Default Under Specified Transaction - ISDA Provision: Difference between revisions

====Acceleration, not Default====  

DUST is triggered by an ''acceleration following an'' event of default under the {{isdaprov|Specified Transaction}}, not upon default itself (except where that happens on maturity - see drafting point below). Since the {{isdaprov|Specified Transaction}} is between you and the other party to the {{isdama}}, there is no great loss - it is within your gift to accelerate the other contract - and to achieve set-off you would have to do so anyway. This is less drastic than the corresponding {{isdaprov|Cross Default}} provision, which imports all the {{isdaprov|Events of Default}} from all {{isdaprov|Specified Transaction}}s into the present one, even if the counterparty to the defaulted contract has itself waived its rights to exercise.

====What if I “jump the gun”?====

Could a wrongfully submitted notice of default be treated as a [[repudiatory|repudiation]]/[[anticipatory breach]] by the "[[non-defaulting party]]" giving the other party at least the right to withhold payments on the basis that this would constitute a {{isdaprov|Potential Event of Default}} by the party submitting the notice? There's not much law on point, but the starting point is "no" - it would simply be an ineffective notice. '''However''', a non-payment on the basis of an ineffective notice would be impermissible and may itself amount to a Failure to Pay. But as to the mere dispatch of the notice itself, there is relatively recent case law (albeit in the bond world) stating that an acceleration notice that is submitted wrongfully, i.e. when no actual event of default, is merely ineffective and does not give rise to a claim for breach of contract or damages from "defaulting party".  Clearly this has not been considered in context of ISDA per se (and may be nuances here that would lead to different result) but at it is a start.