Insolvency Close-out netting. A Comparative Study of English, French and US Laws in a Global Perspective is the full title of a PhD defended by Bernadette Muscat early December 2020 at the University of Leiden. Her supervisors have been professor Matthias Haentjens (financial law) and myself (emeritus international insolvency law). Muscat’s research considers the development of the concept of insolvency close-out netting under the laws of England (i.e. England and Wales), France and the US. Close-out netting developed as a financial market risk mitigation tool on the basis of the lex mercatoria permitting the calculation of risks on a net, rather than a gross, basis. The close-out netting process, when it takes effect in accordance with its terms in insolvency, has provided financial market participants with a substantial measure of self-help in enforcing their claims against an insolvent counterparty.
The question whether the legal system of England, France and the US have influenced the recognition of insolvency close-out netting, the reply is positive for all three jurisdictions, however in varying degrees: English common law has exerted the most influence on such recognition whilst the French regime continues to be the one most ready to develop according to market practices notwithstanding the precepts of civil law. The US legal system, being a hybrid system, continues to exert a more balanced influence.
Bernadette Muscat was head of department at the Malta Financial Services Authority and during her PhD project, starting in 2013 (half a year before my retirement) moved to the Malta Development Bank, heading the Legal and Compliance Department. The book is a very rich source on legislation, soft law and case law, bringing together many perspectives. It dives deep into comparative notions when analysing both common and civil law systems. Viewed from a historic aspect the research critically assesses a highly technical, but incredibly important aspect of our present-day financial markets: the close-out netting technique that is a major element in so many transactions that make our economies work as they work today.
On a personal note: as a one day a week law professor (1988-2008 in Amsterdam and from 2007-2014 in Leiden), since 1991 I guided 13 PhD’s. Specifically, in my Leiden period in the area of international insolvency law these PhDs included two Chinese researchers, one from Estonia and now ms Muscat from Malta. Remarkably, these researchers all have been women. It certainly is sign of the rise of women researchers in our field!
For the full text of the dissertation, see