enterprises Limited [1970] Ch 465, a decision that was reversed by the House of Lords in Re Leyland DAF Limited, Buchler v Talbot [2004] UKHL 9. It was the Leyland DAF decision that prompted the enactment of s 176ZA IA 1986.
- “A consultation on the implementation of EU Directive 2009/44/EC on settlement finality and financial collateral arrangements”, HM Treasury, August 2010.
- Ibid, para 3.7. See also para 3.3.
- See n 19 supra. The concept of a “wholesale arrangement” is referred to in para 7 of Appendix B to the Committee's paper.
- The new Regulation 10(2A) of the 2003 Regulations.
- The new Regulations 8(1)(c) and 10(2B) of the 2003 Regulations.
- Regulation 3 of the 2003 Regulations.
- Ibid.
- The European Commission in their publication “Proposed Directive on financial collateral arrangements – frequently asked questions” (30 March 2001), 3 explained that collateral substitution would allow the collateral-provider to withdraw particular securities and replace them with other securities of equivalent value.
- See the Consultation Paper, 8, question 4.
- For example, the English courts in Re Dallhold Estates (UK) Pty Ltd [1992] BCC 394 at the request of an Australian court made an administration order in respect of a foreign company where under English law there would otherwise have been no jurisdiction to do so.
- Hughes v Hannover-Ruckversicherungs AG [1997] BCC 921.
- Cambridge Gas Transport Corp v The Official Committee of Unse cured Creditors of Navigator Holdings [2006] UKPC 26; [2006] BCC 962.
- Perpetual Trustee Co Ltd v BNY Corporate Trustee Services Ltd and another [2009] EWHC 1912 (Ch). The case went to the Court of Appeal and (sub nom Lehman Brothers Special Financing Inc v Belmont Park Investments Pty Limited and Others) the Supreme Court on a different point.
- See para 61 of the judgment of the Chancellor at first instance.
- See, for example, Arts 20 and 21 of the Model Law. Art 23 allows the English court to make an order under certain provi sions of British insolvency law for the avoidance of antecedent transactions.
- Art 4.
- Lord Millett, “The Remedy of Appropriation under a Share Mortgage”(2008) 2 Law and Financial Markets Review 333, 334.
- Look Chan Ho, supra n 11, 171–72.
- At 41.
- De Beers Consolidated Mines Limited v British South Africa Co [1912] AC 53, HL. See Lord Atkinson at 69.
- At 164.
- At 172.
- But the Court of Appeal took a broad view of the powers con ferred by s 2(2) ECA 1972 in Oakley Inc v Animal Ltd & Ors [2005] EWCA Civ 1191.
- R (Cukurova Finance International Limited and Cukuova Hold ings AS) v HM Treasury and Alfa Telecom Turkey Limited [2008] EWHC 2567 (Admin).
- Lord Millet said in Agnew and another v Commissioner of Inland Revenue and another [2001] 2 AC 710, 730, para 48, in the context of deciding whether a charge on book debts was a fixed charge or a fl oating charge, that “their Lordships would wish to make it clear that it is not enough to provide in the debenture that the account is a blocked account if it is not operated as one in fact”. This would seem to indicate that a court might be prepared to recharacterise an arrangement under which “negative control” had been agreed as one under which no “control” for the purposes of the 2003 Regulations did, in fact, exist.
- FMLC paper dated December 2010, Issue 87 – Control, Gray v G-T-P Group Limited.
- See footnote 53, 152–54.
- Judgment of Joseph-Olivetti J, 16 November 2007, para [34].
- See definitions of “security financial collateral arrangement” and “title transfer financial collateral arrangement” in Regulation 3.
- Eastern Caribbean Court of Appeal: HCVAP 2007/027 29 January/22 April 2008; Privy Council: Times Law Reports 25 May 2009.
- See n 60 supra.
- Regulation 3(1).
- On 14 April 2008, the International Swaps and Derivatives Association, Inc wrote to the European Commission express ing its concern over the Commission's tentative decision not to take on to its agenda the industry's proposals for a substan tial overhaul of the FCD, including the enactment of a new Netting Directive. It appears that the European Commission is continuing to consider a Netting Directive but not as a matter of priority.
- Bank of International Settlements Semiannual Derivatives Sta tistics, November 2010.
- Of course, it may be that the insolvency laws of a particular jurisdiction mean that it is necessary to elect automatic early termination provisions such that the ability to elect the time for termination of the hedge transactions is lost. Whilst its hand may be forced in these circumstances, the non-defaulting party is at least aware of the circumstances when this will happen and can act accordingly.
- Simon Firth, Derivatives: Law and Practice (London, Sweet & Maxwell, 2003), 6–36.
- Question 6 on p 10 of the Consultation Paper asks whether collateral security charges within the meaning of the SF Regulations should be brought within the scope of the 2003 Regulations.
- Para (b) of definition in Regulation 3 of the 2003 Regulations.
- Paras (c) and (d) of definition in Regulation 3 of the 2003 Regulations.
- See the definition of “fl oating charge” in s 251 1A 1986.
- For example, the Spectrum case referred to in n 29 supra; see the speech of Lord Hope, para [47] onwards.
- Para (a) of the definition in Regulation 3 of the 2003 Regulations
- Definition in Regulation 3 of the 2003 Regulations.
- Recital (3) to the FCD.
Law and Financial Markets Review
Volume 5, 2011 - Issue 3