On December 15, 2023, the International Swaps and Derivatives Association, Inc. (“ISDA”) published its legal opinion (the “ISDA RMI Opinion”) as to the enforceability under the law of the Republic of the Marshall Islands of the termination, bilateral close-out netting and multi-branch netting provisions of the ISDA Master Agreements.1 The ISDA RMI Opinion was commissioned by ISDA following the enactment of netting legislation in the RMI in September 2023 (the “Netting Act”),2 which codified the enforceability of netting agreements that enable parties in qualified financial transactions to aggregate contractual obligations into one single net payment obligation. ISDA legal opinions evaluate, among other things, the enforceability of the close-out netting provisions of the 1992 and 2002 ISDA Master Agreements, and are available for many jurisdictions.3 The ISDA RMI Opinion should provide comfort to institutions acting as swap dealers and hedge or financing providers to non-resident entities organized in the Marshall Islands,4 enhancing the ability of such entities to enter into derivatives transactions and other financial contracts for hedging, financing, or trading purposes. The ISDA RMI Opinion also applies to “foreign maritime entities”, i.e., a non-Marshall Islands entity registered in the Marshall Islands for the purposes of owning Marshall Islands flagged vessel(s).
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1 The ISDA RMI Opinion is available to ISDA members on the ISDA site; visit https://www.isda.org/ or contact ISDA for more information.
2 For more information on the Netting Act, please see our Simply Speaking article from October 2023 at the following link: https://maritime.sewkis.com/blog/marshall-islands-netting-act-2023.
3 See International Swaps and Derivatives Association, Opinions Overview, ISDA, https://www.isda.org/opinions-overview/ (last visited Jan. 11, 2024).
4 Non-resident entities organized in the Marshall Islands include non-resident corporations, partnerships, limited partnerships, and limited liability companies.
