Europe's Directive on Financial Collateral Arrangements,
implemented by the UK at the very end of 2003, will make it easier
to take and enforce collateral in a variety of financial
transactions. The drafting of the implementing regulations,
however, creates some new legal uncertainty as well.
The UK implemented the new rules through the Financial
Collateral Arrangements (No 2) Regulations 2003, which took effect
on December 26 2003. Although only the UK and Denmark met the
deadline for implementation (December 27 2003), the necessary
legislation should be passed by the other member states in the EU
in due course.
The Regulations modify certain formalities required to create
and perfect financial collateral arrangements. They modify
insolvency law in relation to the enforcement of financial
collateral arrangements. They modify certain rights (such as the
rights to use and appropriate collateral) in relation to financial
collateral arrangements. They also create a standard test as to
which country's domestic law is...