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Germany’s Highest Court Invalidates Standard Close-Out Netting Clause for Financial Derivatives—BaFin Order Neutralizes the Effects of the Decision
7 July 2016
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Close-out netting clauses frequently used in master agreements for derivative transactions were held invalid by the German Federal Court of Justice.
The German regulator BaFin immediately issued an interim order neutralizing the effects of the decision to avoid disrupting effects on the market.
Legislative action is expected to commence with the aim to ensure the continuing enforceability of close-out netting clauses in market standard master agreements.
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