Force Majeure Event - 1992 ISDA Provision
Content and comparisons
Note that, while the 1992 ISDA does not contain the concept of force majeure, there is an ISDA Illegality/Force Majeure Protocol (see here) which antediluvian swap counterparties can signed to adopt/incorporate the relevant parts.
Force majeure in the 1992 ISDA
There is no equivalent to the 2002 ISDA’s Force Majeure Event in the 1992 ISDA. You could, and many old-timers do, write an Impossibility clause into the Schedule, which endeavoured to do the same thing. Or you could incorporate the 2002 ISDA’s Force Majeure Event into the 1992 ISDA — as long as you carry the concept through to its logical conclusion i.e.:
- Include a “Hierarchy of Events” to be clear what happens where the same event is both a Event of Default and a Force Majeure Event;
- Consider the impact of a deferral on the Early Termination Amount etc.
The concept also impacts the basis of close-out because the 2002 ISDA requires true mids for valuation i.e, not simply the average of each party’s view of the bid/offer where a Force Majeure Event (or Illegality) occurs, which is effectively what you get under the 1992 ISDA with a “Two Affected Parties” option.
The easiest way of achieving this is to sign up to the ISDA protocol on Illegality and Force Majeure.
Template:M sa 1992 ISDA Force Majeure Event