Upcoming Mallesons seminarsIn the progress towards European Monetary Union (`EMU'), the Euro - the single European currency - is scheduled to become the currency of the participating member states of the European Union on 1 January 1999. This begins a three year transitional period towards complete European Monetary Union during which the participating currencies (namely, the currencies of France, Germany, Belgium, Luxembourg, Portugal, Italy, Spain, Ireland, Austria, Finland and the Netherlands) will be irrevocably converted into Euros at prescribed rates and fixed at those rates. The participating currencies will become units of expression of the Euro at those rates and cease to exist as currencies in their own right. Six months after the end of the transitional period (1 January 2002) only Euros will be legal tender.
The introduction of the Euro raises the issue of whether contracts which involve payments in or calculations by reference to a European currency may be frustrated or otherwise rendered ineffective by the introduction of the Euro.
In May 1998, International Swaps and Derivatives Association published the `ISDA EMU Protocol' which allows for the amendment of ISDA Master Agreements by a simple adherence procedure. The protocol contains five annexes dealing with different issues which arise as a result of Euro being a continuity provision, price sources, payment netting, EMU definitions and bond options.
Australian Financial Markets Association (`AFMA') has now released an issues paper dealing with European Monetary Union. It can be accessed on AFMA's web site at http://www.afma.com.au/AFMA:topframe. Mallesons Stephen Jaques acted for AFMA in considering the EMU ramifications for Australia and in doing so produced three legal opinions covering various aspects of the issue. Those opinions are accessible on the AFMA web site.
Both AFMA and Mallesons Stephen Jaques recommend that, generally, parties to ISDA Master Agreements under which transactions are denominated in, or which involve calculations by reference to, participating currencies should adopt the ISDA EMU protocol by adhering to the five annexes in it. But, as noted in the issues paper, it is necessary for each organisation to determine in each case the suitability or otherwise of adopting the protocol having regard to the particular circumstances applicable to that organisation and participants should fully review the AFMA issues paper before taking any action.
Please contact Michael Gammans on (61 2) 9296 2157 or Edward Kerr on (61 2) 9296 2212
if you have any enquiries regarding European Monetary Union.
Edward Kerr
Partner
Tel (61 2) 9296 2212
edward.kerr@msj.com.au