On December 2019 the Parliament of Georgia approved the legislative package on financial collateral, netting and derivatives. On July 29, 2020, the International Swaps and Derivatives Association (ISDA) published a legal opinion on the enforceability of close-out netting in Georgia.
ISDA legal opinion is a recognition of the compliance of Georgian legislation with international practice.
Both the draft law and the ISDA legal opinion were prepared with the active support of the European Bank for Reconstruction and Development (EBRD). ISDA has published legal opinions on close-out netting in more than 75 jurisdictions around the globe and they are updated annually to reflect any changes in legislation. Georgia has now been added to this list.
Counterparties without access to ISDA industry standard legal opinions need to obtain bespoke opinions separately from law firms, which makes investments more complex and expensive. Therefore the absence of an ISDA industry legal opinion results in counterparties refraining from entering into transactions with Georgian financial institutions. From today it is no longer a hindering factor. The ISDA legal opinion will be available to all counterparties, including financial institutions, corporates, funds and other entities. This will significantly reduce exposure for regulatory capital relief purposes and facilitate derivatives transactions with Georgian counterparties.
The ISDA netting opinion of the Association is relied upon by derivatives counterparties across the globe, it's positive legal analysis will give new impetus to the development of the financial market in Georgia.
