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===No such concept in the {{csa}} or the {{1994csa}}===
====Good Faith and Commercially Reasonable Manner====
Concerning as it does ''legal'' and not ''contractual'' ineligibility of [[credit support]], and that being a function of criteria imposed by regulators on one’s ''mandatory'' obligations to post and collect [[Variation margin|margin]], which did not exist before 2016, it is hardly surprising {{icds}} of yore didn’t anticipate the need for this clause, which is convoluted, finnicky, and you can avoid the need for it entirely, should you post [[cash]] in a sensible [[currency]].
Whether a merchant should commit herself to dealing in [[good faith]], or in a [[commercially reasonable manner]], or [[In good faith and a commercially reasonable manner|both]], is one that vexes the legal profession. Especially those in [[US Attorney|America]]. It should not. While doing no more than articulating the [[commercial imperative]] it can put many a tedious, and expensive, [[negotiation]] to the sword.  


===Difference between {{vmcsa}} and {{nyvmcsa}}===
Of course, there is a certain kind of negotiator apt to see phantoms and ghosts at every turn.  She has a bleak vision indeed of a counterparty’s general commercial aspirations for his organisation. Hobbesian.
 
“What if,” she will say, “your traders mendaciously use this clause to bring about my firm’s misfortune in a way I – er – cannot now anticipate?”
 
=====Litigation risk=====
The one argument against the general principle is that acting “reasonably” is inherently ''vague'' and therefore a source of potential dispute ''in itself'', ''even if'' we always exercise our rights reasonably and in good faith. This is just what you would expect a work-creating lawyer to say.
 
JC says, “come now”. This is ''constructive'' vaguess - of the good kind — it only presents [[litigation]] risk to clients who don’t trust you — and here you have bigger problems, frankly — or to those whom ''you'' don’t trust — also not without issues. Here, your problem is not the good faith obligation; it’s that you have a lousy client relationship. It hardly affects litigation risk in any case: An unhappy client will take action either way, and will argue a lack of good faith in any case.
 
A contract is a bond of [[trust]]. How would a merchant explain to his counterparty that he wished to reserve for himself the right to act in ''[[bad faith]]''?
 
As for [[commercial reasonableness]], yes, ''it admits shades of doubt, and encourages litigation'' — well, for you the great case of {{casenote|Barclays|Unicredit}} should be a source of succour. The fact that “[[in good faith and a commercially reasonable manner]]” is written into the [[Uniform Commercial Code]] should bend the American ear: if it is okay there — and in the {{nyvmcsa}} — why not elsewhere?
 
In any case, whatever your contract says, if a court finds you have acted wantonly, or in bad faith, do not expect much sympathy when you argue that, by the contract, you were ''entitled'' to. <br>
 
====Legally ineligible Credit Support====
=====New for the regulatory margin CSAs=====
There is no such concept in the [[ancient CSA]]s, concerning as it does ''legal'' and not ''contractual'' ineligibility of [[credit support]], and that being a function of criteria imposed by regulators on one’s ''mandatory'' obligations to post and collect [[Variation margin|margin]], which did not exist before 2016, it is hardly surprising {{icds}} of yore didn’t anticipate the need for this clause, which is convoluted, finnicky, and you can avoid the need for it entirely, should you post [[cash]] in a sensible [[currency]].
 
