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ABU DHABI / WAM
Abu Dhabi Global Market (ADGM), the International Financial Centre in Abu Dhabi, announced that the International Swaps and Derivatives Association (ISDA), recognised ADGM as an effective netting regime and published a positive legal opinion to its members.
The new recognition further reinforces ADGM’s position in providing a robust legal framework, which allows financial institutions and corporates to efficiently expand their businesses and confidently manage risk.
The ISDA has published the legal opinion which is prepared by Shearman & Sterling LLP, and confirms the enforceability of ISDA’s 1992 and 2002 Master Agreements under the ADGM’s legal regime. The ISDA opinion addresses the enforceability of netting provisions contained in both ISDA Master Agreements.
Close-out netting is commonly used to manage default risks in derivative contracts in over-the-counter derivatives transactions. It is a legal mechanism where two counterparties agree to offset their obligations upon default, in priority to the application of insolvency tools typically used when a debtor is being wound up.