BANKING COMMISSION

ICC Banking Commission Legal Committee

Telephone Conference on 02 February 2015, 14h30 - 16h30
1. Opening and Welcome
The conference call started at 14h36 with a welcome by the Chair and a roll
call. The participants are listed at the end of these minutes. The Chair
welcomed three new members of the Legal Committee, Prof. Nuray Eksi
(Director of the International Private Law Department at Marmara University,
Turkey), Dr. Hans Kuhn (Of Counsel at Swiss law firm Schellenberg Wittmer
and former General Counsel of the Swiss Central Bank) and Eleonore Treu
(ICC Austria).
2. Recorder
Jrg Gloss was appointed to prepare the minutes of this call.
3. Legal Committee Meeting Report 04 November 2014 Istanbul
The meeting report was adopted without comments.
4. New DOCDEX Rules
In view of the expanded scope of the DOCDEX Rules adopted by unanimous
vote at the last ICC Banking Commission Meeting in Istanbul the Chair
encouraged members of the Legal Committee to join the list of DOCDEX
experts which is presently being prepared (deadline 13 February 2015).
The Chair reported that according to the intention of the executive board of
the Banking Commission the rules would come into force on 01 May 2015 and
that he was hoping that DOCDEX decisions should be made available free of
costs on the ICC website. Members of the Legal Committee expressed their
support of this measure. It was approved that the Chair recommends on
behalf of the Legal Committee to the executive board of the Banking
Commission the availability of the DOCDEX decisions free of costs on the
ICC website. The Chair asked members of the Legal Committee to promote
the DOCDEX rules through their ICC National Committees.

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5. Position Paper on Unilateral Jurisdiction Clauses

The draft position paper was briefly introduced highlighting changes proposed
in the last meeting of the Legal Committee. This was followed by a discussion
of a number of views and suggestions. The term dispute resolution clauses
should be changed into unilateral jurisdiction clauses. Although the draft
paper deals with financing contracts the mention of the more general term of
commercial contracts seems justified when it comes to distinguishing between
commercial contracts and consumer contracts. It was suggested to avoid
mentioning the name of the party when describing arguments put forward in
court proceedings and to make use of a passive sentence. Mention of a
revision of Brussels I in the recommendations of the draft paper should be
clarified in order to focus on a future revision because the last revision may
not be considered an improvement of the previous article 23 in increasing
legal certainty and in support of the aim of the paper.
The Chair thanked Floris Carlier and his colleagues of the working group
(Harriette Resnick, Cristina Rooth, Mara Eugenia Zozaya and Xiang Gao) for
the excellent result and asked him to prepare the final version for submission
by the Chair to the executive committee of the ICC Banking Commission in
order to be released as a position paper on the ICC website.
6. Position Paper on Article 194 section 1 CRR (EU regulation on capital
requirements)
The Chair reminded that according to this section banks are required to
provide to the competent regulatory authority the most recent written,
reasoned and independent legal opinion on which it has relied in order to
ascertain whether the collateral agreement is valid and enforceable in all
relevant jurisdictions. Furthermore, the Chair explained that the ICC has never
before commissioned legal opinions for ICC members as ISDA and BAFT
have done so far.
The draft position paper was introduced and it was explained that it is
designed to give guidance to an external counsel providing the criteria of the
CRR and the importance of the ICC rules for the relevant instruments which
may be used as a collateral security.
The question was raised as to the law under which the generic legal opinion
should be provided. The Chair proposed two alternatives, either a generic
opinion based only on the ICC rules together with corresponding assumptions
or a generic opinion based on one of the most frequently applicable laws like
English law. It was indicated that an opinion based on no specific law would
be very generic and would constitute unchartered territory. On the other hand
it was pointed out that a generic opinion based on a frequently applicable law
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could be used as an example or a basis for further opinions under local laws
thus reducing costs.
It was pointed out that ITFA (International Trade and Forfaiting Association) is
commissioning a legal opinion for the purposes of article 194 CRR regarding
the BAFT Master Participation Agreement with a governing law and that he
would make available a draft of this opinion to the Legal Committee.
The Chair remarked that the issue of a periodical updating of such legal
opinions and the specific use of such legal opinions will depend on guidance
by the regulators and on the individual approach each institution will take. It
was explained that in each jurisdiction the internal lawyer could perhaps refer
to a generic and to a local opinion and add her own comment in dealing with
the individual instrument. The Chair proposed to ultimately aim at disclosure
and sharing of such local law opinions. He thanked Angelia Chia for her draft
position paper and asked her to revise it with input of Sean Edwards with his
experience regarding the legal opinion on the BAFT Master Participation
Agreement.
7. Position Paper on articles 44 and 55 of the BRRD (EU-Bank Recovery
and Resolution Directive)
The topic of the draft position paper was briefly introduced and the Chair
pointed out that the paper is aimed at bringing the problem to the notice of the
executive committee of the ICC Banking Commission. The ICC should keep
advocating the role of trade finance like it did a few years ago regarding the
credit conversion factor of trade finance instruments following the Basle II
accord. The implementation of the directive in national legislation has either
taken place or is imminent. The Chair referred to valuable input from German
BRRD-experts.
Attention was drawn to letters of the BBA (British Bankers Association), one
to the EBA (European Banking Authority) in reply to EBAs consultation paper
dated 5 November 2014 (dealing with the draft technical standards relating to
art. 55 (3) of the BRRD and circulated by a Committee member on 11
December 2014) and one to the PRA (Prudential Regulation Authority, the
British regulator). None of these letters mentions trade finance.
It was commented that, in light of art. 55.2 BBRD, it may be argued whether
the competent authorities are empowered to apply and implement the writedown and conversion powers given to them regarding liabilities of affected
banks even without any contractual bail-in-provisions. To this it was replied
that in all probability the authorities would try to do so but it may not work due
to the applicable law and that trade finance liabilities should not be subject to
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bail-in-provisions in the first place.

