Commonwealth Consolidated Acts

PAYMENT SYSTEMS AND NETTING ACT 1998 - SECT 16

  (1)   If:

  (a)   Australian law governs a market netting contract; and

  (b)   the contract is entered into in circumstances that are within Commonwealth constitutional reach;

the following provisions apply:

  (c)   obligations may be terminated, termination values may be calculated and a net amount become payable in accordance with the contract;

  (ca)   any security given, in accordance with the contract, in respect of obligations of a party to the contract may be enforced in accordance with the contract;

  (cb)   rights and obligations of a party to the contract may be transferred in accordance with the contract;

  (cc)   without limiting paragraph   (cb):

  (i)   property (including property over which security has been given) of a party to the contract may be transferred or otherwise dealt with in accordance with the contract; and

  (ii)   property (including property over which security has been given) of another person on whose behalf a party to the contract is acting may, with that other person's prior written consent, be transferred or otherwise dealt with in accordance with the contract;

  (d)   paragraphs   (c), (ca), (cb) and (cc) apply despite:

  (i)   any disposal of rights that may be netted under the contract; or

  (ia)   any disposal of rights or property that may be transferred in accordance with the contract; or

  (ii)   the creation of any encumbrance, or any other interest, in relation to those rights or that property; or

  (iii)   the operation of any encumbrance, or any other interest, in relation to those rights or that property that is created after the commencement of this section;

    in contravention of a prohibition in the contract;

  (e)   for the purposes of any law, the assets of a party to the contract are taken:

  (i)   to include any net obligation owed to the party under the contract; and

  (ii)   not to include obligations terminated under the contract.

  (2)   If:

  (a)   a party to a market netting contract goes into external administration; and

  (b)   Australian law governs either:

  (i)   the external administration; or

  (ii)   the contract;

the following provisions apply:

  (c)   obligations may be netted or terminated, termination values may be calculated and a net amount become payable in accordance with the contract;

  (d)   obligations that are, or have been, netted or terminated under the contract are to be disregarded in the external administration;

  (e)   any net obligation owed by the party under the contract that has not been discharged is provable in the external administration;

  (f)   any net obligation owed to the party under the contract that has not been discharged may be recovered by the external administrator for the benefit of creditors;

  (fa)   any security given by the party, in accordance with the contract, in respect of obligations of a party to the contract may be enforced in accordance with the contract;

  (fb)   rights and obligations of the party may be transferred in accordance with the contract;

  (fc)   without limiting paragraph   (fb):

  (i)   property (including property over which security has been given) of the party may be transferred or otherwise dealt with in accordance with the contract; and

  (ii)   property (including property over which security has been given) of another person on whose behalf the party is acting may, with that other person's prior written consent, be transferred or otherwise dealt with in accordance with the contract;

  (g)   none of the following is to be void or voidable in the external administration:

  (i)   the netting or termination of obligations under the contract;

  (ii)   a payment by the party to discharge a net obligation under the contract;

  (iii)   a payment, or a transfer of property (whether absolutely or by way of security), by the party to meet an obligation under the contract;

  (iv)   the enforcement of a security in accordance with the contract;

  (v)   a transfer of, or dealing with, rights, obligations or property in accordance with the contract;

  (h)   paragraphs   (c) to (g) apply despite:

  (i)   any disposal of rights that may be netted under the contract; or

  (ii)   any disposal of rights or property that may be transferred in accordance with the contract; or

  (iii)   the creation of any encumbrance, or any other interest, in relation to those rights or property over which security mentioned in paragraph   (fa) is given; or

  (iv)   the operation of any encumbrance, or any other interest, in relation to those rights or that property;

    in contravention of a prohibition in the contract, or in the security mentioned in paragraph   (fa).

Note:   By giving express recognition to market netting contracts, subsections   (1) and (2) remove the basis for arguing that the contracts are void as contrary to public policy embodied in the laws dealing with insolvency.

  (3)   Subsections   (1) and (2) have effect despite any other law (including the specified provisions and the specified stay provisions).

Note:   Section   5 defines specified provisions and specified stay provision .

  (4)   A reference in this section to things done, or that may be done, in accordance with a contract is taken to include things done, or that may be done, in accordance with any security given in accordance with the contract.