The Court of Cassation ("Hof van Cassatie" / "Cour de Cassation") held in a recent decision that the infringement of a rule of public order when concluding an interest rate swap agreement does not lead to nullity of the agreement, except in case of an express statutory provision to the contrary.
In a decision dated 30 January 2015, the Court of Cassation held that the infringement of a rule of public order while concluding an interest rate swap agreement only makes the agreement avoidable if such infringement results in the object of the agreement being unlawful. For the object of the agreement to be unlawful, the subject matter of the performance promised by the parties – i.e. the periodic exchange of interest rate payments – would have to be forbidden by a law of public order, which is not the case.
In the dispute that led to the decision at hand, the claimant sought to have the interest rate swap agreement avoided because of an infringement of the identification requirements imposed by the anti-money laundering legislation, which is of public order. However, the principles of the decision could also be applied to infringements of the MiFID conduct of business rules (know your customer, inform your customer, best execution, etc.), which are not of public order, but which are invoked every now and again to support the avoidance of derivative contracts.