Chilean Chapter in ICLG

Derivatives 2020 A practical cross-border insight into derivatives First Edition Featuring contributions from: Bonelli Erede Lombardi Pappalardo LLP Hengeler Mueller Borenius Attorneys Ltd Jeantet AARPI CARDIGOS Maples Group Carey Nagashima Ohno & Tsunematsu Credit Agricole Corporate and Investment Bank Nishimura & Asahi Davis Polk & Wardwell LLP Paul, Weiss, Rifkind, Wharton & Garrison LLP Gilbert + Tobin Shearman & Sterling LLP GSK Stockmann Travers Smith LLP Haynes and Boone, LLP Table of Contents Expert Chapters Smart Contracts in the Derivatives Space: An Overview of the Key Issues for Buy-Side Market Participants 1 Jonathan Gilmour & Vanessa Kalijnikoff Battaglia, Travers Smith LLP Close-out Under the 1992 and 2002 ISDA Master Agreements 4 Donna Parisi, Azam Aziz, Geoffrey Goldman & Daniel Laguardia, Shearman & Sterling LLP Structural Considerations in Deal Contingent Hedges 15 Meyer C. Dworkin & Michele Babkine, Davis Polk & Wardwell LLP Derivatives and Incentives for Opportunistic or Manipulative Behaviour: Related Issues and Responses 19 Giorgio Bovenzi, Matthew Frankle, Matthew Howes & Brian Sung, Haynes and Boone, LLP Japanese Yen Interest Rate Benchmark Reform – Crossroad of the Local Movements in Japan and the Global Movement in 26 the Derivatives Space Yusuke Motoyanagi & Toshiyuki Yamamoto, Nishimura & Asahi Cross-Border Derivatives for Project Finance in Latin America 32 Felicity Caramanna, Credit Agricole Corporate and Investment Bank Q&A Chapters Australia Germany 36 Gilbert + Tobin: Louise McCoach 80 Hengeler Mueller: Stefan Krauss & Christian Schmies Cayman Islands 43 Maples Group: Tina Meigh & Alasdair Robertson Italy 87 Bonelli Erede Lombardi Pappalardo LLP: Giuseppe Chile 48 Massimiliano Danusso, Angelica Spinelli Giordano & Carey: Francisco Ugarte, Alejandra Daroch & Matteo Bencic Domingo Russi Japan England & Wales 94 55 Nagashima Ohno & Tsunematsu: Ichiro Oya, Travers Smith LLP: Jonathan Gilmour & Vanessa Masayuki Fukuda, Hideaki Suda & Tsutomu Endo Kalijnikoff Battaglia Luxembourg Finland 101 64 GSK Stockmann: Andreas Heinzmann & Valerio Borenius Attorneys Ltd: Niina Nuottimäki & Jenny Scollo Shahnovskij Portugal France 107 71 CARDIGOS: Pedro Cardigos, Maria Almeida Jeantet AARPI: Jean-François Adelle, Thibault Fernandes & Sara Santos Dias Mercier & Tamara Mammadova USA 114 Paul, Weiss, Rifkind, Wharton & Garrison LLP: Manuel S. Frey & Anastasia V. Peterson 48 Chapter 9 Chile Chile Francisco Ugarte Alejandra Daroch Carey Domingo Russi 1 Documentation and Formalities transactions entered into by some regulated entities which must be evidenced in writing, no documentary nor execution requirements are needed to ensure that a derivative transaction 1.1 Please provide an overview of the documentation is validly executed. However, not by reason of the formation (or framework of documentation) on which derivatives transactions are typically entered into of the agreement between the parties but by reason of proof of in your jurisdiction. If the 1992 or 2002 ISDA Master the existence of the same, it is recommendable to evidence in Agreements are not typically used, please describe the writing any transaction agreed over the telephone or by elec- contracts which are used, as well as any appendices or tronic means. In this regard, derivatives contracts executed by annexures. individuals or legal entities using an electronic signature will be valid in the same way and will produce the same effects as those Although Chilean law does not require any specific documenta- executed in writing. tion for the valid execution of derivatives transactions, the 1992 Regarding derivatives transactions entered into by legal enti- ISDA Master Agreement, in its forms “Local Currency – Single ties located in Chile – and particularly with respect to those Jurisdiction” and “Multicurrency – Cross Border”, and the 2002 entered by regulated entities and institutional investors (e.g. ISDA Master Agreements, are typically used in our jurisdiction to banks, insurance companies, national reinsurance entities, enter into international derivatives transactions. For local deriva- etc.) – careful review of their bylaws and/or internal regula- tives transactions involving Chilean banks, the typical documen- tions should be made before executing the respective derivative tation is the Master Agreement for Derivatives Agreements in contract since, in the case that corporate authorisation is needed, the Local Market (Condiciones Generales para Contratos de Derivados the omission thereof may cause the derivative transaction to be en el Mercado Local ) approved by the Chilean Banking Association null and void under Chilean law. (Asociación de Bancos e Instituciones Financieras). These agreements have been recognised by the Central Bank of Chile (Banco Central de Chile) (the “Central Bank”) for the purposes of close-out 1.4 Which governing law is most often specified in ISDA documentation in your jurisdiction? Will the netting of derivatives transactions (see section 5 below). courts in your jurisdiction give effect to any choice of foreign law in the parties’ derivatives documentation? 