It was suggested to shorten the paper and to review its structure. It was
asked how bankers acceptances would be affected and reference was made
to section 3.1 of a Final Policy Statement by the PRA of January 2015.
The question arose whether one of the options mentioned in No. 5 a)
(exemption at large of trade finance) and b) (clarifications and extension of
existing exemptions) of the paper or whether both options should be argued.
The Chair suggested that both options should be argued and asked Ron van
Staten to review the paper and to have a phone call with the Chair in order to
finalise the paper for presentation to the executive committee of the ICC
Banking Commission in order to have the paper posted on the website of the
ICC. He thanked Ron for his work.
8. Agenda for the Meeting of the Legal Committee in Singapore
With the approval of the Chair, it was announced that a private dinner will take
place for Committee members in Singapore on 20 April. The Chair thanked
Angelia Chia for this initiative and for her key contributions to the agenda of
the upcoming meeting in Singapore scheduled 21 April 2015.
Reference was made to Chinese court cases on the independence of
guarantees involving arbitration clauses in the underlying contracts and
proposed to discuss this in Singapore. The Chair asked for a one page memo
summarizing the issue to be prepared. It was also suggested to discuss the
problem arising in the examination of documents whether one or three copies
should be presented.
The Chair referred to a proposal for an EU regulation on Securities Financing
Transactions aimed at increasing transparency and providing reporting
requirements. The draft regulation seems to cover the transfer of title to
physical commodities. This would affect substantial parts of trade finance as
title to goods or commodities is not unfrequently used as collateral security in
trade and commodity finance. The Chair circulated a memo of ISDA
mentioning this draft EU regulation and asked for comments.
The Chair invited members to suggest further topics for discussion at the
Singapore meeting of the Legal Committee.

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9. Bank Payment Obligations (BPO)It was reported that Harriett Resnick and
Michael Seeger are working in the drafting group to prepare guidelines for
BPO contracts between banks and their customers. The first draft would be
presented before the Banking Commission Meeting in Singapore.
10. News from BAFT IFSA
It was explained that a white paper has been produced with support of
Sullivan & Cromwell arguing that unfunded trade finance participation
agreements should not be treated as a security based SWAP agreement.
Such treatment would lead to the applicability of a number of provisions in title
VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act and
trigger inter alia burdening reporting requirements. The arguments contained
in the white paper are tailored to fit to bank-to-bank and bank-to-multilaterals
transactions.
The white paper was submitted to the US regulators at the beginning of
January but it is not predictable when and how the regulators will react. The
Chair thanked Harriett Resnick for her report and asked her to provide
updated information on this matter.
11. Recent amendments to the law of guarantees in Thailand
A brief report was made on amendments to the law of guarantees in Thailand
due to take effect on 11 February 2015. These amendments which seem to
constitute mandatory law inter alia provide for the following:

a guarantee has to include the guaranteed amount and the validity period
of the guarantee which cannot be infinite
a provision in a guarantee stating that the guarantor shall be liable as if he
were a joint debtor shall be void
guarantors have to be notified of a default by the main debtor within 60
days
a reduction of the debt of the main debtor can discharge the obligation of
the guarantor
The Chair raised the question whether these amendments refer to
independent guarantees or only to accessory suretyships. There seems to
be no reliable answer to this question at the moment. Reference was
made to an e-mail of a lawyer involved in preparing a client alert dealing
with the Thai law amendments pointing out a potential public order risk
where the guarantee is not governed by Thai law. A Committee member
also circulated a client letter dealing with the amendments to the law of
guarantees in Thailand.

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The Chair indicated that a translation into English of the new statutory
amndement would help and asked members to seek feedback from their
international networks. The discussion should be continued in Singapore.
12. Other matters
The Chair announced that there will be no further telephone conferences of
the Legal Committee until the meeting in Singapore, thanked the members for
their active participation and adjourned the meeting at 16h27.

Participants:

Georges Affaki
Philippe Berta
Floris Carlier
Sean Edwards
Xiang Gao
Jrg Gloss
Angelika Gouskou
Hans Kuhn
Renata Leka
Callie Lombard
Natalia Muina Merino
Mafalda Oliveira Monteiro
Hariette Resnick
Cristina Rooth
Lorna Strong
Ron van Staten
Marco Tagliaferri
Eleonore Treu
AbdelGadir Warsama Ghalib
Mara Eugenia Zozaya

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