Expenses - 1992 ISDA Provision

1992 ISDA Master Agreement A Jolly Contrarian owner’s manual™ 11 in a Nutshell™ The JC’s Nutshell™ summary of this term has moved uptown to the subscription-only ninja tier. For the cost of ½ a weekly 🍺 you can get it here. Sign up at Substack. You can even ask questions! Ask about it here. 11 in all its glory 11 Expenses. A Defaulting Party will, on demand, indemnify and hold harmless the other party for and against all reasonable out-of-pocket expenses, including legal fees and Stamp Tax, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement or any Credit Support Document to which the Defaulting Party is a party or by reason of the early termination of any Transaction, including, but not limited to, costs of collection. edit Related agreements and comparisons Related Agreements Click here for the text of Section 11 in the 2002 ISDA Comparisons Click to compare this section in the 1992 ISDA and 2002 ISDA. Resources and Navigation Resources Wikitext | Nutshell wikitext | 2002 ISDA wikitext | 2002 vs 1992 Showdown | 2006 ISDA Definitions | 2008 ISDA Navigation Preamble | 1 • (a) (b) (c) | 2 • (a) (b) (c) (d) (e) | 3 • (a) (b) (c) (d) (e) (f) | 4 • (a) (b) (c) (d) (e) | 5 • 5(a) Events of Default: 5(a)(i) Failure to Pay or Deliver 5(a)(ii) Breach of Agreement 5(a)(iii) Credit Support Default 5(a)(iv) Misrepresentation 5(a)(v) Default Under Specified Transaction 5(a)(vi) Cross Default 5(a)(vii) Bankruptcy 5(a)(viii) Merger Without Assumption 5(b) Termination Events: 5(b)(i) Illegality 5(b)(ii) Tax Event 5(b)(iii) Tax Event Upon Merger 5(b)(iv) Credit Event Upon Merger 5(b)(v) Additional Termination Event (c) | 6 • (a) (b) (c) (d) (e) | 7 | 8 • (a) (b) (c) (d) | 9 • (a) (b) (c) (d) (e) (f) (g) | 10 | 11 | 12 • (a) (b) | 13 • (a) (b) (c) (d) | 14 | Index: Click ᐅ to expand: 2002 ISDA 1992 ISDA Premium version of this page

Overview

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Observers will note that, but for the odd comma, Section 11 in the 1992 ISDA and the 2002 ISDA are identical. And deliciously brief. Not that they couldn’t be improved, of course; they just weren’t.

Summary

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An indemnity is all very well ...

Bear in mind, also, that your operating theory here is that your counterparty is a Defaulting Party — i.e., for all intents and purposes, broke. So while it’s a fine thing, this indemnity might not be of much practical use.

Is it covered in the close-out calculation?

No. The “Expenses” referred to in this provision would not be captured by the definition of “Close-out Amount” or “Early Termination Amount” because, Q.E.D., they arise only once that amount has been determined and the Non-Defaulting Party is in the process of collecting it.

Stamp Tax and Section 4(e)

In the limited circumstance of default, this section modifies the arrangement for who pays Stamp Tax as set out in Section 4(e) (which says it is the person whose tax residence precipitates it).

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See also

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• Indemnity