The German Jurisdictional Module was created to allow market participants to comply with Section 60a of the German Recovery and Resolution Act regarding contractual stays in financial contracts governed by the law of a “third country” (a jurisdiction other than that of a member of the European Union) or with a place of venue in a third country (German Legislation).

The German Jurisdictional Module to the the ISDA Resolution Stay Jurisdictional Modular Protocol enables entities subject to the German Legislation to amend the terms of their Covered Agreements by obtaining from certain counterparties a contractual recognition of the application of stays on termination with respect to requirements of the German Legislation.

Please refer to the “Frequently Asked Questions” below for more information.

The German Jurisdictional Module is open to ISDA members and non-members. Parties will pay a one-time fee of $500 to ISDA for each adherence to the German Jurisdictional Module. There is no cut-off date to the German Jurisdictional Module. ISDA does, however, reserve the right to designate a cut-off date by giving 30 days’ notice on this.

ISDA has prepared this list of frequently asked questions to assist in your consideration of the GERMAN JURISDICTIONAL MODULE to the ISDA RESOLUTION STAY JURISDICTIONAL MODULAR PROTOCOL (the ISDA Jurisdictional Modular Protocol).

THESE FREQUENTLY ASKED QUESTIONS DO NOT PURPORT TO BE AND SHOULD NOT BE CONSIDERED A GUIDE TO OR AN EXPLANATION OF ALL RELEVANT ISSUES OR CONSIDERATIONS IN CONNECTION WITH THE GERMAN JURISDICTIONAL MODULE. PARTIES SHOULD CONSULT WITH THEIR LEGAL ADVISERS AND ANY OTHER ADVISER THEY DEEM APPROPRIATE PRIOR TO USING OR ADHERING TO THE GERMAN JURISDICTIONAL MODULE.  ISDA ASSUMES NO RESPONSIBILITY FOR ANY USE TO WHICH ANY OF ITS DOCUMENTATION MAY BE PUT.

These FAQs address the following questions:

  • What is the purpose of the German Jurisdictional Module?
  • How does adherence to the German Jurisdictional Module and the ISDA Jurisdictional Modular Protocol work?
  • How does the German Jurisdictional Module relate to the German Legislation?
  • Why are certain terms in italics and others in quotation marks?
  • What agreements are Covered Agreements under the German Jurisdictional Module?
  • What entities are Regulated Entities under the German Jurisdictional Module?
  • When does the German Jurisdictional Module become effective?
  • How do I sign up to the German Jurisdictional Module?

The ISDA Jurisdictional Modular Protocol is designed to facilitate market participants’ compliance with regulations regarding contractual stays in financial contracts governed by third-country law in different jurisdictions. As regulations are adopted in a jurisdiction, a “Jurisdictional Module” to the ISDA Jurisdictional Modular Protocol could be published that would include operational provisions based on the text of that regulation and aimed at enabling parties to comply with those requirements. A party will be able to adhere to a particular Jurisdictional Module by submitting an Adherence Letter for such Jurisdictional Module. Each Jurisdictional Module will be considered individually.

For more information on the ISDA Jurisdictional Modular Protocol and adherence to the ISDA Jurisdictional Modular Protocol, please see the general FAQs for the ISDA Jurisdictional Modular Protocol.

The German Jurisdictional Module was published as a Jurisdictional Module to the ISDA Jurisdictional Modular Protocol on 28 June 2016.

What is the purpose of the German Jurisdictional Module?

The German Jurisdictional Module was created to allow market participants to comply with Section 60a of the German Recovery and Resolution Act regarding contractual stays in financial contracts governed by the law of a “third country” (a jurisdiction other than that of a member of the European Union) or with a place of venue in a third country (German Legislation).Adhering Parties will be able to adhere to the German Jurisdictional Module and identify themselves as either “Regulated Entities” that are subject to the German Legislation or “Module Adhering Parties” that are adhering for the purpose of satisfying the regulatory requirements applicable to their counterparties under the German Legislation.

How does adherence to the German Jurisdictional Module and the ISDA Jurisdictional Modular Protocol work?

Does a Module Adhering Party have to amend its Covered Agreements with all Regulated Entities?

No, a Module Adhering Party has the ability to choose the Regulated Entity or Regulated Entities it would like to amend its Covered Agreements with when it adheres to the German Jurisdictional Module. Once a Module Adhering Party chooses to amend its agreements with a particular Regulated Entity, that Regulated Entity is defined as a “Regulated Entity Counterparty” with respect to that particular Module Adhering Party and to the German Jurisdictional Module.

