S.L. 370.32 Art. 36Discharge of liability.

(1) The depositary’s liability shall not be affected by any delegation referred to in regulation 34.

(2) Notwithstanding the generality of sub-regulation (1), in the case of a loss of financial instruments held in custody by a third party pursuant to regulation 34, the depositary may discharge itself of liability if it can prove that:

(a) all requirements for the delegation of its custody tasks set out in regulation 34 are met;

(b) a written agreement between the depositary and the third party expressly transfers the liability of the depositary to that third party and makes it possible for the AIF or the AIFM acting on behalf of the AIF to make a claim against the third party in respect of the loss of financial instruments or for the depositary to make such a claim on their behalf; and

(c) a depositary agreement between the depositary and the AIF or the AIFM acting on behalf of the AIF expressly allows a discharge of the depositary’s liability and establishes the objective reason to contract such a discharge.

(3) Where the law of a third country requires that certain financial instruments are held in custody by a local entity and there are no local entities that satisfy the delegation requirements prescribed in regulation 34(2)(d)(ii), the depositary can discharge itself of liability provided that the following conditions are met:

(a) the rules or instruments of incorporation of the AIF concerned expressly allow for such a discharge under the conditions prescribed in this sub-regulation;

(b) the investors of the relevant AIF have been duly informed of that discharge and of the circumstances justifying the discharge prior to their investment;

(c) the AIF or the AIFM on behalf of the AIF instructed the depositary to delegate the custody of such financial instruments to a local entity;

(d) there is a depositary agreement between the depositary and the AIF or the AIFM acting on behalf of the AIF which expressly allows such a discharge; and

(e) there is a written agreement between the depositary and the third party that expressly transfers the liability of the depositary to that local entity and makes it possible for the AIF or the AIFM acting on behalf of the AIF to make a claim against that local entity in respect of the loss of financial instruments or for the depositary to make such a claim on their behalf.