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Brexit UK JMP Stay Protocol published

As expected, ISDA has yesterday opened the 2020 UK (PRA Rule) Jurisdictional Module Protocol (UK Module) for adherence. The new UK Module joins its stablemates as part of the ISDA Resolution Jurisdictional Modular Protocol, replacing the previous 3 May 2016 UK (PRA Rule) Module with a shiny, new Brexit-ed version. At the expiry of the transition period, pursuant to the European Union (Withdrawal) Act 2018, EU law whether derived or direct, is largely retained in the UK. Amendments need to be made to account for the UK’s new third country (EEA perspective) status. The PRA is accordingly proposing changes to its final rule regarding contractual stays in financial contracts governed by third-country law. These amendments are being finalised and are expected to be published before the end of the transition period.

The UK Module makes the following changes to its predecessor:

  1. “Compliance Date” is amended, replacing the previous phase-in with a new date which is the later of rule publication or end of the transition period
  2. The 2016 UK Module recognised a system designated under the Settlement Finality Directive in an EEA state as an “Excluded Counterparty”. This type of “Excluded Counterparty” has been deleted from UK Module (note that such systems may be an Excluded Counterparty, in other categories)
  3. “Regulated Entities” is amended to include those subsidiaries which would be an investment firm if it had its registered of head office in the UK, as opposed to the previous “in the EEA”

Aside from these changes, the UK Module is based on the 2016 version, with Adherence Letter party elections: All Regulated Entities, All G-SIBs or Entity-by-Entity. The UK Module is open to ISDA members and non-members, parties will pay the usual $500 one-time $500 fee of $500 per adherence to ISDA for each adherence to the 2020 UK Module. There is no cut-off date, but ISDA reserves the right to the 2020 UK Module. ISDA does, however, reserve the right to designate one with 30 days’ notice.

In summary, whether amending via the Protocol or bilaterally, this is another urgent Brexit-related workstream- the 2016 UK Module has 2421 adherents. To date the BRRD is a dog that is yet to bite; while potential penalties are severe, enforcement has been slow. Clearly, absent a forbearance statement, this laxity is not to be relied on, Brexit-related Stay amendments should be near the top of the already-overflowing 2021 to-do list.

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