Affected Transactions - ISDA Provision

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2002 ISDA Master Agreement
A Jolly Contrarian owner’s manual™

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Section Affected Transactions in a Nutshell

Use at your own risk, campers!
Affected Transactions” means:
(a) for an Illegality, Force Majeure Event, Tax Event or TEUM, all Transactions affected by the Termination Event (and if it is an Illegality or Force Majeure Event that affects Credit Support Document covering only some Transactions, those Transactions) and
(b) for any other Termination Event, all Transactions.

Full text of Section Affected Transactions

Affected Transactions” means (a) with respect to any Termination Event consisting of an Illegality, Force Majeure Event, Tax Event or Tax Event Upon Merger, all Transactions affected by the occurrence of such Termination Event (which, in the case of an Illegality under Section 5(b)(i)(2) or a Force Majeure Event under Section 5(b)(ii)(2), means all Transactions unless the relevant Credit Support Document references only certain Transactions, in which case those Transactions and, if the relevant Credit Support Document constitutes a Confirmation for a Transaction, that Transaction) and (b) with respect to any other Termination Event, all Transactions.

Related agreements and comparisons

Related Agreements
Click here for the text of Section Affected Transactions in the 1992 ISDA
Click to compare this section in the 1992 ISDA and 2002 ISDA.

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Content and comparisons

The provisions are identical but for reference to the newly added Force Majeure Termination Event and also a cheeky caveat relating to an Illegality or Force Majeure which affects only the Credit Support Document, and here the “leave no detail, however tiresome, unconsidered” department of ISDA’s crack drafting squad™ caters for the eventuality that your Credit Support Document provides credit support for some, but not, all Transactions.

Seeing how third party credit support generally works under an ISDA Master Agreement — it only comes into play once Transactions have been closed out, and there are no Transactions left, Affected or otherwise[1] this does seem a rather fussy detail; all the more so now in the age of regulatory variation margin. I mean, who provides credit support for individual Transactions under a master agreement specifically designed to achieve cross-transactional closeout netting?

Hold your letters: I am sure you can think of some reason.



Note that for Additional Termination Events and Credit Event Upon Merger, all Transactions are automatically caught, and if you want to capture just certain Transactions, you’ll need to tweak this definition too.

But why, really, would you want to capture just some Transactions in an ATE? Well, there is a reason, though it is a fussy one:

Additional Representations as Additional Termination Events

In the case of Additional Representations this can be somewhat drastic, especially if your Additional Representation is Transaction-specific (for example India, China and Taiwan investor status reps for equity derivatives), and it would seem churlish to close out a whole ISDA Master Agreement on their account.

Then again, show me a swap dealer who would detonate an entire swap trading relationship with a solvent counterparty and I’ll show you a moron — but, as we know, opposing legal eagles operate on the presumption that everyone else is a moron and thus tend to be immune to such grand rhetorical flourishes, and regard such appeals to basic common sense as precisely such flourishes, so don’t expect that argument to carry the day, however practically true it may be.

Instead, expect to encounter leagues of agonising drafting, but there are easier roads to travel. Try:

These representations will be Additional Representations, except that where they prove to be materially incorrect or misleading when made or repeated it will not be an Event of Default but an Additional Termination Event, where the Transactions in question are the Affected Transactions and the misrepresenting party is the sole Affected Party.

Mean time, there is a lot more about how pointlessly over-engineered this clause is at the commentary to Section 6(b)(iv), the Right to Terminate.


See also



  1. The notable exception being a New York law Credit Support Annex of course.