Mauritania's Parliament Approves a New Close-out Netting Regime

On November 12, 2024, the National Assembly of the Islamic Republic of Mauritania passed bill no. 24-036. The new law, sponsored by the Central Bank of Mauritania, radically reorganizes the banking and financial markets and their supervision in line with the latest international standards.

Among its provisions, the law creates a legal framework for close-out netting applicable to derivatives transactions, securities financing transactions, and certain other transactions commonly included within the scope of safe harbors in civil-law jurisdictions, such as spot FX.

The bill, prepared by Jones Day teams in close cooperation with those of the Central Bank and Société nationale industrielle et minière ("SNIM"), takes the form of nine articles of law which, among other things:

• Define the operations covered by the safe harbor;
• Lay down a limited number of conditions for its application—these conditions relate essentially to the legal status of the counterparties, on the one hand, and to the mandatory use of an agreement complying with the general principles of a national or international market master agreement, such as ISDA Master Agreements, on the other hand;
• Assert the priority of close-out netting operations over civil seizures and enforcement procedures;
• Disapply any provision of bankruptcy law—and to the extent useful and commonly accepted—of banking resolution law, which could hinder the validity and enforceability against third parties and the counterparty of the provisions of the netting agreement;
• Create a comprehensive regime for the collateralization of such transactions, either by title transfers or security interests, using assets or currencies located either in Mauritania or abroad, and benefiting from an accounting and tax-neutral regime modelled on the securities lending regime; and
• Protect multi-branch netting.

We are now awaiting ratification of the law by the President of the Republic and publication in the Journal Officiel, which should take place within 30 days of transmission of the law to the President of the Republic.

At a time when Mauritania, following the discovery of the BirAllah and Grand Tortue Ahmeyim offshore gas fields, is on the verge of opening a new chapter in its economic history, possibly making the country one of the world’s leading gas producers, the support given to this economic development by the evolution of its banking and financial markets law deserves to be highlighted to market players active in North and West Africa. Jones Day is grateful to the Central Bank of Mauritania and to SNIM for the opportunity to participate in this initiative and in the advancement of the Rules of Law in Mauritania.

The country’s leading economic operator, SNIM, has already launched work to gather legal opinions on both the new netting and collateral regimes, so as to ensure that counterparties benefit from the best international standards of insurance, enabling net positions to be taken into account when calculating regulatory capital.