Amendments - 1992 ISDA Provision
Content and comparisons
“In writing” means recorded for posterity, in words ingestable by means of the eyes, as opposed to the ears. This is not the OED definition, I grant you — I made it up just now — but it zeroes in on the immutable fact that, whether it is on parchment, paper, cathode ray tube, LED screen or electronic reader, you take in writing by looking at it. Not orally — from the mouth — or for that matter, aurally — to the ears nor, in the JC’s favourite example, via semaphore, by a chap waving flags from a distant hill, but in visible sentences, made up of visual words.
So WHAT THE HELL IS “INCLUDING A WRITING EVIDENCED BY A FACSIMILE TRANSMISSION” MEANT TO ADD? What even is “a” writing? But, readers, this brief sentence gets only worse. Then it says “AND executed by each of the parties” — so what, are you saying you have to get them to sign your fax copy, or re-transmit it over a telex?
And note, email does not count as an electronic messaging system. I know it seems odd, but that is the unambiguous text in the definition of “electronic messaging system”. So a waiver of a NAV Trigger by email, even by an exchange of emails, are not strictly enforceable. Though of course waivers unsupported by consideration are generally revocable on fair notice under English law anyway.
As a result ISDA’s crack drafting squad™ can pat itself on the back for having inserted as long ago as 1992 what, at the time, was an unnecessary clause but which turned out to anticipate a rather woeful decision of the Supreme Court in 2018.
“No oral modification” is a self-contradictory stricture on an amendment agreement, until 2018 understood by all to be silly fluff put in a contract to appease the lawyers and guarantee them an annuity of tedious work. But as of 2018 it is no longer, as it ought to be, a vacuous piece of legal flannel — thanks to what we impolitely consider to be an equally vacuous piece of legal reasoning by no less an eminence than Lord Sumption of the Supreme Court in Rock Advertising Limited v MWB Business Exchange Centres Limited if one says one cannot amend a contract except in writing then one will be held to that — even if on the clear evidence the parties to the contract later agreed otherwise.
This is rather like sober me being obliged to act on promises that drunk me made to a handsome rechtsanwältin during a argument about theoretical physics in a nasty bar in Hammersmith after the end-of-year do, which that elegant German attorney can not even remember me making, let alone wishing to see performed. Hold my beer.
Three lookouts here.
One: Email isn’t included. According to her majesty’s judiciary, email is not included and does not count as an electronic messaging system. Let your klaxons blare. But at leadst the 1992 ISDA is equivocal about it: in the 2002 ISDA it is written into the definition of “electronic messaging system” that it doesn’t include email. I know it seems absurd at first glance — some would say it seems absurd having read the whole judgment in Greenclose v National Westminster Bank plc and thought about it at length over a hearty walk in the woods — but there it is: that is the law of the land at the time of writing.
Two: This might not so much matter were it not for another spectacular outing for her majesty's judiciary, in which Lord Sumption decided that a “no oral modification” clause means what it says. Hitherto is had been assumed to be an easy concession to pedantic lawyers to let then can march in triumph back to their clients having had their iatrogenic way, but it now actually means something. Strictly interpreting a NOM clause probably makes sense if you are contemplating the eternal verities on the hard benches of a law library — or your judicial chambers — but it makes none if your job is to manage the cut and thrust of daily operational contract management.
To be sure, most financial institutions have a military-industrial complex handling the negotiation of ISDA Master Agreements and other trading contracts, so a formal amendment is not likely to pass without copperplate script execution in any case. And where the agreement contains a manifest error, and the parties perform to its true intent, notwithstanding misdirected written text, does this give one side a free, unconscionable option? — who can say?
And as for waivers — especially when your credit department is in the thrall of setting NAV triggers it doesn’t monitor and isn’t likely to to exercise — by the lights of this clause you must formally confirm these waivers in writing, which is a profound waste of everyone’s time.
Three: Good luck reconciling the above with the Counterparts and Confirmations clause, which says, rightly, that the binding action on a Transaction is the moment the parties first agree it — that is, as likely as not, a phone call or Bloomberg chat, or in volume products, an electronic handshake between booking systems. Since a Transaction is a modification to the ISDA Master Agreement, the words above ring a bit hollow.
- I know this sounds oddly, verisimilitudinally specific, but it actually isn’t. I really did just make it up.
- Rock Advertising Limited v MWB Business Exchange Centres Limited