Payment Systems and Netting Act 1998

If an approved netting arrangement is entered into in circumstances that are within Commonwealth constitutional reach:

obligations may be terminated, termination values may be calculated and a net amount become payable in accordance with the arrangement; and

paragraph (a) applies despite:

any disposal of rights that may be netted under the arrangement; or

the creation of any encumbrance, or any other interest, in relation to those rights; or

the operation of any encumbrance, or any other interest, in relation to those rights that is created after the commencement of this section;

for the purposes of any law, the assets and liabilities of a party to the arrangement are taken:

to include any net obligation owed to a party under the arrangement; and

not to include obligations terminated under the arrangement.

If a party to an approved netting arrangement goes into external administration:

if the external administration is not a non‑terminal administration—the party may do anything permitted or required by the arrangement in order to net:

obligations incurred before or on the day on which the party goes into external administration; and

net obligations if the obligations that are directly or indirectly netted are incurred before or on the day on which the party goes into external administration; and

if the external administration is a non‑terminal administration—the party may do anything permitted or required by the arrangement in order to net:

obligations incurred before the participant goes into, or while the participant is in, non‑terminal administration; and

net obligations if the obligations that are directly or indirectly netted are incurred before the participant goes into, or while the participant is in, non‑terminal administration; and

the obligations that are, or have been, netted under the arrangement are to be disregarded in the external administration (but see subsection (4)); and

any net obligation owed by the party under the arrangement that has not been discharged is provable in the external administration; and

any net obligation owed to the party under the arrangement that has not been discharged may be recovered by the external administrator for the benefit of creditors; and

the netting and any payment made by the party under the arrangement to discharge a net obligation is not to be voidable in the external administration; and

for an arrangement that is governed by the rules of a licensed CS facility (within the meaning of the Corporations Act 2001)—a payment, or a transfer of property, by a party under the arrangement to discharge a net obligation is not to be void or voidable in the external administration; and

paragraphs (a) to (f) apply despite:

any disposal of rights that may be netted under the arrangement; or

the creation of any encumbrance, or any other interest, in relation to those rights; or

the operation of any encumbrance, or any other interest, in relation to those rights;

Paragraphs (2)(a) and (2)(aa)—These paragraphs only authorise the party to take action to arrive at a net obligation; they do not authorise the party to settle the net obligation by payment or transfer of property.

By giving express recognition to approved netting arrangements, subsections (1) and (2) remove the basis for arguing that the arrangements are void as contrary to public policy embodied in the laws dealing with insolvency.

Subsections (1) and (2) have effect despite any other law (including the specified provisions and the specified stay provisions).

Section 5 defines specified provisions and specified stay provision.

If:

a party to an approved netting arrangement goes into external administration; and

an obligation owed by the party to another party to the arrangement has been netted under the arrangement; and

a direct payment by the party owing the obligation to the other party would have been voidable in the external administration if it had been made to settle the obligation on the day on which the netting occurred;