Legal development

EU extends intragroup exemptions under EU EMIR

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    Temporary intragroup exemptions extended to 30 June 2025

    On 13 February 2023, the EU officially extended until 30 June 2025 the temporary intragroup exemptions from clearing and margining available under EU EMIR .1

    The amending regulations - EU Regulation 2023/314 and EU Regulation 2023/315 - were published in the Official Journal of the European Union on 13 February 2023 and entered into force on 14 February 2023. They defer the date from which (i) the requirement to exchange variation margin and, if applicable, initial margin pursuant to the EU Margin Rules2 and (ii) the EU EMIR clearing obligation will apply to in-scope intragroup transactions, from 30 June 2022 to 30 June 2025. 

    Regulatory forbearance since June 2022

    The extensions were originally proposed in early June 2022, before the then-current 30 June 2022 expiry date, but have only recently been officially implemented. To bridge the regulatory gap, on 10 June 2022 the European Supervisory Authorities (ESAs) recommended that national competent authorities exercise regulatory forbearance3  for the period between 30 June 2022 and implementation of the extensions (read more in our briefing).  

    Permanent v temporary exemptions

    Under EU EMIR, permanent exemptions from clearing and margining are available for certain intragroup transactions between an EU entity and a non-EU entity, but only where the non-EU entity is established in a jurisdiction in respect of which an equivalence decision has been made by the European Commission. For intragroup transactions involving a non-EU counterparty in a non-equivalent jurisdiction, temporary exemptions - or "derogations" - are available.

    Having already been extended previously, the derogations expired on 30 June 2022. However, as relatively few jurisdictions had been recognised by the EU as equivalent for these purposes by such date, the ESAs considered it appropriate to extend the temporary exemptions further, and proposed the necessary amendments to the relevant rules last year. Official implementation of the derogations until 30 June 2025 gives the European Commission additional time to consider equivalence assessments with respect to other jurisdictions, or to implement its proposed replacement of the requirement for an equivalence decision with a requirement that the third country jurisdiction is not a "blacklisted" jurisdiction (read more in our briefing).

    Similar position under UK EMIR

    The position is similar under the onshored version of EU EMIR (UK EMIR). Under Regulation 82 of The Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2019, which forms part of the suite of documents onshoring and amending UK EMIR, temporary exemptions are available for intragroup transactions between a UK entity and a non-UK entity established in a jurisdiction which has not been found equivalent by HM Treasury.

    The exemptions last until 31 December 2023 unless equivalence is granted in the meantime, in which case they expire either two months (for clearing exemptions) or four months (for margin exemptions) thereafter and permanent exemptions can be sought prior to the date of expiry instead.

    The UK is also considering reforms to its financial services regulation in the context of the Financial Services Bill but it remains to be seen whether those reforms will include changes to the intragroup exemptions under UK EMIR and whether any such reforms will be implemented before the current temporary exemptions expire. UK EMIR has not been identified by the UK government as one of its current priority areas for reform.

    For more information on EU EMIR and UK EMIR, please see our EMIR Hub.

    Authors: Kerion Ball and Kirsty McAllister-Jones

    1. EU Regulation 648/2012.
    2. EU Regulation 2016/2251.
    3. An official recommendation that NCAs not prioritise supervisory action against entities which were technically in breach of the rules after the 30 June 2022 expiry date, pending official implementation of the extensions.
    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.

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