Two Affected Parties - 1992 ISDA Provision

1992 ISDA Master Agreement A Jolly Contrarian owner’s manual™ 6(b)(iii) 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. 6(b)(iii) in all its glory 6(b)(iii) Two Affected Parties. If an Illegality under Section 5(b)(i)(1) or a Tax Event occurs and there are two Affected Parties, each party will use all reasonable efforts to reach agreement within 30 days after notice thereof is given under Section 6(b)(i) on action to avoid that Termination Event. edit Related agreements and comparisons Related Agreements Click here for the text of Section 6(b)(iii) 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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Be careful here: Under the 1992 ISDA, if your Failure to Pay is also an Illegality it is treated as an Illegality: if there are two Affected Parties you will face a significant delay when closing out. A bit of a trick for young players.

Note also that reference to Illegality has been excised from the 2002 ISDA version. They changed this because, in practice, it turned out to too be hard to implement a transfer or amendment after an Illegality. Folks realised that if an Illegality happens you don’t want to have to wait 30 days to terminate, especially if you can’t rely on 2(a)(iii) to withhold payments in the meantime.

Summary

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Handwaving appeals to one another’s good natures with this talk of reasonableness and, of course, both parties will probably be incentivised to keep the trade on foot if some unfortunate tax eventuality comes about — seeing as they were incentivised enough to start it —but ultimately, this is an agreement to agree, however you dress it up, and is as contractually enforceable as one. That is, not very.

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See also

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• Agreement to agree
• Commercially reasonable manner