=====Regulatory margin {{ttcsa}} vs {{sicsa}}=====
In most respects they are identical (with references to “{{vmcsaprov|Transferor}}” and “{{vmcsaprov|Transferee}}” switched to “{{nyvmcsaprov|Pledgor}}” and “{{nyvmcsaprov|Secured Party}}”). There are two technical differences, for completists:
In most respects they are identical (with references to “{{vmcsaprov|Transferor}}” and “{{vmcsaprov|Transferee}}” switched to “{{nyvmcsaprov|Pledgor}}” and “{{nyvmcsaprov|Secured Party}}”). There are two technical differences, for completists:
*The exception in the {{vmcsa}} for {{vmcsaprov|Legally Ineligible Credit Support}} counting as {{vmcsaprov|Eligible Credit Support}} for the purpose of {{vmcsaprov|Credit Support Balance}} and {{vmcsaprov|Equivalent Credit Support}}. This is because, being a {{ttca}}, even though it is worth zero ''for the purposes of discharging one’s regulatory obligation to collect and return collateral'', in the ''real'' world it is still worth something, and the {{vmcsaprov|Transferee}} still has to give it back, even if that has no effect on [[Value - VM CSA Provision|valuations]] under the {{vmcsa}}. With a {{nyvmcsa}} since the {{nyvmcsaprov|Secured Party}} never<ref>Ahem [[Use of Posted Collateral (VM) - NY VM CSA Provision|rehypothecation]] folks.</ref> “gets” it in the first place, the {{nyvmcsaprov|Secured Party}} doesn’t have to give it back either. (By the way, if you aren’t saying, “hey, but what about rehypothecation under Paragraph {{nyvmcsaprov|6(c)}}?” yet, you ''should'' be.)
*The exception in the {{vmcsa}} for {{vmcsaprov|Legally Ineligible Credit Support}} counting as {{vmcsaprov|Eligible Credit Support}} for the purpose of {{vmcsaprov|Credit Support Balance}} and {{vmcsaprov|Equivalent Credit Support}}. This is because, being a {{ttca}}, even though it is worth zero ''for the purposes of discharging one’s regulatory obligation to collect and return collateral'', in the ''real'' world it is still worth something, and the {{vmcsaprov|Transferee}} still has to give it back, even if that has no effect on [[Value - VM CSA Provision|valuations]] under the {{vmcsa}}. With a {{nyvmcsa}} since the {{nyvmcsaprov|Secured Party}} never<ref>Ahem [[Use of Posted Collateral (VM) - NY VM CSA Provision|rehypothecation]] folks.</ref> “gets” it in the first place, the {{nyvmcsaprov|Secured Party}} doesn’t have to give it back either. (By the way, if you aren’t saying, “hey, but what about rehypothecation under Paragraph {{nyvmcsaprov|6(c)}}?” yet, you ''should'' be.)
*The exception for valuation on {{csaprov|Default}} — that flows from the fundamental difference between the {{vmcsa}} a {{ttca}} which is a {{isdaprov|Transaction}} under the {{isdama}} and the {{nyvmcsa}} which is a {{sfca}} which is only a {{isdaprov|Credit Support Document}} under the {{isdama}}. <br>
*The exception for valuation on {{csaprov|Default}} — that flows from the fundamental difference between the {{vmcsa}} a {{ttca}} which is a {{isdaprov|Transaction}} under the {{isdama}} and the {{nyvmcsa}} which is a {{sfca}} which is only a {{isdaprov|Credit Support Document}} under the {{isdama}}.  
====Specification of certain matters====
One from the “well, I’ll be blowed” school of legal expression wherein {{icds}} states the bleeding obvious for the benefit of those [[Legal eagle|timid type]]s who — despite being schooled in its weft and warp — don’t quite trust the [[common law]] to deliver elementary common ''sense''.
 
On the one hand, you can see where they’re coming from — this is the same [[common law]] which concluded that [[email]] is not an [[electronic messaging system]],<ref>{{casenote|Greenclose|National Westminster Bank plc}}.</ref> after all - but on the other hand ''come on''.

Latest revision as of 16:00, 13 May 2024

Good Faith and Commercially Reasonable Manner

Whether a merchant should commit herself to dealing in good faith, or in a commercially reasonable manner, or both, is one that vexes the legal profession. Especially those in America. It should not. While doing no more than articulating the commercial imperative it can put many a tedious, and expensive, negotiation to the sword.

Of course, there is a certain kind of negotiator apt to see phantoms and ghosts at every turn. She has a bleak vision indeed of a counterparty’s general commercial aspirations for his organisation. Hobbesian.

“What if,” she will say, “your traders mendaciously use this clause to bring about my firm’s misfortune in a way I – er – cannot now anticipate?”

Litigation risk

The one argument against the general principle is that acting “reasonably” is inherently vague and therefore a source of potential dispute in itself, even if we always exercise our rights reasonably and in good faith. This is just what you would expect a work-creating lawyer to say.

JC says, “come now”. This is constructive vaguess - of the good kind — it only presents litigation risk to clients who don’t trust you — and here you have bigger problems, frankly — or to those whom you don’t trust — also not without issues. Here, your problem is not the good faith obligation; it’s that you have a lousy client relationship. It hardly affects litigation risk in any case: An unhappy client will take action either way, and will argue a lack of good faith in any case.

A contract is a bond of trust. How would a merchant explain to his counterparty that he wished to reserve for himself the right to act in bad faith?

As for commercial reasonableness, yes, it admits shades of doubt, and encourages litigation — well, for you the great case of Barclays v Unicredit should be a source of succour. The fact that “in good faith and a commercially reasonable manner” is written into the Uniform Commercial Code should bend the American ear: if it is okay there — and in the 2016 NY Law VM CSA — why not elsewhere?

In any case, whatever your contract says, if a court finds you have acted wantonly, or in bad faith, do not expect much sympathy when you argue that, by the contract, you were entitled to.

Legally ineligible Credit Support

New for the regulatory margin CSAs

There is no such concept in the ancient CSAs, concerning as it does legal and not contractual ineligibility of credit support, and that being a function of criteria imposed by regulators on one’s mandatory obligations to post and collect margin, which did not exist before 2016, it is hardly surprising ISDA’s crack drafting squad™ of yore didn’t anticipate the need for this clause, which is convoluted, finnicky, and you can avoid the need for it entirely, should you post cash in a sensible currency.

Regulatory margin title transfer CSA vs security interest CSA

In most respects they are identical (with references to “Transferor” and “Transferee” switched to “Pledgor” and “Secured Party”). There are two technical differences, for completists:

Specification of certain matters

One from the “well, I’ll be blowed” school of legal expression wherein ISDA’s crack drafting squad™ states the bleeding obvious for the benefit of those timid types who — despite being schooled in its weft and warp — don’t quite trust the common law to deliver elementary common sense.

On the one hand, you can see where they’re coming from — this is the same common law which concluded that email is not an electronic messaging system,[2] after all - but on the other hand come on.