Template:Isda Affected Party summ

One who is subject to a Section {{{{{1}}}|5(b)}} {{{{{1}}}|Termination Event}}, but not a Section {{{{{1}}}|5(a)}} {{{{{1}}}|Event of Default}} — thus one of a marginally less opprobrious character, seeing as {{{{{1}}}|Termination Event}}s are generally not considered to be one’s fault as such, but just sad things that happen that no-one expected, or wanted, but bring what was once a beautiful relationship to an end. It’s not you, it’s — well, it’s not me either — it’s just that confounded tax event that occurred upon your recent merger.

Note that, in its wisdom, ISDA’s crack drafting squad™ chose not to have a generic term for the sort of person who is subject to either a {{{{{1}}}|Termination Event}} or an {{{{{1}}}|Event of Default}}, so there is much “{{{{{1}}}|Defaulting Party}} and/or {{{{{1}}}|Affected Party}}, as the case may be” sort of malarkey. This depresses we prose stylists, but ISDA’s crack drafting squad™ has never cared about us, so we should hardly be surprised.

One lump or two?

And given its relentless quest for infinitesimal particularity — and accepting for a moment it is warranted — perhaps ISDA’s crack drafting squad™ has a point, for “{{{{{1}}}|Affected Party}}” appears in subtly different guises in each of the {{{{{1}}}|Termination Events}}. Sometimes there is one {{{{{1}}}|Affected Party}}; sometimes there are two.

For all {{{{{1}}}|Termination Events}} except {{{{{1}}}|Credit Event Upon Merger}}, there is at least the theoretical potential that both parties could be affected: the same {{{{{1}}}|Illegality}}, can impede both parties’ performance, obviously enough; as can the same pandemic, plague of locusts or aquatic invastion be a {{{{{1}}}|Force Majeure}} for both. Likewise a {{{{{1}}}|Tax Event}} — if both parties are in the same jurisdiction — even if they are not, come to think of it — and for the same reason {{{{{1}}}|Tax Event Upon Merger}} might stretch its clammy claws to impact even the innocent b bystander. But a {{{{{1}}}|Credit Event Upon Merger}} affects only the party being merged, and while {{{{{1}}}|Additional Termination Event}}s are al fresco, and therefore could potentially be affect both, in practice they tend to be heavily credit-focussed, and really should have been designated as “Additional Events of Default”.

Editorial comment: had only ISDA’s crack drafting squad™ thought to call {{{{{1}}}|Credit Event Upon Merger}} an {{{{{1}}}|Event of Default}} and not a {{{{{1}}}|Termination Event}}, much of this confusion might have been saved.

In any case, where there are two {{{{{1}}}|Affected Parties}} there is not a “victim” and a “perpetrator” as such, but you are in this odd new millennial world where everyone’s a victim, either party may trigger the {{{{{1}}}|Termination Event}}, both may estimate replacement prices on termination and they have to split the difference.

Where there is one {{{{{1}}}|Affected Party}}, only the {{{{{1}}}|Unaffected Party}} can terminate, and it is responsible for obtaining the valuation.