1.2 Are there any variances in documentation for If the parties do not specify a choice of law in their certain types of derivatives transactions or between derivatives contracts, what are the main principles in certain types of counterparties in your jurisdiction? For your jurisdiction that will determine the governing law of example, what differences do you see between over-the- the contract? counter (“OTC”) and exchange-traded derivatives (“ETD”) or for particular asset classes? New York law and English law are often specified as governing law in ISDA documentation executed in our jurisdiction, with Unless the derivative contract is executed with a foreign coun- the former being more frequently used. terparty, derivatives contracts in Chile are typically executed Under Chilean law, parties may freely and validly agree to the according to the Master Agreement for Derivatives Agreements governing law of the derivative documentation and the courts in the Local Market referred to in question 1.1 above. will give effect to any choice of foreign law. If the parties do not specify a choice of law in their derivatives contracts, the 1.3 Are there any particular documentary or execution governing law will be determined pursuant to conflict of laws’ requirements in your jurisdiction? For example, rules applicable in Chile which state that the formalities of the requirements as to notaries, number of signatories, or contract are determined by the law of the jurisdiction in which corporate authorisations? it was executed, but if such contract is intended to be performed or to produce effects in Chile, such effects must conform to the Pursuant to Chilean law, except for specific derivatives requirements of Chilean law. Derivatives 2020 © Published and reproduced with kind permission by Global Legal Group Ltd, London Carey 49 2 Credit Support 2.7 What are the required formalities to create and/ or perfect a valid security over an asset? Are there any regulatory or similar consents required with respect to 2.1 What forms of credit support are typically provided the enforcement of security? for derivatives transactions in your jurisdiction? Chilean law allows the creation of security interests over all In the case of ISDA transactions, the forms commonly used are kinds of assets but the type of collateral in which a party is taking the 1994 and 1995 Credit Support Annexes (New York law). a security interest will dictate the formalities (regulated under different bodies of law) for perfecting the security interest. 2.2 How is credit support for derivatives transactions Whilst no consents are required with respect to enforcement typically documented in your jurisdiction? For example, of securities, it is important to bear in mind that Chilean law under an ISDA Credit Support Annex or Credit Support does not allow self-help remedies and out-of-court enforcement Deed. of securities but provides for specific enforcement rules which are part of Chilean public policy and as such cannot be waived Typically, credit support for ISDA derivatives transactions is or contracted-out. documented under an ISDA Credit Support Annex. For local derivatives transactions, credit support is typically documented 3 Regulatory Issues by each local bank credit support annex and through a Chilean law security (e.g., pledge). 3.1 Please provide an overview of the key derivatives regulation(s) applicable in your jurisdiction and the regulatory authorities with principal oversight. 2.3 Where transactions are collateralised, would this typically be by way of title transfer, by way of security, or a mixture of both methods? There is no single or overarching law regulating derivatives in Chile. The main regulations include the following: Law No. 20,544 on Tax Treatment of Derivatives (the “Derivatives Chilean law does not recognise – other than in a few excep- Taxation Law”); Chapter III.D of the Compendium of tional cases, such as REPOs transactions – a transfer of title as Financial Regulations of the Central Bank regarding deriva- valid security. Thus, where transactions are collateralised by an tives transactions carried out in the local market; Chapter IX eligible credit support located onshore, this would typically be of the Foreign Exchange Regulations of the Central Bank – by way of security. An exception would be the pledge over cash. which basically imposes the obligation to comply with certain

Load more