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The legal aspects of non-financial market central counterparties
Version 2 2024-06-17, 22:53
Version 1 2017-02-24, 13:45
journal contribution
posted on 2011-01-01, 00:00 authored by Christian Chamorro-CourtlandInternational Air Transport Association v. Ansett Australia Holdings Limited
(2008) was decided correctly by the High Court of Australia. However, the reasoning
of the judges was unsound due to their apparent unfamiliarity with the operation
of Central Counterparty (“CCP”) systems. The judges failed to recognize that
“open offer” was the mechanism of counterparty substitution used in the International
Air Transport Association (“IATA”) clearing rules to create mutuality and
guarantee multilateral insolvency set-off. This article analyzes the Ansett decision
and describes the legal principles that should have been used to decide the case.
Only “financial market” CCPs receive special statutory protections from burdensome
corporate insolvency laws. Therefore, it is argued that the new transnational
lex mercatoria confers analogous protection on the arrangements of “non-financial
market” CCPs such as IATA. The High Court would have reached the same outcome
that they did by applying this legal framework to the facts in Ansett.
(2008) was decided correctly by the High Court of Australia. However, the reasoning
of the judges was unsound due to their apparent unfamiliarity with the operation
of Central Counterparty (“CCP”) systems. The judges failed to recognize that
“open offer” was the mechanism of counterparty substitution used in the International
Air Transport Association (“IATA”) clearing rules to create mutuality and
guarantee multilateral insolvency set-off. This article analyzes the Ansett decision
and describes the legal principles that should have been used to decide the case.
Only “financial market” CCPs receive special statutory protections from burdensome
corporate insolvency laws. Therefore, it is argued that the new transnational
lex mercatoria confers analogous protection on the arrangements of “non-financial
market” CCPs such as IATA. The High Court would have reached the same outcome
that they did by applying this legal framework to the facts in Ansett.
