Page 23 - ITU-T Focus Group Digital Financial Services – Recommendations

ITU-T Focus Group Digital Financial Services
Recommendations

Title of recommendation Legal aspects of interoperability
Working Group Interoperability

Audience for recommendation DFS providers

Interoperability arrangements should be compliant with the legal and regulatory frameworks within all the
functional and/or geographic jurisdictions they are implemented in. Interoperability rules should be enforceable
within as well as across all these relevant jurisdictions. Conflicts of laws should be identified upfront and miti-
gated in the interoperability arrangements.

The legal framework (laws, regulations, rules and procedures) applicable to interoperability should provide
a high degree of certainty for every aspect relating to interoperability. The rules, procedures and contracts
governing interoperability should be clear, understandable and consistent with relevant laws and regulations.
They should be readily available as appropriate for all parties with a legitimate interest.
The rules, procedures and contracts governing interoperability should be complete, valid and enforceable
in all relevant jurisdictions. There should be a high degree of certainty that actions taken under such rules
and procedures will not be stayed, voided or reversed.
Interoperability should be consistent with the applicable regulatory frameworks. In cross-border
interoperable systems, risks arising from any potential conflicts of laws across jurisdictions should be identified
and mitigated.
An unclear and/or inconsistent regulatory framework may result in payments processed via interoperability
arrangements being subject to higher legal risks, compared with those processed in a single and/or
proprietary system. In particular, conflicts may arise if it is not clear which are the specific laws, regulations,
rules or procedures applicable to payments processed via interoperable arrangements. In exceptional
circumstances (e.g., the default of a participant), uncertainties or conflicts could arise if the rules governing
interoperability do not clearly specify the procedures to be followed.

Conflicts may also arise when the legal basis, and in particular the contracts, do not clearly define the rights
and obligations of the entities participating in interoperability arrangements. Conflicts could stem from
differences in laws and regulations defining rights and obligations, finality and irrevocability, and settlement
finality. In order to safeguard the protection of customers’ assets, market participants should determine
appropriate liability regimes to minimize the potential loss for their customers. Legal risks should also be
mitigated in case interoperability involves a settlement agent that temporarily holds the funds transferred
between one market participant and another in a transitional account.

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