Module Adhering Parties have multiple options for how they can choose the Regulated Entity or Regulated Entities they would like to amend their Covered Agreements with.

How can a Module Adhering Party choose which Regulated Entities it will amend its Covered Agreements with?

A Module Adhering Party with respect to the German Jurisdictional Module may choose the Regulated Entity or Regulated Entities it would like to amend its Covered Agreements with by choosing between the following three options in its Adherence Letter:

  1. All Regulated Entities: Under this option, a Module Adhering Party identifies every Adhering Party that has identified itself as a “Regulated Entity” with respect to the German Jurisdictional Module to be a Regulated Entity Counterparty with respect to it. That means that the Module Adhering Party is agreeing to amend all of the relevant Covered Agreements with all of the Regulated Entities that have adhered or will adhere in the future to the German Jurisdictional Module.
  2. All G-SIBs: Under this option, a Module Adhering Party identifies any current or future Regulated Entity with respect to the German Jurisdictional Module that is part of a banking group that has been designated by the Financial Stability Board as a “global systemically important bank” (G-SIB), as of the date of the publication of the German Jurisdictional Module, as a Regulated Entity Counterparty with respect to it. This election would include Regulated Entities within such G-SIB group that subsequently adhere to such Jurisdictional Module but not Regulated Entities that are members of banking groups that are subsequently identified as G-SIBs.
  3. Entity-by-Entity: Under this option, the Module Adhering Party chooses to identify one or more Regulated Entities with respect to the German Jurisdictional Module as Regulated Entity Counterparties with respect to it. The Module Adhering Party can notify each Regulated Entity that it identifies as a Regulated Entity Counterparty, either through ISDA Amend or by sending a bilateral “Module Adherence Notice” directly to such Regulated Entity. Note that a Module Adhering Party that chooses to identify one or more Regulated Entities as Regulated Entity Counterparties with respect to it may choose between Regulated Entities in the same banking group within the German Jurisdictional Module.

Note that a Module Adhering Party can elect both option 2 to identify all G-SIB Regulated Entities as its Regulated Entity Counterparties and option 3 to identify additional Regulated Entities as its Regulated Entity Counterparties.

Once I submit my Adherence Letter, is my adherence to the German Jurisdictional Module complete or are there any other steps I have to take?

Depending on the elections you make as a Module Adhering Party, you may be required to send notices to Regulated Entity Counterparties after you submit your Adherence Letter to complete your adherence to the German Jurisdictional Module.

Entity-by-Entity Designation

If you adhere as a Module Adhering Party and elect to identify Regulated Entity Counterparties on an “Entity-by-Entity” basis (i.e., option 3 above), you need to take steps to identify Regulated Entity Counterparties. You can do this either (1) through ISDA Amend or (2) by sending a bilateral “Module Adherence Notice” to each Regulated Entity Counterparty. Your contracts will not be amended until the date you notify a Regulated Entity that it is a Regulated Entity Counterparty with respect to you.

If you wish to use ISDA Amend to identify one or more specific Regulated Entities as Regulated Entity Counterparties with respect to you, you may do so by using the ISDA Amend website (http://www.markit.com/product/isda-amend).

To use the ISDA Amend website, you will need to have an account with ISDA Amend, log in and complete the steps necessary to make Entity-by-Entity elections.

If you wish to identify one or more specific Regulated Entities as Regulated Entity Counterparties with respect to you by sending such Regulated Entity or Regulated Entities bilateral Module Adherence Notices, rather than through ISDA Amend, such notices must at a minimum (1) identify the Module Adhering Party and the Jurisdictional Module and (2) identify the Regulated Entity as a Regulated Entity Counterparty with respect to the Module Adhering Party. ISDA has published a sample Module Adherence Notice (http://assets.isda.org/media/f253b540-102/3eb0dc21.docx) that Module Adhering Parties can use to make Entity-by-Entity elections.

Adherence as an Agent on Behalf of Clients

If you are an agent adhering on behalf of “some but not all” clients, you must either identify the clients on whose behalf you are adhering in an annex to your Adherence Letter (which will be made public on the ISDA website) or send a list to each Regulated Entity Counterparty with respect to such clients identifying the clients on whose behalf you are adhering.

If you are an agent adhering on behalf of “all” clients that you represent, you may, but are not required to, identify the clients on whose behalf you are adhering, either in an annex to your Adherence Letter (which will be made public on the ISDA website) or by sending a list of the clients on whose behalf you are adhering to each Regulated Entity Counterparty with respect to such clients.

