Under a Ministry of Justice proposal yet to be formally released, Finland would legislate to clarify the regulatory regime for netting in the securities and currency markets. The present uncertainty surrounding the legality of netting under Finnish insolvency laws would be largely dispelled by making netting (including close-out netting and multi-party netting) and certain related procedures expressly enforceable if based on terms, such as those of the ISDA master agreement, widely used in securities and currency trading.
The proposed legislation would among other things provide that bankruptcy or other insolvency events in relation to a party to a netting agreement would not prevent the netting of obligations arising before the bankruptcy or other insolvency event.
Furthermore, under the proposed legislation netting effected or security granted during the three-month suspect period preceding the bankruptcy or reorganization of the Finnish party participating in the netting or granting the security would not be liable to be revoked under Finnish voidable preferance regulations.
If implemented, the legislation would also apply retroactively to netting agreements made before the entry into force of its provisions unless insolvency proceedings had been initiated before that time.
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