Prohibition for institutions to enter into agreements with third country counterparties

Article 17(5) BRRD enables resolution authorities to take a number of measures in order to remove any substantive impediments to the resolvability of an entity. Such provision does not constitute a sufficient legal basis for resolution authorities to prohibit the concerned entity to enter into agreements governed by third country law that does not accept cross-border contractual recognition of bail-in. In fact, Article 55(2) BRRD provides for a different course of action. It requires that, further to the notification from an entity of the assessed impracticability to contractually recognise the bail-inability of the relevant liability, the resolution authority may either concur or disagree with the impracticability assessment. If it disagrees, the relevant clause must be inserted; if it concurs with the impracticability and deems it to create a substantive impediment to resolvability, the resolution authority may rely on any of the powers provided in Article 17 BRRD to remove that impediment, but it may not prevent the entity from entering the relevant transaction. The same does not hold true for contractual recognition of resolution stay powers. In fact, contrarily to Article 55 BRRD, Article 71a BRRD does not provide for a specific discipline of the matter, but simply states that the entity’s failure to include a contractual provision recognising stay powers does not prevent the resolution authority from exercising such powers. Thus, Article 17 BRRD is a sufficient legal basis to enable the resolution authority to prevent the concerned entity to enter the agreement, if this would constitute a substantive impediment to the resolvability of the entity. Disclaimer: The answers clarify provisions already contained in the applicable legislation. They do not extend in any way the rights and obligations deriving from such legislation nor do they introduce any additional requirements for the concerned operators and competent authorities. The answers are merely intended to assist natural or legal persons, including competent authorities and Union institutions and bodies in clarifying the application or implementation of the relevant legal provisions. Only the Court of Justice of the European Union is competent to authoritatively interpret Union law. The views expressed in the internal Commission Decision cannot prejudge the position that the European Commission might take before the Union and national courts.