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Market Participants Expect Supreme Arbitration Court Opinion on Interest Rate Swap Contracts

10.09.2013 20:06 / PRIME

Russian stock market participants expect the Supreme Arbitration Court (SAC) to release an opinion on IRS contracts, said Head of National Stock Market Participants Assocaition (NAUFOR) Alexey Timofeev at the Derivatives in Russia 2013 conference on Tuesday.

The need for a court opinion on IRS contracts became evident in 2011-2012, when Unicredit bank counterparties walked away from a similar trade prior to a coupon payment date. Moscow Arbitration Court ruled in favor of the counterparties, arguing that the company had no outstanding obligations. The bank filed an appeal, but the court passed a similar verdict once again.

“We expect the Supreme Arbitration Court (SAC) to release an opinion on IRS contract debates shortly, confirming that IRS contract obligations are deemed outstanding from contract execution date, and not from accrual date”, said Timofeev. He speculated that in the future this opinion could become a SAC Plenary Session Resolution.

The opinion will stipulate an option to unilaterally cancel a financial derivative trade contract, if parties are a professional and a non-professional and the latter has not been warned of risks and possible adverse effects.

“In our opinion, the decision is acceptable. All it takes is setting disclosure standards for derivative trades. There is an option to amend the trade amount or cancel the IRS contract if the purpose is hedging risks from another amended contract, such as a loan, between the same parties”, he added.

Corporate and contract lawProject Group №1Alexey Timofeev