6.66. Requirements—legal opinion

(1) Before an Islamic Bank uses a legal opinion to support a netting agreement, an Islamic Bank:

• (a) must ensure that the opinion is not subject to assumptions or qualifications that are unduly restrictive;
• (b) must review the assumptions about the enforceability of the agreement and must ensure that they are specific, factual and adequately explained in the opinion; and
• (c) must review and assess the assumptions, qualifications and omissions in the opinion to determine whether they give rise to any doubt about the enforceability of the agreement.

(2) An Islamic Bank must have procedures to monitor legal developments and to ensure that its netting agreements continue to be enforceable. An Islamic Bank must update the legal opinions about the agreements, as necessary, to ensure that the agreements continue to be eligible.

(3) An Islamic Bank may rely on a legal opinion obtained on a group basis by another member of the financial group of which it is a member if an Islamic Bank and the other member have satisfied themselves that the opinion covers a netting agreement to which an Islamic Bank is a counterparty.

(4) An Islamic Bank must report a transaction on a gross basis if there is any doubt about, or any subsequent legal development affects, the enforceability of the agreement.