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Inter-affiliate ISDA negotiation: Difference between revisions

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Inter-affiliate ISDA negotiation (view source)

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''With apologies to [http://www.gutenberg.org/files/1023/1023-h/1023-h.htm Charles Dickens]''
''With apologies to [http://www.gutenberg.org/files/1023/1023-h/1023-h.htm Charles Dickens]''


On such an afternoon some score of members of the Contract Negotiation Specialists Group ought to be — as here they are — mistily engaged in one of the ten thousand stages of an endless cause, tripping one another up on the slippery slope of [[precedent]], groping knee-deep in [[Escalation|escalations]], running their heads against unpunctuated walls of words and making a great pretence of commercial point and counterpoint, as players might.  
The idea first struck Wickliffe Hampton’s London trading desk that it should hedge its own [[debt value adjustment]]s by laying them off to its German affiliate, Wickliffe Hampton Deutschland GmbH, as it then was, in 1996. A quick conversation between the desks settled that this might be a mutually beneficial arrangement — ''Deustchland'' had its own, own-credit risk to manage, after all, and couldn’t they swap them? The transaction management process was invoked, a request raised  to put in place the necessary contract documentation, a {{1992ma}}, following the prompt conclusion of which the pair of affiliates could scratch each others’ revenue-stating backs cheaply, effectively and the for the hereafter.


On such an afternoon the various [[paralegal]]s, [[negotiator]]s, [[alternative legal service provider]]s, [[credit officer]]s in the cause, some two or three of whom have inherited it from a parent, who also made a living out of it, ought to be — as are they not? — arranged in a line, with [[Side letter|side-letter]]s, [[Margin lock-up|margin lock-ups]], [[Credit support document|credit support documents]], [[SFTR disclosures|title-transfer collateral arrangement disclosures]], [[Threshold Amount - ISDA Provision|Cross Default thresholds]], [[Additional Termination Event - ISDA provision|Additional Termination Events]], fee schedules, [[conditions precedent]], [[conditions subsequent]], [[Authorised signatory lists|authorised signatory lists]], audited financial statements, mountains of costly nonsense all, piled before them.


Well may the commercial objective be dim; well may the fog of war saturate the recycled tropes have grown calcific through time-tested abeyance, their original purpose now so encrusted in soporific text it can not escape, and no [[negotiator]] has the disposition, let alone a mandate, let alone the ''fortitude'', to go in after it with the hammer and chisel it deserves. Instead, countless [[disempowered]] agents will lay yet more silt upon the accretive communiques by which they relay their halting progress back to countless [[disempowered]] superiors, bewildering may the obstacles to [[Consensus ad idem|consensus]] described within them be that they may pass uncomprehended and therefore unresolved amongst those occupying the higher rungs whose designated role is adjudication; well may we uninitiated from the streets, were we yet allowed to slip those security-controlled doors, gather up a printed sheaf and peruse its labyrinthine figures, be deterred from going on by its owlish aspect and by the simple acreage of black 11 point Times New Roman on white on a scale that presents as entropic blur, an invariant shade of grey that crisply snuffs what wick the lantern of curiosity might ever have possessed.
On such an afternoon some score of members of the “Contract Negotiation Specialists Group”, as it is for the time being known, are  mistily engaged in one of the ten thousand stages of an endless cause, tripping one another up on the slippery slope of [[precedent]], groping knee-deep in [[Escalation|escalations]], running their heads against unpunctuated walls of words and making a great pretence of commercial point and counterpoint, as players in a cosmic comedy might.
 
On such an afternoon the various [[transaction manager]]s [[paralegal]]s, [[negotiator]]s, [[legal process outsourcer]]s, [[credit officer]]s in the cause, most of whom have inherited these roles from a predecessor who also made a living out of it, ought to be — as are they not? — arranged in a line, with [[Side letter|side-letter]]s, [[Margin lock-up|margin lock-ups]], [[Credit support document|credit support documents]], [[SFTR disclosures|title-transfer collateral arrangement disclosures]], [[Threshold Amount - ISDA Provision|Cross Default thresholds]], [[Additional Termination Event - ISDA Provision|Additional Termination Events]], fee schedules, [[conditions precedent]], [[conditions subsequent]], [[Authorised signatory lists|authorised signatory lists]], audited financial statements, mountains of costly nonsense all, piled before them.
 
Well may the commercial objective be dim; well may the fog of war saturate the recycled tropes have grown calcific through time-tested abeyance, their original purpose now so encrusted in soporific text it can not escape, and no [[negotiator]] has the disposition, let alone a mandate, let alone the ''fortitude'', to go in after it with the hammer and chisel it deserves. Instead, countless [[disempowered]] agents will lay yet more silt upon the accretive communiques by which they relay their halting progress back to countless [[disempowered]] superiors, bewildering may the obstacles to [[Consensus ad idem|consensus]] described within them be that they may pass uncomprehended and therefore unresolved amongst those occupying the higher rungs whose designated role is adjudication; well may we uninitiated from the streets, were we yet allowed to slip those security-controlled doors, gather up a printed sheaf and peruse its labyrinthine figures, be deterred from going on by its owlish aspect and by the simple acreage of black 11 point Times New Roman on white on a scale that presents as [[entropy|entropic]] blur, an invariant shade of grey that crisply snuffs what wick the lantern of curiosity might ever have possessed.


