Right to Terminate Following Termination Event - 1992 ISDA Provision

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ISDA Text: 6(b)

6(b) Right to Terminate Following Termination Event
6(b)(i) Notice. If a Termination Event occurs, an Affected Party will, promptly upon becoming aware of it, notify the other party, specifying the nature of that Termination Event and each Affected Transaction and will also give such other information about that Termination Event as the other party may reasonably require.
6(b)(ii) Transfer to Avoid Termination Event. If either an Illegality under Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the Affected Party, the Affected Party will, as a condition to its right to designate an Early Termination Date under Section 6(b)(iv), use all reasonable efforts (which will not require such party to incur a loss, excluding immaterial, incidental expenses) to transfer within 20 days after it gives notice under Section 6(b)(i) all its rights and obligations under this Agreement in respect of the Affected Transactions to another of its Offices or Affiliates so that such Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will give notice to the other party to that effect within such 20 day period, whereupon the other party may effect such a transfer within 30 days after the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be subject to and conditional upon the prior written consent of the other party, which consent will not be withheld if such other party’s policies in effect at such time would permit it to enter into transactions with the transferee on the terms proposed.
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.
6(b)(iv) Right to Terminate. If: —
(1) a transfer under Section 6(b)(ii) or an agreement under Section 6(b)(iii), as the case may be, has not been effected with respect to all Affected Transactions within 30 days after an Affected Party gives notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger or an Additional Termination Event occurs, or a Tax Event Upon Merger occurs and the Burdened Party is not the Affected Party,
either party in the case of an Illegality, the Burdened Party in the case of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event or an Additional Termination Event if there is more than one Affected Party, or the party which is not the Affected Party in the case of a Credit Event Upon Merger or an Additional Termination Event if there is only one Affected Party may, by not more than 20 days notice to the other party and provided that the relevant Termination Event is then continuing, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all Affected Transactions.

Related agreements and comparisons

Related Agreements
Click here for the text of Section 6(b) in the 2002 ISDA
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) | 55(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 to expand:



Changes largely to account for the new Force Majeure Event and some tidying up, but beyond that Section 6(b) works in the same general way under the 1992 ISDA and 2002 ISDA.



There is a difference between Termination Events that are non-catastrophic, and usually Transaction-specific, and those that are catastrophic, which are usually counterparty specific.

Non-catastrophic ones affecting just a subset of Transactions might be caused by, say, a Tax Event or a local Illegality, but in any weather do not concern the solvency, creditworthiness or basic mendacity of your counterparty. They generally won’t have much, directly, to do with your counterparty at all beyond the jurisdictions it inhabits and the laws it is subject to. These are generally the Termination Events, but not Additional Termination Events.

The catastrophic ones are by their nature affect — that is, “Affect” — all Transactions. These generally are the bespoke Additional Termination Events your credit department insisted on — or theirs did; they will have something to do with the naughtiness of lack of fibre of your counterparty (or you!), and these function for most respects a lot more like Events of Default.

Thus, in the drafting of ISDA Schedules, CSAs and so on, you will often find laboured reference to Events of Default and/or Termination Events which lead to Early Termination Dates with respect to all outstanding Transactions as some kind of special, hyper-exciting, class of Termination Event.

Lucky premium content subscribers get a lot more discussion about the practical implications of all the above and a table comparing the events.

Premium content

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  • The JC’s famous Nutshell summary of this clause
  • A clause-by-clause anaylsis of this provision
  • A discussion about the curious limited termination optionality in the Illegality and (in 2002 ISDA) Force Majeure Termination Events

See also

  • The comparison table in the premium section for Section 6