Update On The Status Of The Covered Agreement

In the February issue of this publication we published an article on the Covered Agreement ("the Agreement") negotiated and entered into by the Obama Administration with the European Union in January of this year.1 The U.S. and E.U. announcements of the completion of the Agreement were made January 13, 2017, one week before the inauguration of President Trump.2 The Subcommittee on Housing and Insurance of the House Financial Services Committee held a hearing on the Agreement on February 16, 2017, and the witnesses at that hearing expressed divergent views as to the appropriateness of the Agreement, with some urging the Trump Administration to attempt to re-negotiate the Agreement. However, based upon recent developments, the Trump Administration has decided to proceed and implement the Agreement. This article provides guidance with respect to the implementation of the Agreement.

1. The Approval and Effectiveness of the Agreement

   There are several different dates set by the Agreement that are relevant to the implementation of the Agreement. First, the Agreement comes into force by its terms seven days after the date that the parties "exchange written notifications certifying that they have completed their respective internal requirements and procedures, or on such other date as the Parties may agree" ("the In Force Date").3 Since there has not been any disclosure of an agreed-upon effectiveness date, the In Force Date will be the date that the Parties provide notification to each other of the completion of their internal approval procedures. Second, the Agreement "shall apply" on the later of the In Force Date or 60 months from the date of the Parties' signature of the Agreement ("the Applicability Date").4 Finally, there are some provisions which are to be "provisionally applied" by the Parties prior to the In Force Date or the Applicability Date, presumably immediately upon execution of the Agreement ("the Provisional Date").5 As will be seen, there are a number of exceptions to the general proposition that the Agreement's terms apply beginning on one of these three dates.

   1. Approval by the U.S.

      The "internal requirements and procedures" for the approval by the U. S. of a covered agreement are contained in the Dodd-Frank Act, which introduced the concept of covered agreements into the area of insurance and reinsurance,6 and establishes the process for the negotiation and approval of such agreements. Once negotiated and entered into by the Secretary of the Treasury and the United States Trade Representative, the full text of a covered agreement must be submitted to certain Congressional committees, and the agreement becomes effective after the expiration of 90 calendar days from the date of submission to the Congressional committees.7 A covered agreement is not a treaty and need not be submitted to Congress for its approval. The submission of the Agreement to the Congressional committees occurred January 13, 2017, and the 90 day period after such submission expired April 13, 2017.

      After the House subcommittee hearing on the Agreement there was some doubt as to whether the new Administration would honor the Agreement or press for re-negotiation. However, after several months of silence as to the fate of the Agreement, the U.S. Department of the Treasury and the U.S. Trade Representative announced in July 14, 2017 press releases their intention to sign the Covered Agreement, without mention of any re-negotiation or changes to the Agreement.8 It appears that the "internal requirements or procedures" on the U.S. side set forth in the Dodd-Frank...