Template:M summ GMRA 19
For a wealth of reasons we obsess far more than we need about sovereign immunity in global markets contracts than we should — it is all good fun, though, and keeps more pedestrian legal eagles busy worrying about things. Even though the Global Master Repurchase Agreement is designed as a self-help remedy contract which should not need litigation, and even though there is generally no immunity from suit under a commercial contract under English law, and even though your geopolitical risk when dealing with sovereigns dwarfs your contractual one, people still insist. It will be annoying when you are asked to strike the clause, by an actual sovereign, and you find you have contracted out of your protections under the Sovereign Immunity Act 1978 though, won’t it.
Sovereign immunity and close-out netting
Does the fact that a counterparty may have, or may claim, sovereign immunity from legal proceedings before a foreign court (or its own courts, for that matter) invalidate a close-out netting clause?
We think not: the close-out mechanism does not require the intervention of any court to work: it is a self-help remedy. You terminate, net off and walk away.[1] To the contrary, it would only come before a court were the Defaulting Party to apply to the court to challenge its exercise. And you can’t have it both ways: a sovereign immunity right only avails you if you stay away from court. The moment Queenie puts the matter before a court she submits to the court and, Q.E.D., waives her immunity. Sorry, Your Majesty: I don’t make the rules.