engleski

Legal Issues Regarding Netting in the Croatian Legal System - de lege lata and Perspectives

The concept of netting as a risk management tool opens up many issues in the Croatian legal system. In general, netting in the context of the EU is the cancellation of reciprocal obligations, the valuation of terminated obligations and its replacement by a single payment obligation. The main issue which was put forth and is still before the Croatian legislator is the recognition of netting enforceability in a so-called close-out netting insolvency context. In spite of its widespread use in developed financial markets since the 1980s, it only appeared in Croatia in 1996. Since then the hyperproduction of legal rules in the Croatian legal system regarding netting has been quite obvious. Although this situation has produced a lot of legal uncertainties for participants in the Croatian financial market, this process has made its impact on the development of the Croatian financial market. In the first part of this paper, the author analyses the meaning of the netting concept from a comparative law perspective, its ifferentiation from set-off and the forms of netting in the financial market. The author also examines the role of ISDA in the harmonisation of the legal treatment in different legislations in the world. ISDA stresses the main economic purposes of netting and its impact on the financial market. In the second part, the author further debates whether it is necessary to relax the criteria for enforceability of netting agreements and identifies various legal uncertainties in the enforceability of netting in the Croatian legal system together with ideas on how to overcome them.

derivatives ; insolvency ; ISDA Master Agreement ; netting ; set-off

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