Right to Terminate Following Termination Event - ISDA Provision: Difference between revisions
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Latest revision as of 16:44, 31 December 2023
2002 ISDA Master Agreement
A Jolly Contrarian owner’s manual™ ISDA Text: 6(b)
Related agreements and comparisons
Resources and Navigation
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Overview
Changes largely to account for the new Force Majeure Event and some tidying up, but beyond that Section 6(b) works in the same general way under the 1992 ISDA and 2002 ISDA.
Summary
There is a difference between Termination Events that are non-catastrophic, and usually Transaction-specific, and those that are catastrophic, which are usually counterparty specific.
Non-catastrophic ones affecting just a subset of Transactions might be caused by, say, a Tax Event or a local Illegality, but in any weather do not concern the solvency, creditworthiness or basic mendacity of your counterparty. They generally won’t have much, directly, to do with your counterparty at all beyond the jurisdictions it inhabits and the laws it is subject to. These are generally the Termination Events, but not Additional Termination Events.
The catastrophic ones are by their nature affect — that is, “Affect” — all Transactions. These generally are the bespoke Additional Termination Events your credit department insisted on — or theirs did; they will have something to do with the naughtiness of lack of fibre of your counterparty (or you!), and these function for most respects a lot more like Events of Default.
Thus, in the drafting of ISDA Schedules, CSAs and so on, you will often find laboured reference to Events of Default and/or Termination Events which lead to Early Termination Dates with respect to all outstanding Transactions as some kind of special, hyper-exciting, class of Termination Event.
Lucky premium content subscribers get a lot more discussion about the practical implications of all the above and a table comparing the events.
Premium content
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- The JC’s famous Nutshell™ summary of this clause
- A clause-by-clause anaylsis of this provision
- A discussion about the curious limited termination optionality in the Illegality and (in 2002 ISDA) Force Majeure Termination Events
See also
- The comparison table in the premium section for Section 6