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| In which the [[JC]] thinks he might have found a ''bona fide'' use for the awful legalism “[[and/or]]”. Crikey.
| | {{isda 5(c) summ|isdaprov}} |
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| What to do if the same thing counts as an {{isdaprov|Illegality}} ''[[and/or]]'' a {{isdaprov|Force Majeure Event}} ''[[and]]'' an {{isdaprov|Event of Default}} ''[[and/or]]'' a {{isdaprov|Termination Event}}.
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| Why do we need this? Remember, an {{isdaprov|Event of Default}} is an apocalyptic disaster scenario which blows your whole agreement up with extreme prejudice; a {{isdaprov|Termination Event}} is just “one of those things” which justifies termination, but may relate only to a single {{isdaprov|Transaction}}, and even if it affects the whole portfolio, it isn’t something one needs necessarily to hang one’s head about. (It’s hardly ''your'' fault if they go and change the law on you, is it?)
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| A {{isdaprov|Force Majeure Event}} is something that is so beyond one’s control or expectation that it shouldn’t count as an {{isdaprov|Event of Default}} or even a {{isdaprov|Termination Event}} ''at all'' — at least until you’ve had a chance to sort yourself out, fashion a canoe paddle with a Swiss Army knife, jury-rig an aerial and get reconnected to the world wide web.
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| ===Non-[[Repudiatory breach|repudiatory]] {{isdaprov|Breach of Agreement}}===
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| Note that the subordination of {{isdaprov|Events of Default}} to {{isdaprov|Illegality}} and {{isdaprov|Force Majeure}} in section {{isdaprov|5(c)(i)}} specifically excludes a [[Repudiatory breach|repudiatory]] {{isdaprov|Breach of Agreement}} as contemplated under the newly introduced section {{isdaprov|5(a)(ii)(2)}}, and any {{isdaprov|Credit Support Default}} other than a direct, non-[[Repudiatory breach|repudiatory]], default by the {{isdaprov|Credit Support Provider}}.
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| Why? Well, firstly, this is about {{isdaprov|Events of Default}} that are ''directly caused by'' an {{isdaprov|Illegality}} or {{isdaprov|Force Majeure}}, not simply ones which are coincidental with them. That being said, disciples of [[David Hume]] will appreciate that causal relations are not always perfectly clear, a spurious [[correlation]] can resemble [[causation]], so there is inevitably scope for a mischievous defaulter to create confusion and angst here. Recognising this, {{icds}} inserted some language which, in a world governed unstintingly by cold economic logic, would be redundant, but may help to put [[Credit department|easily riled minds]] at rest here.
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| Secondly, if you have actually ''[[Repudiation|repudiated]]'' your contract — that is to say, point-blank ''refused'' to perform its clear terms — and, by lucky hap, your [[repudiation]] coincides with an {{isdaprov|Illegality}} or a Force Majeure by which you couldn’t perform it even if you wanted to, then your counterparty should not be obliged to give you the benefit of the doubt and have to close you out via the more genteel route of an {{isdaprov|Illegality}} {{isdaprov|Termination Event}}.
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| If you’ve thrown your toys out of the pram, expected to be spanked, that is to say.<ref>It ought to go without saying that the [[Jolly Contrarian]] does not condone corporal punishment to wanton boys, although it never did him any harm.</ref>
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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.