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Abu Dhabi Global Market is now an ISDA recognised netting jurisdiction

First Published 25th September 2017

International Swaps and Derivatives Association (ISDA) has recognised Abu Dhabi Global Market (ADGM) as an effective netting regime with immediate effect

Abu Dhabi - ISDA has published the legal opinion prepared by Shearman & Sterling for ISDA and its members which confirms the enforceability of ISDA's 1992 and 2002 Master Agreements under the ADGM's legal regime. The ISDA opinion addresses the enforceability of netting provisions contained in both ISDA Master Agreements.

Close-out netting is commonly used to manage default risks in derivative contracts in over-the-counter derivatives transactions. It is a legal mechanism where two counterparties agree to offset their obligations upon default, in priority to the application of insolvency tools typically used when a debtor is being wound up.

ADGM 's netting framework, contained in the ADGM Insolvency Regulations 2015, is based on the ISDA Model Netting Act. The ISDA Model Netting Act provides example text for a netting law and has been the basis of regimes adopted by a number of countries that have introduced netting into their jurisdiction.

The ADGM Insolvency Regulations 2015, including the netting provisions, are part of ADGM's legislative framework and of its value proposition for parties, which seek to engage in derivative trading activities.