In this way [[negotiation]] acquires its own life, its own interests, its own corporeal ''form''. It has a personality; it has its own interests, quite distinct from those whose fussy ministrations give it life. As a [[negotiation]] endures, it grows stronger — every extra effort in its cause expands it mass and lends it gravity, such that those who people its onward trajectory fall under its influence and then into its orbit: they can no more escape it than can they slip the surly bonds of Earth and dance the skies. Nor would they care to do so, for in its silken folds lie safety, security, nourishment and warmth — as long as the negotiation is on foot, their basest needs are met.  
In this way [[negotiation]] acquires its own life, its own interests, its own corporeal ''form''. It has a personality; it has its own interests, quite distinct from those whose fussy ministrations give it life. As a [[negotiation]] endures, it grows stronger — every extra effort in its cause expands it mass and lends it gravity, such that those who people its onward trajectory fall under its influence and then into its orbit: they can no more escape it than can they slip the surly bonds of Earth and dance the skies. Nor would they care to do so, for in its silken folds lie safety, security, nourishment and warmth — as long as the negotiation is on foot, their basest needs are met.  
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Who happen to be engaged on an [[all-hands conference call]] this murky afternoon? There is the [[negotiator]], his boss, a chap from [[tax]], two or three from [[operations]] who, as best the remainder know, are never otherwise occupied but to participate on calls like this, and a brace calling in from an outsourced [[credit]] risk team in Gdansk. The transition manager makes his way through a twelve-point list in dour monotone. The rest, not talking, yawn; those not yawning multi-task; those not multitasking have disabled cameras and gone on mute while they book last-minute weekend breaks in the vain hope of restoring sagging spirits, for on no account will spiritual redemption be found in the matter at hand: it was squeezed dry, dusted with lime and buried months ago. Salespeople, normally so animated, invariably decamp when this [[negotiation]] an ISDA Master Agreement between two wholly-owned subsidiaries of the same firm, comes on.  
Who happen to be engaged on an [[all-hands conference call]] this murky afternoon? There is the [[negotiator]], his boss, a chap from [[tax]], two or three from [[operations]] who, as best the remainder know, are never otherwise occupied but to participate on calls like this, and a brace calling in from an outsourced [[credit]] risk team in Gdansk. The transition manager makes his way through a twelve-point list in dour monotone. The rest, not talking, yawn; those not yawning multi-task; those not multitasking have disabled cameras and gone on mute while they book last-minute weekend breaks in the vain hope of restoring sagging spirits, for on no account will spiritual redemption be found in the matter at hand: it was squeezed dry, dusted with lime and buried months ago. Salespeople, normally so animated, invariably decamp when this [[negotiation]] an ISDA Master Agreement between two wholly-owned subsidiaries of the same firm, comes on.  


It drones on. The points of contention in this scarecrow of a deal have, over time, become so complicated that no soul alive now knows in detail what they are. The negotiation teams least of all, but it has been observed that no two stakeholders discuss it for five minutes without coming to a total disagreement as what remains outstanding. Innumerable third parties have, through is tedious course, been dragged in. A [[custodian]] here, a [[process agent]] there; a third-party bank to intermediate journal entries between branches of the same entity, to help the financial reporting right. Some of these have merged, consolidated, changed business model or just fallen outright into bankruptcy along the way. The [[indemnities]], [[disclaimer]]s, keep-wells and [[covenant]]s they extracted — these, and other textual flourishes on which they in their pomp insisted, by way of [[For the avoidance of doubt|doubt avoidance]], [[Incluso|inclusion]] or [[Limitation of recourse|recourse limitation]] and which made it into the draft remain embedded, so structurally critical to the architecture of the document that no-one dares to take them out lest the whole edifice collapses under its gargantuan weight. There is not a single representative of either party who attended the birth of this monster and who is still in situ in the same role now. Dozens have resigned, a few retired, at least one has died: but the Wickliffe Hampton Agency ISDA still drags its dreary length before the market, perennially hopeless.
It drones on. The points of contention in this scarecrow of a deal have, over time, become so complicated that no soul alive now knows in detail what they are. The [[negotiation]] teams least of all, but it has been observed that no two stakeholders can discuss it for five minutes without becoming heated as what remains outstanding. Innumerable third parties have, through is [[tedious]] course, been dragged in. Other businesses, with no real business being there, but which have ''made'' it their business and then become catatonically transfixed by the dreadful business, yet strangely induced to remain by the promise of ''more'' business. A [[custodian]] here, a [[process agent]] there; a third-party intermediary bank to stand between journal entries between branches of the same entity, to help get the financial reporting right. They have pressed their own teams into the fray, extract necessary protections from the parties so that they may carry out their limited functions,. collected their fees, and their executives sleep dreamless sleep. Yet, that being as it may, some of these other businesses have in the mean time merged, consolidated, changed business model or just fallen outright into bankruptcy along the way. The [[indemnities]], [[disclaimer]]s, keep-wells and [[covenant]]s they extracted — these, and other textual flourishes on which they in their pomp insisted, by way of [[For the avoidance of doubt|doubt avoidance]], [[Incluso|inclusion]] or [[Limitation of recourse|recourse limitation]] and which made it into the draft remain embedded, so structurally critical to the architecture of the document that no-one dares to take them out lest the whole edifice collapses under its gargantuan weight. There is not a single representative of either party who attended the birth of this monster and who is still in situ in the same role now. Dozens have resigned, a few retired, at least one has died: but the Wickliffe Hampton Agency ISDA still drags its dreary length before the market, perennially hopeless.
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