Section 2(a)(iii) - ISDA Provision

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ISDA Anatomy™

2002 ISDA

2(a)(iii) Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and (3) each other condition specified in this Agreement to be a condition precedent for the purpose of this Section 2(a)(iii).

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Index: Click to expand:Navigation
See ISDA Comparison for a comparison between the 1992 ISDA and the 2002 ISDA.
The Varieties of ISDA Experience
Subject 2002 (wikitext) 1992 (wikitext) 1987 (wikitext)
Preamble Pre Pre Pre
Interpretation 1 1 1
Obligns/Payment 2 2 2
Representations 3 3 3
Agreements 4 4 4
EODs & Term Events 5 Events of Default: FTPDBreachCSDMisrepDUSTCross DefaultBankruptcyMWA Termination Events: IllegalityFMTax EventTEUMCEUMATE 5 Events of Default: FTPDBreachCSDMisrepDUSTCross DefaultBankruptcyMWA Termination Events: IllegalityTax EventTEUMCEUMATE 5 Events of Default: FTPDBreachCSDMisrepDUSSCross DefaultBankruptcyMWA Termination Events: IllegalityTax EventTEUMCEUM
Early Termination 6 Early Termination: ET right on EODET right on TEEffect of DesignationCalculations; Payment DatePayments on ETSet-off 6 Early Termination: ET right on EODET right on TEEffect of DesignationCalculationsPayments on ETSet-off 6 Early Termination: ET right on EODET right on TEEffect of DesignationCalculationsPayments on ET
Transfer 7 7 7
Contractual Currency 8 8 8
Miscellaneous 9 9 9
Offices; Multibranch Parties 10 10 10
Expenses 11 11 11
Notices 12 12 12
Governing Law 13 13 13
Definitions 14 14 14
Schedule Schedule Schedule Schedule
Termination Provisions Part 1 Part 1 Part 1
Tax Representations Part 2 Part 2 Part 2
Documents for Delivery Part 3 Part 3 Part 3
Miscellaneous Part 4 Part 4 Part 4
Other Provisions Part 5 Part 5 Part 5
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The world-famous flawed asset provision in the ISDA Master Agreement In a Nutshell, section 2(a)(iii) does the following:


2(a)(iii) in a Nutshell (ISDA edition)

Template:Nutshell ISDA 2(a)(iii)

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I’m sorry I asked

Draft ISDA Section 2(a)(iii) Protocol

These amendments are being led by ISDA and are likely to take effect by protocol. These changes are separate to the ones being contemplated under DFA.

The revised text looks to address 4 concerns (each arising from English case law):

Still, the revised language raises a few concerns:

Original Text of Section 2(a)(iii)

The original language is in the panel above right. Innocuous looking, isn't it. But then the Protocol of the Elders of ISDA had a go at fixing Metavante concerns. Now look what they've done:

Modified Text as per ISDA draft protocol

Section 2(a)(iii)

2002 ISDA
Template:ISDA Master Agreement 2002 2(a)(iii) Protocol
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Restatement of Section 9(c) Survival of Obligations in entirety:

2002 ISDA
Template:ISDA Master Agreement 2002 9(c) Protocol
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Amendment to Section 2(e) of the 1992 ISDA only

1992 ISDA
Template:ISDA Master Agreement 1992 2(e) Protocol
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NB there isn't a Section 2(e) in 2002 ISDA Master - this amendment is purely to bring the 1992 ISDA in line with the 2002 provision on Interest and Compensation.

Additional Definitions in Section 14

In gory detail

1992 ISDA
Template:ISDA Master Agreement 1992 Terminated Transactions Definition Protocol
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2002 ISDA
"Terminated Transactions” means, with respect to any Early Termination Date, (a) if resulting from an Illegality or a Force Majeure Event, all Affected Transactions specified in the notice given pursuant to Section 6(b)(iv), (b) if resulting from any other Termination Event, all Affected Transactions and (c) if resulting from an Event of Default, all Transactions, in each case under which a party has or may have any obligation, including, without limitation, an obligation to pay an amount that became payable (or would have become payable but for Section 2(a)(iii) or due but for Section 5(d)) to the other party under Section 2(a)(i) or 2(d)(i)(4) on or prior to that Early Termination Date and which remains unpaid as at such Early Termination Date.
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2002 ISDA
Template:ISDA Master Agreement 2002 Condition End Date Definition Protocol
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