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2018 10 17 Tbilisi Legal Committee

International Chamber of Commerce - ICC
International Chamber of Commerce - ICC

The ICC Banking Commission Legal Committee discusses various legal issues related to international banking and trade. They are working to amend Article 55 of the EU Bank Recovery and Resolution Directive to exempt trade finance liabilities from bail-in requirements, which could significantly harm EU businesses' ability to import and export if not changed. The committee is also looking into providing guidance on the legal treatment of negotiation credits without drafts presented and encouraging adoption of the UNCITRAL model law on electronic trade documents.

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ICC Banking Commission Legal Committee
Established in 2013 Chaired by Georges Affaki 30 Members 17 Countries (3 continents) 63% Senior in-house lawyers 37% Practitioners and Professors
New Docdex Rules Art. 194 EC Regulation 575/2013 (CRR) Boycott or discriminatory clauses in LCs Art. 55 BRRD BAFT Master Trade Loan Agreement Asymmetrical jurisdiction clauses Legal risks inherent to inventory financing Jurisdiction clauses in SWIFT based LGs / CGs Golden Rules to mitigate legal risks in inventory financing Boycott clauses in LCs Art. 44 and 55 BRRD Art. 194 CRR .dealing with several topics! Papers on:
Article 55 BRRD requires EU banks to add a bail-in clause to any contract governed by a non-EU law under which the bank has, or may have, liabilities. Purpose: assuring that no exceptions (regarding the treatment of those liabilities according to the resolution procedure) are raised by any counterparty / Courts in case of resolution of a EU Bank. According to a bail-in clause, the counterparty will accept a reduction or cancellation of the EU bank's obligation to pay what is due under the contract (ruled by non-EU law) in case of resolution of the EU bank. The unintended consequence of this requirement is that EU banks have to add a bail-in clause also to any LC, or LG (bid bond, customs bond etc.) they issue to a counterparty outside the EU (if ruled by the relevant non-EU country law). Art. 55 BRRD (Bank Recovery and Resolution Directive 2014/59/EU)
ICC bodies have already alerted EU decision makers that if Article 55 is not amended in a way that excludes trade finance / contingent liabilities, the ability of EU banks to continue to provide trade financing services will be significantly affected. Requirements set out in Article 55 in its current form will do considerable harm to businesses that export from and/or import from the EU. The nature and specific features of trade finance liabilities justify an outright exemption from the requirement set out in Article 55. The special features of trade finance liabilities have been recognized in various EU reports and proposals. Art. 55 BRRD (Bank Recovery and Resolution Directive 2014/59/EU)
The process of amending BRRD and particularly art. 55 - has now reached the so-called trilogue stage. The positions developed by (1) the EU Council and (2) the EU Parliament are currently discussed with the aim of reaching an agreement on a common text. The process should be finalized by the end of the year. In both proposals article 55 BRRD would be amended in a way that would provide for the possibility of a waiver or exemption from the contractual recognition requirement for trade finance liabilities. Unfortunately, the EPs proposal: comes with a cap on the waiver (15% of the total liabilities senior to the so called new class of non-preferred senior debt and meet the conditions set by art. 55.1.(a), (b) and (d)). Which is unnecessary because (i) of the other safeguards already in place for any waiver and (ii) such a cap is very complex to calculate and to be complied with; still says that unsecured debt instruments cannot be exempted. A condition that may rule out promissory notes and bills of exchange accepted by banks. Art. 55 BRRD (Bank Recovery and Resolution Directive 2014/59/EU)
We do encourage all ICC EU members, together with their national Committees, to approach decision makers and to properly address this matter, so that art. 55 BRRD does not apply to trade finance. The EU Council proposal looks preferable (though the resolution authority might require the inclusion of a bail-in clause where it considers either there is no impracticability or that it is necessary to ensure the resolvability of the EU Bank). Anyhow, points to be promoted: a specific waiver for trade finance liabilities (though difficult at this stage. See also the new par. 7) no cap for (waivers / exemptions regarding) trade finance liabilities deleting the broad preclusion from waivers of unsecured liabilities that are debt instruments The Trilogue stage is expected to be concluded within 2018. HURRY UP!!! Art. 55 BRRD (Bank Recovery and Resolution Directive 2014/59/EU)
Apparently one of the main reasons according to which banks look reluctant to issue negotiation credits that does not require the presentation of a draft, is that legal depts. are unsure about how negotiation of documents under a complying presentation will be look at by Courts in the event of a dispute. Investigating the matter in a representative number of jurisdictions, so that to get a deeper understanding and provide, in case, additional appropriate guidance? Investigating also the legal system of the most representative countries that tend to use drafts, to the same purpose? Guidance Paper on the use of drafts under documentary credits
The adoption of UNCITRAL model law to govern the use of electronic transferable records - such as bills of lading and bills of exchange - would be a step forward and therefore organizations such as the ICC should encourage national governments to adopt the model law. But such a step might be not final, though it may lead to a more harmonized framework. ICC might take the lead, sponsoring a medium-term plan (with all proper stakeholders) to create a common playfield? Digital Trade Documents eBills of lading
http://www.icclegalcommittee.org/ Legal Committee Website

