By Ian Borman and Lorraine Vaz, King & Wood Mallesons London
The Bail-In Clause has been causing lawyers to scratch their heads for some time. Will Brexit mean that English-law contracts have to include a Bail-in Clause? What happens if a counterparty refuses to incorporate the Bail-In wording?
Bail-In – a reminder
What does the clause do? – A Bail-In Clause requires counterparties to an agreement entered into with an EEA financial institution to acknowledge that a Regulator’s rescue plan may involve the cancellation, conversion or write-down of that institution’s liabilities. Broadly speaking, all EEA banks and major investment firms together with their branches, EEA parents and certain EEA subsidiaries must ensure that a Bail-In Clause is included in any agreement they enter into which is governed by non-EEA law and contains in-scope liabilities. The EEA consists of the EU, Iceland, Liechtenstein and Norway.
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