If you wish to use ISDA Amend to notify your Regulated Entity Counterparties of the clients on whose behalf you are adhering, you may do so by using the ISDA Amend website(http://www.markit.com/product/isda-amend).To use the ISDA Amend website, you will need to have an account with ISDA Amend, log in and complete the steps necessary to provide Regulated Entity Counterparties with the lists of clients on whose behalf you are adhering.

If you wish to bilaterally notify your Regulated Entity Counterparties of the clients on whose behalf you are adhering, ISDA has published a sample Underlying Funds Notice (http://assets.isda.org/media/f253b540-103/af6818e9.docx) that agents can use to notify their Regulated Entity Counterparties of the clients on whose behalf they are adhering.

How does the German Jurisdictional Module relate to the German Legislation?

The German Jurisdictional Module is intended to facilitate compliance with the German Legislation. The provisions of the German Jurisdictional Module that amend Covered Agreements are based on the provisions of the German Legislation and the interpretive guidance provided by the explanatory memorandum ordered by the German Ministry of Finance in respect of the German Legislation. Note, however, that as discussed in Question 5 of the general FAQs for the ISDA Jurisdictional Modular Protocol, amendments in a Jurisdictional Module, including the German Jurisdictional Module, are made to Covered Agreements on a “retrospective” and “prospective” basis, even if this is not required by the regulations.

Parties should consult with their legal advisers and any other adviser they deem appropriate to understand the requirements of the German Legislation.

Why are certain terms in italics and others in quotation marks?

Words and phrases in quotation marks have the meaning given in the German Legislation to the bracketed and italicized German word or phrase immediately following such word or phrase. The German Jurisdictional Module is interpreted in accordance with the German Legislation.

What agreements are Covered Agreements under the German Jurisdictional Module?

German Regulated Agreements, as defined under the German Jurisdictional Module, are Covered Agreements under the German Jurisdictional Module.

A German Regulated Agreement is, as such terms are defined in the German Legislation, a “financial contract” [Finanzkontrakt] which is governed by “third country law” [Recht eines Drittstaats], or the “legal venue” [Gerichtsstand] for the agreement has been explicitly agreed to be a “third country” [Drittstaat] that is identified in the “financial contract” [Finanzkontrakt].

If the party to, or beneficiary of, the “financial contract” [Finanzkontrakt] is an “affiliated entity” [gruppenangehöriges Unternehmen] of an “institution” [Institut], and the affiliated entity is “incorporated abroad” [mit Sitz im Ausland], such “financial contract” [Finanzkontrakt] shall only be a “German Regulated Agreement” if it contains termination rights or other contractual rights within the meaning of Sections 82 to 84, 144(3), and 169(5) numbers 3 and 4 of the German Recovery and Resolution Act [Sanierungs- und Abwicklungsgesetz] which would otherwise become exercisable due to a contractual reference to the “domestic affiliated entity” [gruppenangehöriges Unternehmen mit Sitz im Inland].

The German Jurisdictional Module also states that if the party to, or beneficiary of, the “financial contract” [Finanzkontrakt] is an “affiliated entity” [gruppenangehöriges Unternehmen] of an “institution” [Institut], and the affiliated entity is “incorporated abroad” [mit Sitz im Ausland], such “financial contract” [Finanzkontrakt] shall only be a “German Regulated Agreement” if it contains termination rights or other contractual rights within the meaning of Sections 82 to 84, 144(3), and 169(5) numbers 3 and 4 of the German Recovery and Resolution Act [Sanierungs- und Abwicklungsgesetz] which would otherwise become exercisable due to a contractual reference to the “domestic affiliated entity” [gruppenangehöriges Unternehmen mit Sitz im Inland].

What entities are Regulated Entities under the German Jurisdictional Module?

A Regulated Entity under the German Jurisdictional Module is, as such terms are defined in the German Legislation, any:

(a)                “institution” [Institut]; or

(b)               “affiliated entity” [gruppenangehöriges Unternehmen] of such “institution” [Institut].

When does the German Jurisdictional Module become effective?

The German Legislation became effective 1 January 2016, and so the German Jurisdictional Module becomes effective on the “Implementation Date” (the date that both parties submit, and have accepted, their Adherence Letters for the German Jurisdictional Module) with respect to a Module Adhering Party and a Regulated Entity Counterparty.

How do I sign up to the German Jurisdictional Module?

Please see the general ISDA Jurisdictional Modular Protocol FAQs for information on adherence to Jurisdictional Modules and the ISDA Jurisdictional Modular Protocol.