Counterparts and Confirmations - ISDA Provision

2002 ISDA Master Agreement A Jolly Contrarian owner’s manual™ Go premium Overview — Summary — Premium — See also — Wikitext Crosscheck: →’87 equivalent →’92 equivalent →’02 equivalent 9(e) in a Nutshell™ The JC’s Nutshell™ summary of this term has moved uptown to the subscription-only ninja tier. For the cost of ½ a weekly 🍺 you can get it here. Sign up at Substack. You can even ask questions! Ask about it here. Original text 9(e) Counterparts and Confirmations. 9(e)(i) This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including by facsimile transmission and by electronic messaging system), each of which will be deemed an original. 9(e)(ii) The parties intend that they are legally bound by the terms of each Transaction from the moment they agree to those terms (whether orally or otherwise). A Confirmation will be entered into as soon as practicable and may be executed and delivered in counterparts (including by facsimile transmission) or be created by an exchange of telexes, by an exchange of electronic messages on an electronic messaging system or by an exchange of e-mails, which in each case will be sufficient for all purposes to evidence a binding supplement to this Agreement. The parties will specify therein or through another effective means that any such counterpart, telex, electronic message or e-mail constitutes a Confirmation. 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: FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events: Illegality • FM • Tax Event • TEUM • CEUM • ATE 5 Events of Default: FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events: Illegality • Tax Event • TEUM • CEUM • ATE 5 Events of Default: FTPD • Breach • CSD • Misrep • DUSS • Cross Default • Bankruptcy • MWA Termination Events: Illegality • Tax Event • TEUM • CEUM Early Termination 6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations; Payment Date • Payments on ET • Set-off 6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations • Payments on ET • Set-off 6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations • Payments 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 Resources and Navigation Index: Click ᐅ to expand: ISDA

Comparisons

But for some finicking around at the margin — allowing Confirmations to be exchanged by telex, fax or email; that kind of thing — the 2002 ISDA is substantially the same as for the 1992 ISDA

Basics

In which the ISDA Master Agreement deals with the pointless topic of counterparts, and the workaday one of Confirmations.

Section 9(e)(i) Counterparts

There is an impassioned essay about the idiocy of counterparts clauses elsewhere. For now, just know this:

Black’s Law Dictionary has the following to say on counterparts:

“Where an instrument of conveyance, as a lease, is executed in parts, that is, by having several copies or duplicates made and interchangeably executed, that which is executed by the grantor is usually called the “original,” and the rest are “counterparts;” although, where all the parties execute every part, this renders them all originals.”

Sometimes it is important that more than one copy of a document is recognised as an “original” — for tax purposes, for example, or where “the agreement” must be formally lodged with a land registry. But these cases, involving the conveyance of real estate, are rare — non-existent, indeed, when the field you are ploughing overflows with flowering ISDA Master Agreements, confidentiality agreements and so on. If yours does — and if you are still reading, I can only assume it does, or you are otherwise at some kind of low psychological ebb — a “counterparts” clause is as useful to you as a chocolate tea-pot.

Indeed: even for land lawyers, all it does is sort out which, of a scrum of identical documents signed by different people, is the “original”. This is doubtless important if you are registering leases in land registries, or whatever other grim minutiae land lawyers care about — we banking lawyers have our own grim minutiae to obsess about, so you should forgive us for not giving a tinker’s cuss about yours, die Landadler.

ANYWAY — if your area of legal speciality doesn’t care which of your contracts is the “original” — and seeing as, Q.E.D., they’re identical, why should it? — a counterparts clause is a waste of trees. If the law decrees everyone has to sign the same physical bit of paper (and no legal proposition to our knowledge does, but let’s just say), a clause on that bit of paper saying that they don’t have to, is hardly going to help.

Mark it, nuncle: there is a chicken-and-egg problem here; a temporal paradox — and you know how the JC loves those. For if your contract could only be executed on several pieces of paper if the parties agreed that, then wouldn’t you need them all to sign an agreement, saying just that, on the same piece of paper? And since, to get that agreement, they will have to sign the same piece of paper, why don’t you just have done with it and have them all sign the same copy of the blessèd contract, while you are at it?

But was there ever a logical cul-de-sac so neat, so compelling, that it stopped a legal eagle insisting on stating it anyway, on pain of cratering the trade? There are little eaglets to feed, my friends.

Section 9(e)(ii) Confirmations

“Trade” versus “confirmation”: celebrity death-match

If a trader agrees one thing, and the confirmation the parties subsequently sign says another, which gives? A 15 second dealing-floor exchange on a crackly taped line, or the carefully-wrought ten page, counterpart-executed legal epistle that follows it?

The original oral trade prevails. As to why — we address that in the premium section.

Dare we mention ... email?

Note also the addition of e-mail as a means of communication to the 2002 ISDA (email not really having been a “thing” in 1992). This caused all kinds of fear and loathing among the judiciary, when asked about it, as can be seen in the frightful case of Greenclose v National Westminster Bank plc.Oh dear, oh dear, oh dear.

Timely confirmation regulations and deemed consent

Both EMIR and Dodd Frank have timely confirmation requirements obliging parties to have confirmed their scratchy tape recordings within a short period (around 3 days). This fell out of a huge backlog in confirming structured credit derivatives trades following the Lehman collapse.

Roger Moore indahouse

Lastly, a rare opportunity to praise those maestros of legal word-wrangelry, ISDA’s crack drafting squad™. In Section 9(e)(ii), they contemplate that one might agree a Transaction “orally or otherwise”. This is a smidgen wider than the usual legal eagle formulation of orally or in writing. It shows that while the swaps whizzes were conservative about how to close out a Transaction, when putting one on you are constrained only by the bounds of your imagination and the limits of interpersonal ambiguity: not just written words, nor even oral ones, but the whole panoply of possible human communications: semaphore, naval flags, Morse code, waggled eyebrows, embarrassed smiles and any other kinds of physical gesture.

Premium content Here the free bit runs out. Subscribers click 👉 here. New readers sign up 👉 here and, for ½ a weekly 🍺 go full ninja about all these juicy topics👇 JC’s “nutshell” summary of the clause Background reading and long-form essays A foray into why the Confirmation does not override the original trade conformation, even though it is there, in writing, at length, and no-one can remember what the trader actually said.

See also

• Mistake
• Counterparts
• Greenclose