Offices; Multibranch Parties - 1992 ISDA Provision: Difference between revisions

From The Jolly Contrarian
Jump to navigation Jump to search
No edit summary
No edit summary
 
Line 1: Line 1:
{{newisda92manual|10}}
{{nman|isda|1992|10}}

Latest revision as of 17:10, 14 August 2024

1992 ISDA Master Agreement

A Jolly Contrarian owner’s manual™

10 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

10. Offices; Multibranch Parties

10(a) If Section 10(a) is specified in the Schedule as applying, each party that enters into a Transaction through an Office other than its head or home office represents to the other party that, notwithstanding the place of booking office or jurisdiction of incorporation or organisation of such party, the obligations of such party are the same as if it had entered into the Transaction through its head or home office. This representation will be deemed to be repeated by such party on each date on which a Transaction is entered into.
10(b) Neither party may change the Office through which it makes and receives payments or deliveries for the purpose of a Transaction without the prior written consent of the other party.
10(c) If a party is specified as a Multibranch Party in the Schedule, such Multibranch Party may make and receive payments or deliveries under any Transaction through any Office listed in the Schedule, and the Office through which it makes and receives payments or deliveries with respect to a Transaction will be specified in the relevant 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: 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

Resources and Navigation

Index: Click to expand:

Comparisons

A bit of development from the 1992 ISDA to cater for the more fiddlesome nature of the 2002 ISDA (in particular the effect of Illegality and Force Majeure events that affect some branches of a Multibranch Party but not others).

Basics

Section 10 of the ISDA Master Agreement allows parties to specify whether they are Multibranch Parties. Electing “Multibranch Party” status allows you to transact out of the named branches of the same legal entity.

Section 10(a)

A seldom-regarded but basically potty representation thrown in to allow parties to represent that if it trades through a minor branch, recourse against it will be no different from the recourse it would have had it traded though its head office.

Law students of all vintages will remember from Company Law class that this is necessarily the case: this is what the legal fiction of the “corporate legal personality” is designed to do: create a new, unitary “person” who is liable at law, can sue and be sued, live, love and survive independently of its stakeholders, for anything done in the name of that company — as long as intra vires and properly authorised by the company, regardless of where and through whose agency it is done.

Now it may be the case that certain primitive jurisdictions, for certain primitive entity types, this is not the case but, if so, the answer ought to be do not trade with entities like that or, if you really must, do not trade with entities like that out of branches that won’t bind the legal entity.

There is a chicken-and-egg problem here: if you do, then Q.E.D. the entity is not bound. Yes, you may be left with an action for damages (in tort — there is no contract, remember) for misrepresentation, but we think the better approach is for your onboarding and credit sanctioning teams to do their due diligence before you start trading, and avoid trading with entities like this.

Section 10(b)

The one place where all this lofty talk about “legal personhood” and “it not mattering a jot which part of a corporate organisation makes the promise to be bound by the contract” falls about is when it comes to taxation. Taxation authorities don’t care about holistic entities, only the bits of them that are in their jurisdiction and over whose income and outgoing they have power to tax.

So, while it might not matter to you or your counterparty which bit of your organisation “did the deed” or “reaped its rewards”, it will matter to their respective tax departments, and the taxing authorities to which appendages of the entity are beholden. Yes, the net tax burden on the whole entity is the same, but one still tries to “optimise” that burden as best one can, by arranging things to be as far beyond the reach of nefarious excise authorities as can be plausibly arranged. Don’t @ me folks: I don’t make the rules.

Section 10(c)

Again, a provision largely there to keep the respective tax departments happy. Each books the transaction depending on certain tax representations from the other; if the other then changes Offices or some such thing in a way that upsets that careful tax analysis, well —

Simple: just don’t fiddle with Offices and Branches post execution. Why would you? (Unless to correct an error you made on the Trade Date ... )

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
    • More on taxation
    • Must you complete onboarding in each jurisdiction though?
    • Netting: could the validity of close-out netting depend on the branch through which the entity transacts?

See also

References