New German Master Agreement published
The Association of German Banks (Bundesverband deutscher Banken) which has published the German Master Agreement for Financial Derivatives Transactions (Rahmenvertrag für Finanztermingeschäfte - DRV) has released an updated version of the DRV on 5 September 2018.
The DRV was first published in 1993 and is the standard market documentation for OTC-derivatives and cross-border transactions within the German market. The last significant update of the DRV prior to the recent one took place in 2001.
The new version of the DRV (DRV 2018) is meant to serve as an alternative to the existing 2001 version of the DRV and allows market participants to use a modernised DRV with a number of new features while retaining the conceptual approach and contractual structure of the existing DRV 1993/2001.
The DRV 2018 was, inter alia, prompted by the recent revision of Sec. 104 of the German Insolvency Code (Insolvenzordnung - InsO), which sets out the general legal framework for netting under German (insolvency) law.
The key differences between the DRV 2018 and the DRV 1993/2001 are:
- reversal of standard regarding payment netting, ie transaction-based payment netting is now the default method
- new option to elect special provisions regarding insolvency proceedings against qualified branches
- new option to include a provision postponing the due date in view of counterclaims
- modernisation of the definition of the term financial derivatives transaction (eg now expressly referencing credit derivatives)
- introduction of text form as a general standard for communications and deletion of reference to now obsolete forms of communication
- introduction of shorter cure period for terminations for good cause, clarification regarding insolvency proceedings initiated by a competent authority, clarification of the due date for the claim for non-performance, and
- concentration of all key elements, closer terminological and structural alignment with new statutory netting provision, introduction of new features such as applicable periods for conclusion of actual or potential replacement transactions, including the possibility to significantly extend the period where necessary.
In addition to the DRV 2018, an Amendment Agreement is available, which allows counterparties to update an existing DRV to a DRV 2018 in case they would like to benefit from the new features introduced with the DRV 2018.
