European Commission Clarifies Scope of EMIR Intragroup Reporting Exemption

ESMA has published an updated Q&A document for EMIR in which the European Commission (EC) has commented on whether the exemption from the reporting obligation for intragroup transactions applies in the case of non-EU headquartered companies. 

The EC has chosen to adopt a narrow reading of EMIR to state that for transactions where the parent undertaking is not established in the EU, intragroup transactions between the EU entities of said group cannot benefit from the EU intragroup reporting exemption. 

Question:

In the case of derivatives contracts where at least one of the counterparties is a non-financial counterparty: does the exemption of reporting obligation for intra-group transactions introduced in Article 9(1) of EMIR REFIT apply when the parent undertaking is established in a third country?

*Answer provided by the European Commission in accordance with article 16b(5) of the ESMA Regulation*

The exemption contained in Article 9(1) of EMIR does not cover intragroup transactions for which the parent undertaking is established in a third country, even if the transaction occurs between two counterparties which are both established in the EU. This conclusion is based on the following elements:

1) The definition of parent undertaking refers to an undertaking governed by the law of a Member State and nothing in EMIR indicates a will to modify that reference.

2) This interpretation fits the actual purpose of Article 13 of EMIR: deference is granted where there is equivalence with the jurisdiction hosting the parent undertaking.

3) This interpretation ensures a meaningful use and purpose of the transparency objective of Article 9 while limiting the exemption in article 9(1) to the minimum necessary.

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