Force Majeure Event - 1992 ISDA Provision
Comparisons
Force Majeure Event: There is no Force Majeure in the 1992 ISDA, though parties would habitually negotiate one in, and by the time the 2002 ISDA was published it was in fairly standardised. For those who didn’t negotiate it in there was also the ISDA Illegality/Force Majeure Protocol (see here) which they could sign — upon payment of the suitable fee is ISDA — to adopt/incorporate the relevant parts.
Waiting period
There is no “Waiting Period” in the 1992 ISDA or in the 1987 ISDA. ISDA’s crack drafting squad™ introduced it in the 2002 ISDA with the arrival of Force Majeure, and liked it so much they extended it to Illegality.
Basics
For the last word on force majeure, the JC’s ultimate force majeure clause is where it’s at. Breaking what must be a habit of a lifetime, somehow ISDA’s crack drafting squad™ managed to refrain from going crazy-ape bonkers with a definition of force majeure and instead, didn’t define it at all. In the 1992 ISDA they didn’t even include the concept.
Interlude: if you are in a hurry you can avoid this next bit.
I don’t know this, but I am going to hazard the confident hypothesis that what happened here was this:
ISDA’s crack drafting squad™, having convened its full counsel of war, fought so bloodily over the issue, over so long a period, that the great marble concourse on Mount Olympus was awash with the blood of slain legal eagles, littered with severed limbs, wings, discarded weapons, arcane references to regional variations of tidal waves, horse droppings from Valkyries etc., that there was barely a soul standing, and the only thing that prevented total final wipe-out was someone going, “ALL RIGHT, GOD DAMN IT. WE WON’T DEFINE WHAT WE MEAN BY FORCE MAJEURE AT ALL.”
There was then this quiet, eerie calm, when remaining combatants suddenly stopped; even those mortally wounded on the floor looked up, beatifically; a golden light bathed the whole atrium, choirs of angels sang and the chairperson said, “right, well that seems like a sensible, practical solution. What next then?”
“We thought we should rewrite the 2002 ISDA Equity Derivatives Definitions in machine code, your worship.”
“Excellent idea! Let’s stop faffing around with this force majeure nonsense and do that then!”
Ok back to normal.
Force Majeure in the 1992 ISDA
We may have said this before but, just because there isn’t a Force Majeure proper in the preprinted 1992 doesn’t mean people don’t borrow the concept from the 2002 — which has been around for, you know, 21 years now — and put it in anyway. One thing we can’t fathom is what possessed ISDA’s crack drafting squad™ to put it in at Section 5(b)(ii), rather than Section 5(b)(iv) just before the Additional Termination Event section, because for absolute shizzle anyone familiar with one version of the ISDA Master Agreement is going to get confused as hell if they start misunderstanding clause references in the other.
Act of state
Note the reference to “act of state”. Now a state, rather like a corporation, is a juridical being — a fiction of the law — with no res extensa as such. It exists on the rarefied non-material plane of jurisprudence. There are, thus, only a certain number of things that, without the agency of one if its employees, a state can do, and these involve enacting and repealing laws, promulgating and withdrawing regulations, signing treaties, entering contracts and, where is has waived its sovereign immunity, litigating their meaning.
Thus, a force majeure taking the shape of an act of state is, we humbly submit, a change in law which makes it impossible for one side or the other to perform its obligations. Compare, therefore, with Illegality.
Waiting Period (2002)
The point of Waiting Period is, for potential scenarios that might wind up justifying termination later, but you don’t yet know that, to build in a period to wait and see. For Illegality events (Section 5(b)(i)) is three Local Business Days — it is not so likely that an Illegality will sort itself out; for a Force Majeure Event (5(b)(ii) — where insh’Allah, things will come right and everyone can eventually go back to what they were doing, it is eight Local Business Days.
Waiting Periods — as defined in the ISDA Master Agreement also sometimes show up sometimes in other booklets — for example, ISDA’s Emissions Annex.
Through the good offices of Section 5(d), payments and deliveries which otherwise would be due during a Waiting Period are suspended.
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See also
- Force majeure generally
- Waiting Period