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Template:Eventsofdefault: Difference between revisions
→“Soft” or “Passive” {{isdaprov|Events of Default}}
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Where a state of affairs has arisen ''permitting'' a hard {{isdaprov|Event of Default}} to be called, but it has not been designated it happened, such as {{isdaprov|Cross Default}}, where person owning the actual "hard" default right against your counterparty may not have triggered (or have any intention of triggering) it. | Where a state of affairs has arisen ''permitting'' a hard {{isdaprov|Event of Default}} to be called, but it has not been designated it happened, such as {{isdaprov|Cross Default}}, where person owning the actual "hard" default right against your counterparty may not have triggered (or have any intention of triggering) it. | ||
That said, and for the same reason, such | That said, and for the same reason, such “not independently verifiable” termination/default events are effectively soft anyway, even where we have such an obligation from counterparty to notify us of their occurrence, because we have no means of policing whether or not the Counterparty has in fact notified us, and therefore no practical remedy anyway if it does not. It is a self certification, after all, and all we can rely on is its moral force and the party's competence to monitor its own position and be sufficiently organised to tell us. | ||
Additionally, the obligation on a counterparty to monitor "passive" {{isdaprov|Events of Default}} like {{isdaprov|Cross Default}} (as opposed to [[cross acceleration]] where [[QED]] a defaulting party will be notified about the occurrence) is a pretty onerous one particularly for a large entity, and even more so where (as they often are for funds) derivatives are included in definition of {{isdaprov|Specified Indebtedness}}. | Additionally, the obligation on a counterparty to monitor "passive" {{isdaprov|Events of Default}} like {{isdaprov|Cross Default}} (as opposed to [[cross acceleration]] where [[QED]] a defaulting party will be notified about the occurrence) is a pretty onerous one particularly for a large entity, and even more so where (as they often are for funds) derivatives are included in definition of {{isdaprov|Specified Indebtedness}}. | ||
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#Impose notification requirement only on "active" termination/default events which are non-public and CP has no excuse for not having monitored them and counterparty has actually exercised; and | #Impose notification requirement only on "active" termination/default events which are non-public and CP has no excuse for not having monitored them and counterparty has actually exercised; and | ||
#If that doesn't work, agree to drop the provision altogether, as in my view its practical utility is limited to "moral" at best (as there is no effective sanction for counterparty breach anyway) | #If that doesn't work, agree to drop the provision altogether, as in my view its practical utility is limited to "moral" at best (as there is no effective sanction for counterparty breach anyway) | ||
===={{isdaprov|Illegality}}==== | ===={{isdaprov|Illegality}}==== | ||
{{isdaprov|Illegality}} trumps {{isdaprov|Event of Default}}. Be careful where, for example, a {{isdaprov|Failure to Pay}} is occasioned by a mandatory change in law by a government having jurisdiction over one or other counterparty — see {{isdaprov|Illegality}}. Good example: Greek capital controls of June 2015. | {{isdaprov|Illegality}} trumps {{isdaprov|Event of Default}}. Be careful where, for example, a {{isdaprov|Failure to Pay}} is occasioned by a mandatory change in law by a government having jurisdiction over one or other counterparty — see {{isdaprov|Illegality}}. Good example: Greek capital controls of June 2015. | ||