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| {{isdaanat|3(c)}} | | {{nman|isda|2002|3(c)}} |
| Reference to {{isdaprov|Affiliate}}s can be controversial, particularly for [[hedge fund]] managers.
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| More generally, [[absence of litigation]] it is roundly pointless [[representation]], but seeing as (other than unaffiliated Hedge Fund managers) no-one really complains about it, it is best to just leave well alone. It is one for the {{t|life’s too short}} file.
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| But if you do see your life stretching away unendingly to the horizon, and you haven’t got anything else in the calendar in the next half hour, go west, young man. If you can’t try this:
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| ===[[Absence of litigation]] generally===
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| An [[absence of litigation]] representation seeks to address litigation carrying two particular risks:
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| *'''Enforceability''': Litigation that could somehow undermine or prejudice the very enforceability of life was we know it (a.k.a the agreement you are presently negotiating);
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| *'''Credit deterioration''': Litigation that is so monstrous in scope that it threatens to wipe your [[counterparty]] from the face of the earth altogether, while it still owes you under the agreement you’re negotiating.
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| ====Enforceability-threatening {{tag|litigation}}====
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| Firstly, Earth to Planet ISDA: what kind of {{tag|litigation}} or regulatory action — we presume about something unrelated to this agreement since, by your theory, ''it doesn’t damn well exist yet'' — could adversely impact in the ''enforceability'' of this future private legal {{t|contract}} between one of the litigants and an unrelated, and ignorant, third party?
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| Search me. But still, I rest assured there will an [[Mediocre lawyer|ISDA boxwallah]] out there somewhere who could [[Chicken Licken|think of something]].
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| ====Existentially apocalyptic {{tag|litigation}}====
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| Look, if your [[counterparty]] is banged up in court proceedings so awful to behold that an adverse finding might bankrupt it altogether, and your credit sanctioning team hasn’t got wind of it independently then, friend, you have way, way bigger problems than whether you have this feeble covenant. And, if you are only catching it at all thanks to a carelessly given [[absence of litigation]] rep, by the time said {{tag|litigation}} makes itself known to you<ref>Judgment day, in other words.</re>''won’t it be a bit late''?
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| ====Pick your battles====
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| All that said, and probably for all of the above reasons, parties tend not to care less about this representation too vehemently, so your practical course is most likely to leave it where you find it.
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| {{seealso}}
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| *[[Representation]]
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2002 ISDA Master Agreement
A Jolly Contrarian owner’s manual™
3(c) in a Nutshell™
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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.
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Original text
Resources and Navigation
Index: Click ᐅ to expand:
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Comparisons
Section 3(c) was one of the bits of the 1992 ISDA that ISDA’s crack drafting squad™ “got mostly right” at the first time of asking. But still, some bright sparks on the ’Squad took it upon themselves, in the 2002 ISDA, to switch out reference to “Affiliates” which — I don’t know, might take in some distant half-bred cousin you don’t enormously care about and who doesn’t cast any real shadow on your creditworthiness — with “Credit Support Providers” and “Specified Entities” who no doubt more keenly do, but this leads to just more fiddliness in the Schedule over-stuffed with fiddliness, since one must then go to the trouble of specifying, and then arguing with your counterparties about, who should count as a Specified Entity for this remote and rather vacuous purpose.
Keeps the home fires burning in the hobbity shires where ISDA negotiators make their homes, we suppose.
Basics
Reference to Affiliates can be controversial, particularly for hedge fund managers.
More generally, absence of litigation is a roundly pointless representation, but seeing as (other than unaffiliated hedge fund managers) no-one complains about it, it is best to just leave well alone.
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
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- More information, should you want it, as to why people ask for this clause, what it is driving at, why it does not make much difference.
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See also
References