Hierarchy of Events - ISDA Provision: Difference between revisions
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Latest revision as of 15:43, 31 December 2023
2002 ISDA Master Agreement
A Jolly Contrarian owner’s manual™ ISDA Text: 5(c)
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Overview
A simple piddling match between Events of Default and Illegality in the 1992 ISDA makes way for a full-blown hierarchy of competing circumstances justifying closeout of the ISDA Master Agreement in the 2002 ISDA.
Summary
Compared with its Byzantine equivalent in the 2002 ISDA the 1992 ISDA is a Spartan cause indeed: it is as if ISDA’s crack drafting squad™ assumed all ISDA users would be cold, rational economists who instinctively appreciate the difference between causation and correlation — or hadn’t considered the virtual certainty that they would not be — and therefore did not spell out that where your Event of Default is itself, and of itself, the Illegality, this hierarchy clause will intervene but it will not where your it simply is coincidental with one. I.e., if you were merrily defaulting under the ISDA Master Agreement anyway, and along came an Illegality impacting your ability to perform some other aspect of the Agreement, you can’t dodge the bullet.
In the 2002 ISDA the JC thinks he might have found a bona fide use for the awful legalism “and/or”. What to do if the same thing counts as an Illegality and/or a Force Majeure Event and an Event of Default and/or a Termination Event.
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- The JC’s famous Nutshell™ summary of this clause
- On why we need a hierarchy clause between Events of Default and Termination Events in the first place
- The Force Majeure Upgrade (for 1992 fans)
- The Repudiation exception: what is that all about?
See also
- Force majeure (including the JC’s ultimate force majeure clause)
- Event of default
- Termination event