Force Majeure Event - 1992 ISDA Provision
Overview
Note that, while the 1992 ISDA does not contain the concept of force majeure, there is an ISDA Illegality/Force Majeure Protocol (see here) which antediluvian swap counterparties can signed to adopt/incorporate the relevant parts.
Summary
Force majeure in the 1992 ISDA
There is no equivalent to the 2002 ISDA’s Force Majeure Event in the 1992 ISDA. You could, and many old-timers do, write an Impossibility clause into the Schedule, which endeavoured to do the same thing. Or you could incorporate the 2002 ISDA’s Force Majeure Event into the 1992 ISDA — as long as you carry the concept through to its logical conclusion i.e.:
- Include a “Hierarchy of Events” to be clear what happens where the same event is both a Event of Default and a Force Majeure Event;
- Consider the impact of a deferral on the Early Termination Amount etc.
The concept also impacts the basis of close-out because the 2002 ISDA requires true mids for valuation i.e, not simply the average of each party’s view of the bid/offer where a Force Majeure Event (or Illegality) occurs, which is effectively what you get under the 1992 ISDA with a “Two Affected Parties” option.
The easiest way of achieving this is to sign up to the ISDA protocol on Illegality and Force Majeure.
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- The JC’s famous Nutshell™ summary of this clause
See also
Template:M sa 1992 ISDA Force Majeure Event