Template:M summ 2002 ISDA 5(b)(iv)

A “Burdened Party” is different from an “Affected Party” because the tax obligation — well, burden — resulting from the merger of one counterparty may fall on the other one. If I were Russian and you Cypriot, and I was able to pay without withholding thanks to the Russia-Cyprus double tax treaty, and you went and merged into a Scottish company, meaning you became Scottish, then suddenly I can’t take advantage of that marvellous double tax treaty any more. In that case I am the “Burdened Party” — the one suffering the tax burden — but you are the “Affected Party” — since it was your merger which triggered the unhappy tax transformation.

In the case where my merger also caused me to suffer the tax burden, I would be both the Burdened Party and the Affected Party.

This is you can imagine, a red letter day for ISDA’s crack drafting squad™ w2ho quite outdid itself in the complicated permutations for how to terminate an ISDA Master Agreement should there be a Tax Event or a Tax Event Upon Merger. Things kick off in Section 6(b)(ii) and it really just gets better from there on in.