Extraordinary rendition

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Extraordinary rendition
/ɪksˈtrɔːdnri/ /rɛnˈdɪʃən/ (n.)

Legal drafting that is so convoluted as to violate the UN convention against the cruel, inhuman or degrading treatment of language.

ISDA’s crack drafting squad™ are past masters, of courese, but the most recent identified violation was Clifford Chance Luxembourg’s non-definition of “companies” in its 2021 GMRA netting opinion (where else?).

Here our learned colleagues, having already devoted hundreds of words to what Luxembourg companies are, then embark on hundreds more musing, in excruciating detail, on what they are not.

It is a form of waterboarding just to read it:

For the purpose of this opinion, the word “companies” shall neither refer to economic interest groups (groupements d’interêts économiques) nor European economic interest groups (groupements d’interêts économiques européens). It shall furthermore not encompass any entities listed hereafter or any entities which are subject to a specific legislative framework or any specific licensing requirements, such as, without limitation, reinsurance undertakings, pension funds, investment companies in risk capital, securitisation vehicles, alternative investment fund managers subject to the Luxembourg law of 12 July 2013 on investment fund managers (as amended) (the “AIFM Law”), alternative investment funds subject to the AIFM law other than UCI or reserved alternative investment funds (fonds d’investissement alternatives reserves (“RAIF”) which are additionally subject to the Luxembourg law of 2016 on RAIF (as amended) (except the extent such entities are specifically covered in Appendix 2 part 1).

Yet, as the pain and grogginess wear off, we find ourselves feeling curious.

Firstly, if one did want good clear illustrations of things that aren’t companies, the examples picked here seem singularly ill-suited. Many of them, for one thing, are companies; just not the special types of company that the blessèd author of this opinion has in mind.

Now there are lots of things — most things on heav’n and earth, indeed — that are not Luxembourg companies. If the idea is to put clear water between what is, and what is not, a Luxembourg company, wouldn’t it be better to draw comparisons with things that, more plainly, are not?

Giraffes, for example, are certainly not Luxembourg companies. Nor, to bring it a little closer to home, are Moules Frites. Nor tapioca.

None of these things are like companies in any way. We feel their very non-“companyness”, when compared to things that the learned author has in contemplation, helps a novice reader construct the sorts of categories that companies do and do not fall into. They promise helpful, practical advice on how to go about one’s day, should you come across something that might or might not be a legal fiction. Do not make sago-pudding out of a SICAV, for example. Do not try to close-out a giraffe.

These, we submit, are much better, distinctions, conducive to a frustration-free working day, whether it is primarily concerned with tapioca or credit risk management.

But we can imagine someone saying “I know very well zebras are not companies. I do not need a legal opinion for that. It is the very nearness of these things to being companies, given that in law they are not companies, that makes the definition necessary and helpful.”

Just so. But still, let us draw nearer, for there is “helpful” and there is “torturing the sinews of logic for no good reason”. To do that we must leave pure, tedious, black-letter law and get our hands dirty with set theory. Buried in that dense list of almost-but-for-present-purposes-not-quite companies, is another negative: “alternative investment funds subject to the AIFM law other than UCI”. The author has already told us that UCIs — even those that are, in fact, companies — for the purpose of this opinion are not “companies”. But around these non-companies, there is a penumbra of similar, but different entities: things that are like UCIs, but are not UCIs. These fringe entities — even though they, too, might actually be companies, are not “companies” either. We are left with a logical structure which stretches the Euclidean idea of space tedium so profoundly I have struggled to render it in plain English:

Investment funds which are not non-companies by dint of being investment funds, and might otherwise be companies, do not count as companies after all, and therefore should be treated as non-companies anyway.

Now, it is all very well to pick holes, but at the Jolly Contrarian we are bigger than that. We can propose solutions. And here our solution would be this:

“Companies” means normal companies in the corporate sector. It does not include:

(a) Regulated insurance or reinsurance undertakings

(b) Pension or other regulated investment funds

(c) Flora or fauna; or

(d) Puddings.

See also

• Netting opinion
• Luxembourg lawyer