Jun 10, 2026 · 9 min · 5 segments
The second and final part of Rallie's chat with Jon Wilkinson, exploring Credit Support Annexes, breaking down the differences between an English Law CSA and a New York Law CSA, as well as a…
Jon WilkinsonGuest
Ralitza ShiderovaHostNo entities detected.
When you are a counterparty deciding between the two, what is the determining factor for you choosing between an English law CSA and a New York law CSA? Well,
I think first and foremost, especially if you're adding a collateral arrangement to an existing ISDA, but generally in all cases, the first question you should be asking is, well, what is the governing law of my underlying ISDA master agreement? Sort of taking a step back, these documents form part of the ISDA master agreement and therefore parties generally want the governing law of the annex to match the governing law of their ISDA master.
So if you already have a New York law governed ISDA, unless there's a particular reason not to do so, parties are probably going to look towards the New York CSA and vice versa.
So that's sort of a very practical way point, but then looking more towards the legal analysis and bringing together some of the things we just discussed.
If you're looking to enter into an English ISDA and an English CSA, you'll be wanting to check internally or check industry legal opinions for your counterparty and all relevant jurisdictions and check, is there a risk that this arrangement could be re-characterized? And if the answer to that is no, well, is closeout netting in that jurisdiction enforceable? Yes or no.
If it's not, then fundamentally there's a risk that the English CSA may not work as intended and you may actually be better off going with a New York CSA where the security analysis may be different.
On the flip side, if you're looking at a New York law CSA, you really need to be asking yourself, is there anything that I need to do to ensure that this security interest is perfected? As we said, sometimes that may be straightforward, other times not so much.
If you're looking at things like registration in a particular jurisdiction, something you're also going to want to bear in mind is, well, if I register this security interest, what are the implications of that for the document itself? Now, in some jurisdictions, when you register a security interest, it becomes publicly available on the registry.
And so that's something that counterparties are definitely going to want to bear in mind, particularly if there's sort of commercially sensitive terms in that document, terms that you maybe don't want becoming public knowledge.
That's definitely something that you're going to want to bear in mind and that may um, sort of steer you towards using an English law CSA as a, as an alternative, because with the English law CSA, of course there's, there's no security interest to register because you're gaining ownership of those assets.
And then also is my security interest going to be enforceable in my counterparty's insolvency? Um, that again is something that, um, is to maintain a number of legal opinions in respect of, um, in a lot of jurisdictions, particularly with financial collateral legislation, there are not massive issues, but it's something that needs to be checked on a case by case basis, whether there's the likelihood of a stay on the enforcement of security or anything of that nature.
So really, despite the fact that these two documents look very similar and perform almost an identical function, legally, the mechanisms by which they work are very, very different and dependent on what jurisdictions you're looking at and what sort of collateral you're looking at, there may be a clear preference of one over the other so i guess the the main thing to bear in mind um for counterparties entering into these documents is just not to assume that because they look similar that they are the same and they'd always work in the same way because that's not the case at all
When you are a counterparty deciding between the two, what is the determining factor for you choosing between an English law CSA and a New York law CSA? Well,
I think first and foremost, especially if you're adding a collateral arrangement to an existing ISDA, but generally in all cases, the first question you should be asking is, well, what is the governing law of my underlying ISDA master agreement? Sort of taking a step back, these documents form part of the ISDA master agreement and therefore parties generally want the governing law of the annex to match the governing law of their ISDA master.
So if you already have a New York law governed ISDA, unless there's a particular reason not to do so, parties are probably going to look towards the New York CSA and vice versa.
So that's sort of a very practical way point, but then looking more towards the legal analysis and bringing together some of the things we just discussed.
If you're looking to enter into an English ISDA and an English CSA, you'll be wanting to check internally or check industry legal opinions for your counterparty and all relevant jurisdictions and check, is there a risk that this arrangement could be re-characterized? And if the answer to that is no, well, is closeout netting in that jurisdiction enforceable? Yes or no.
If it's not, then fundamentally there's a risk that the English CSA may not work as intended and you may actually be better off going with a New York CSA where the security analysis may be different.
On the flip side, if you're looking at a New York law CSA, you really need to be asking yourself, is there anything that I need to do to ensure that this security interest is perfected? As we said, sometimes that may be straightforward, other times not so much.
If you're looking at things like registration in a particular jurisdiction, something you're also going to want to bear in mind is, well, if I register this security interest, what are the implications of that for the document itself? Now, in some jurisdictions, when you register a security interest, it becomes publicly available on the registry.
And so that's something that counterparties are definitely going to want to bear in mind, particularly if there's sort of commercially sensitive terms in that document, terms that you maybe don't want becoming public knowledge.
That's definitely something that you're going to want to bear in mind and that may um, sort of steer you towards using an English law CSA as a, as an alternative, because with the English law CSA, of course there's, there's no security interest to register because you're gaining ownership of those assets.
And then also is my security interest going to be enforceable in my counterparty's insolvency? Um, that again is something that, um, is to maintain a number of legal opinions in respect of, um, in a lot of jurisdictions, particularly with financial collateral legislation, there are not massive issues, but it's something that needs to be checked on a case by case basis, whether there's the likelihood of a stay on the enforcement of security or anything of that nature.
So really, despite the fact that these two documents look very similar and perform almost an identical function, legally, the mechanisms by which they work are very, very different and dependent on what jurisdictions you're looking at and what sort of collateral you're looking at, there may be a clear preference of one over the other so i guess the the main thing to bear in mind um for counterparties entering into these documents is just not to assume that because they look similar that they are the same and they'd always work in the same way because that's not the case at all
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