The sheer complexity of derivative products should make it unsurprising that there is a need for a standard contract governing all over-the-counter (“OTC”) derivatives transactions. 

Sure enough, such a contract exists in the form of the 2002 ISDA Master Agreement. Published by the International Swaps and Derivatives Association, or “ISDA”, this master agreement outlines various provisions. 

These provisions encompass such aspects as the obligations of the counterparties, as well as payment and deliveries, contract termination, and dispute resolution arrangements. 

However, you might already be familiar with many of the essential elements of the 2002 ISDA Master Agreement, and the importance of this standard contract for OTC derivatives transactions. 

What you may be less familiar with, is whether you will require a process agent in the UK if you are looking to enter into an arrangement based on the 2002 ISDA Master Agreement. So, let’s take you through the key things to know in response to this frequent question. 

What is a process agent in the UK, anyway? 

The term “process agent” (also sometimes known as an “agent for service of process”, or a “registered agent”) is commonly used in reference to a designated entity or individual that a party appoints in order to receive legal documents on its behalf in a particular jurisdiction. 

This is relevant to agreements involving complicated financial products such as derivatives, because the counterparties to such transactions aren’t always in the same jurisdiction as each other. 

So, in the event of the agreement in question being governed by English law, and one party wishing to take legal action against the other, it will greatly help if the latter party already has a physical presence in the UK, in order to receive legal documents, proceedings, or notices. 

A process agent in the UK, appointed at the time of the transaction first commencing, can help make this process easier and smoother. 

The relevance of Section 13 of the 2002 ISDA Master Agreement 

It is this section of the 2002 ISDA Master Agreement that focuses on the governing law for the given transaction. 

Under this standard contract for OTC derivatives transactions, the general practice is for the counterparties to decide that either English law or New York law will apply to the agreement. 

Whichever decision is made between these two jurisdictions, it is given affect in the Schedule to the ISDA Master Agreement. 

An alternative system of law could theoretically be chosen as the governing law for an ISDA transaction; however, it is unusual for this to be the case. 

So, will you require a process agent in the UK for your own ISDA derivative transaction? 

The short answer to this question is that while a process agent might not always technically be required as part of a contract under the 2002 ISDA Master Agreement, it often is needed.  

Presuming English law has been chosen to govern the transaction, typically, a process agent in the UK will need to be appointed if one of the parties is incorporated or domiciled in the UK, but the other one is based outside the UK. 

So, if one party is based in the UK but the other one is in the European Union (EU), the latter party is normally required to appoint a process agent in the UK that can receive legal documents on their behalf. This would allow for any necessary legal proceedings to be initiated and served without cross-border complexities causing delays. 

On the other hand, a process agent may not be strictly necessary if both parties are domiciled in the same jurisdiction as the governing law for the contract (so for example, if the governing law is English, and they are both UK entities). In such a situation, it will likely be straightforward enough for any legal documents to be served directly to the relevant party. 

Whatever combination of circumstances might necessitate you appointing a process agent in the UK, we would be pleased here at London Registrars to provide tailored advice and guidance. Please feel free to call 0044 20 7608 011 today, or to download our process agency brochure for further information.