The Abu Dhabi Global Market announced that the International Swaps and Derivatives Association (ISDA) has published two new legal opinions on the validity and enforceability of collateral arrangements under ISDA Credit Support Agreements within ADGM.
These opinions are the first ever published by ISDA in respect of any jurisdiction in the GCC and further reinforce ADGM’s position in providing a robust international legal framework, allowing financial institutions and corporates to efficiently manage risk.
ISDA’s collateral opinions on ADGM, prepared by Shearman & Sterling LLP for ISDA and its members, confirms the enforceability of collateral arrangements under ISDA's credit support documentation, for both collateral takers and collateral providers located in ADGM. The opinions complement ISDA’s netting opinion on the enforceability of ISDA’s 1992 and 2002 Master Agreements under the laws of ADGM.
ISDA Credit Support Agreements manage and mitigate default risks in derivative contracts in over-the-counter derivatives transactions by enabling trading parties to pledge variable levels of collateral in support of their trading positions on an ongoing basis. When granted on a reciprocal basis, such margin arrangements operate to reduce insolvency risk exposure to both counterparties and enable certain financial institutions to comply with international requirements such as margin regulations.
The ADGM Insolvency Regulations 2015, including netting and collateral provisions based upon the ISDA Model Netting Act, are part of ADGM's comprehensive legislative framework and an important part of its value proposition for parties which seek to engage in derivative trading activities.