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2018 10 17 Tbilisi Legal Committee

  • 1. ICC Banking Commission Legal Committee
  • 2. Established in 2013 Chaired by Georges Affaki 30 Members 17 Countries (3 continents) 63% Senior in-house lawyers 37% Practitioners and Professors
  • 3. New Docdex Rules Art. 194 EC Regulation 575/2013 (CRR) Boycott or discriminatory clauses in LCs Art. 55 BRRD BAFT Master Trade Loan Agreement Asymmetrical jurisdiction clauses Legal risks inherent to inventory financing Jurisdiction clauses in SWIFT based LGs / CGs Golden Rules to mitigate legal risks in inventory financing Boycott clauses in LCs Art. 44 and 55 BRRD Art. 194 CRR .dealing with several topics! Papers on:
  • 4. Article 55 BRRD requires EU banks to add a bail-in clause to any contract governed by a non-EU law under which the bank has, or may have, liabilities. Purpose: assuring that no exceptions (regarding the treatment of those liabilities according to the resolution procedure) are raised by any counterparty / Courts in case of resolution of a EU Bank. According to a bail-in clause, the counterparty will accept a reduction or cancellation of the EU bank's obligation to pay what is due under the contract (ruled by non-EU law) in case of resolution of the EU bank. The unintended consequence of this requirement is that EU banks have to add a bail-in clause also to any LC, or LG (bid bond, customs bond etc.) they issue to a counterparty outside the EU (if ruled by the relevant non-EU country law). Art. 55 BRRD (Bank Recovery and Resolution Directive 2014/59/EU)
  • 5. ICC bodies have already alerted EU decision makers that if Article 55 is not amended in a way that excludes trade finance / contingent liabilities, the ability of EU banks to continue to provide trade financing services will be significantly affected. Requirements set out in Article 55 in its current form will do considerable harm to businesses that export from and/or import from the EU. The nature and specific features of trade finance liabilities justify an outright exemption from the requirement set out in Article 55. The special features of trade finance liabilities have been recognized in various EU reports and proposals. Art. 55 BRRD (Bank Recovery and Resolution Directive 2014/59/EU)
  • 6. The process of amending BRRD and particularly art. 55 - has now reached the so-called trilogue stage. The positions developed by (1) the EU Council and (2) the EU Parliament are currently discussed with the aim of reaching an agreement on a common text. The process should be finalized by the end of the year. In both proposals article 55 BRRD would be amended in a way that would provide for the possibility of a waiver or exemption from the contractual recognition requirement for trade finance liabilities. Unfortunately, the EPs proposal: comes with a cap on the waiver (15% of the total liabilities senior to the so called new class of non-preferred senior debt and meet the conditions set by art. 55.1.(a), (b) and (d)). Which is unnecessary because (i) of the other safeguards already in place for any waiver and (ii) such a cap is very complex to calculate and to be complied with; still says that unsecured debt instruments cannot be exempted. A condition that may rule out promissory notes and bills of exchange accepted by banks. Art. 55 BRRD (Bank Recovery and Resolution Directive 2014/59/EU)
  • 7. We do encourage all ICC EU members, together with their national Committees, to approach decision makers and to properly address this matter, so that art. 55 BRRD does not apply to trade finance. The EU Council proposal looks preferable (though the resolution authority might require the inclusion of a bail-in clause where it considers either there is no impracticability or that it is necessary to ensure the resolvability of the EU Bank). Anyhow, points to be promoted: a specific waiver for trade finance liabilities (though difficult at this stage. See also the new par. 7) no cap for (waivers / exemptions regarding) trade finance liabilities deleting the broad preclusion from waivers of unsecured liabilities that are debt instruments The Trilogue stage is expected to be concluded within 2018. HURRY UP!!! Art. 55 BRRD (Bank Recovery and Resolution Directive 2014/59/EU)
  • 8. Apparently one of the main reasons according to which banks look reluctant to issue negotiation credits that does not require the presentation of a draft, is that legal depts. are unsure about how negotiation of documents under a complying presentation will be look at by Courts in the event of a dispute. Investigating the matter in a representative number of jurisdictions, so that to get a deeper understanding and provide, in case, additional appropriate guidance? Investigating also the legal system of the most representative countries that tend to use drafts, to the same purpose? Guidance Paper on the use of drafts under documentary credits
  • 9. The adoption of UNCITRAL model law to govern the use of electronic transferable records - such as bills of lading and bills of exchange - would be a step forward and therefore organizations such as the ICC should encourage national governments to adopt the model law. But such a step might be not final, though it may lead to a more harmonized framework. ICC might take the lead, sponsoring a medium-term plan (with all proper stakeholders) to create a common playfield? Digital Trade Documents eBills of lading