Single Agreement - Pledge GMSLA Provision

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2018 Global Master Securities Lending Agreement (Pledge Version)
A Jolly Contrarian owner’s manual™

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Clause 17 in a Nutshell

Use at your own risk, campers!
17 Single Agreement

The parties enter into this Agreement and each Loan on the assumption that Loans constitute a single business and contractual relationship and are made in consideration of each other and therefore agrees:

(a) that its default under one Loan will be a default under all of them (except where provided otherwise); and
(b) that its performance under any one Loan is in consideration of the other Party’s performance under all Loans.

Full text of Clause 17

17 Single Agreement

Each Party acknowledges that, and has entered into this Agreement and the related agreements referred to herein and will enter into each Loan in consideration of and in reliance upon the fact that, all Loans constitute a single business and contractual relationship and are made in consideration of each other. Accordingly, each Party agrees:

(a) to perform all of its obligations in respect of each Loan, and that a default in the performance of any such obligations shall constitute a default by it in respect of all Loans, subject always to the other provisions of this Agreement and such related agreements; and
(b) that payments, deliveries and other transfers made by either of them in respect of any Loan shall be deemed to have been made in consideration of payments, deliveries and other transfers in respect of any other Loan.

Related agreements and comparisons

Related agreements: Click here for the same clause in the 2010 GMSLA
Comparison: Click to compare the 2010 GMSLA and 2018 Pledge GMSLA versions of this clause.

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Content and comparisons

The same, but for a rather pernickety reference to “related agreements”.

“But true,” says ICMA’s crack drafting squad™.

“But pernickety,” says the JC.



The “single agreement” concept

Here several pieces of magic come together to create the capital foundation of the modern master trading agreement. The challenge, originally solved by the First Men, was to create an architecture that allowed discrete, unitary, complete Transactions, such that creating a new one or terminating an old one didn’t upset the economic or legal integrity of other Transactions that were currently on foot — no untoward tax consequences, that is to say — while at the same time creating an umbrella framework so that, should something regrettable happen to either party, all Transactions can be quickly rounded up, evaluated, stopped and then collapsed down — “netted” — to a single payment, payable by one party to the other.

This involved some canny financial engineering. The general rules of set-off require not just a mutuality of parties to the off-setting debts, but also amounts falling due on the same day and in the same currency — neither of which was necessarily true of the independent Transactions executed under a multi-currency, cross-border ISDA Master Agreement.

Their solution was this concept of the “Single Agreement”: the over-arching agreement that, however independent and self-contained Transactions are for any other purpose, when it comes to their early termination, they transmogrify into the single host agreement, in the process reduced to mere calculation inputs to the final amount which one party must pay the other. Thereby the process is not one of “set-off” at all, but of calculating a single net amount, the payment of which would sort out all matters outstanding under the relationship.

The JC once had the idea of doing a “boring talk” about the history of the ISDA Master, and actually pitched it to the BBC for their podcast series. It was rejected, on account of being too boring. True story.

Under the GMSLA specifically

Interestingly ICMA’s crack drafting squad™ elected not to use the expression “single agreement”, so beloved of ISDA’s crack drafting squad™ and the ninjas of the eye-ess-dee-aye that is has more or less become a term of art.

Why so? We may never know. But the point is purely to defeat the mendacious designs of insolvency administrators in far flung locales who may take it into their heads to pick apart valuable Loan exposures in their estate’s favour. That is to say — is that the dramatic look gopher I hear? — to be a cherry-picker.


See also