Clifford Chance

Which Law Applies? A recent Bahraini case highlights the relevance of forum to choice of law

23 May 2016

Market participants looking to engage in sales and trading transactions, such as swaps and repos, with emerging market counterparties rightly investigate whether the close-out and netting provisions in their contracts will be recognised and given effect in the jurisdiction of the relevant counterparty.

A recent Bahraini case is a timely reminder that, while the effectiveness of netting is certainly an important element to due diligence, it is by no means the only aspect to investigate. In particular, if the forum before which the case is likely to be heard will not recognise and apply the parties' choice of law, the claim may never get as far as close-out and netting.

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