View source for Offices; Multibranch Parties - ISDA Provision

{{isdasnap|10}}

===Commentary===
Paragraph 10 of the {{isdama}} allows parties to specify whether they are multibranch parties or not.

====Branches====
A "branch" in this context is a presence in a jurisdiction other than the jurisdiction in which the counterparty is incorporated.  For example: 
*"Deutsche Bank AG, London Branch" is a physical manifestation of the German [[Aktiengesellschaft]], albeit located in London, with no other standing under English law and is a "branch". 
*"Goldman Sachs International", on the other hand, is an unlimited liability company incorporated in England and Wales which is legally distinct from The Goldman Sachs Group, Inc., and would not count as a "branch", and indeed has its own ISDA.

Electing "multibranch party" status allows a [[counterparty]] to transact swap confirms out of various different branches of the same legal entity. Deutsche may wish to transact out of its Frankfurt HQ and also out of its London branch.

Details fans will immediately note that, from the point of view of legal and corporate philosophy - surely a subject dear to every attorney's heart - the differing branches of a legal entity have no distinct legal personality any more than does a person's arm or leg have different personality from her head. So being a "multibranch" party seems immaterial.

===Taxation===
Those details fans will have overlooked the strange, parallel universe of taxation. Here it is presence and not legal personality is important. Specifying that your counterparty may trade from its offices in, for example, [[Prague]], [[Kabul]] or [[The Sudan]] may impact the tax payable on payments under the relevant transactions under the [[ISDA]]. Where both parties are multibranch parties and have numerous overseas branches, a complex multilateral analysis of all the different permutations is assured.

Quoth, elegantly, the great Alistair Fulton (now departed):

:"The risk for {{Bank}} is essentially a [[withholding tax]] gross-up risk.  If withholding tax arises in relation to a payment made to a counterparty through our NYK office, and the counterparty hasn't provided us with evidence of an exemption from withholding, the counterparty may argue that {{Bank}} is obliged to [[gross-up]] the payment on the basis that, but for our failure to disclose to them that payments may be made from NYK, they would have provided evidence of their exemption.  So, by failing to disclose that USD payments will originate in NYK, we make a misrepresentation by omission of something that may be material to the counterparty.

:"So you end up in a double-jeopardy, in that counterparties may refuse to make a US {{isdaprov|Payee Tax Representation}} on the grounds that, in the absence of the disclosure that NYK is a {{Bank}} settlement centre, there's nothing to convince them that payments will be made to them (as Payee) from NYK.  So, no [[Payee Tax Representation]] (or [[W-8BEN]] form) + no multibranch election = potential withholding tax gross up by {{Bank}}. And/or a possible Misrepresentation [[Event of Default]]".

:"Of course there are other ways to get around it:  disclosure of the branch in a Confirmation (operational risk, and of no use in electronically booked txns), or more detailed reps in Part 5 - but none is as simple or uncomplicated as simply putting "New York" in the Multibranch election"

====Netting====
While, by dint of the legal personality, it wouldn't make any difference under English or New York law, and really shouldn't anywhere else, there are those jurisdictions which are not so theroetically pure in their conceptualisation of the corporate form. Your counterparty may have the misfortune to be incorporated in such a place. 

If so, the validity of close-out [[netting]] against that entity may indeed depend on the branch from which it transacts - and indeed there is a possibility that the governing law of the jurisdiction of the branch may endeavour to intervene (particularly relevant if it has assets). Another reason, perhaps, to disapply the "multibranch party" for a counterparty incorporated in such a jurisdiction. The way to check this is at the netting opinion review sheet contains the following question:

 Does the opinion confirm that close-out netting under the agreement is enforceable notwithstanding the 
 inclusion of branches in non netting jurisdictions? Yes/No
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