Section 2(a)(iii) - ISDA Provision: Difference between revisions

{{fullanat|isda|2(a)(iii)|2002}}

The world-famous [[flawed asset]] provision in the {{isdama}}

In a {{nutshell}}, section {{isdaprov|2(a)(iii)}} does the following:

{{nuts|ISDA|2(a)(iii)}}

{{isia}}

===Draft ISDA Section {{isdaprov|2(a)(iii)}} Protocol===

These amendments are being led by [[ISDA]] and are likely to take effect by protocol. These changes are separate to the ones being contemplated under DFA.   

The revised text looks to address 4 concerns (each arising from English case law):

#'''Extinguishment issue''': (Firth Rixson) and the "Terminated Transaction" issue (per [[Pioneer v Cosco (Case Note)|Cosco]]).

#'''Incurable {{isdaprov|Events of Default}}''': [[ISDA]] was looking to apply the time restriction only in respect of "incurable" {{isdaprov|Events of Default}}'''". Not actually sure the list was sufficiently comprehensive to achieve that. Others have suggested to limit to {{isdaprov|Bankruptcy}}. Anyway, does not matter because none of that works under English law for capital reasons and so [[ISDA]] will be changing to apply the language to all {{isdaprov|Events of Default}} ([[FSA]] will require this).

#The language is problematic where, for example, a {{isdaprov|Defaulting Party}} informs the {{isdaprov|Non-defaulting Party}} of a {{isdaprov|Misrepresentation}}. {{isdaprov|Non-defaulting Party}} waives the misrep and then the "defaulter" experiences a {{isdaprov|Default Under Specified Transaction}}. Would leave a gap on the CP.  

==Modified Text as per ISDA draft protocol==

{{isdaquote|{{ISDA Master Agreement 2002 2(a)(iii) Protocol}}|2(a)(iii)|2002}}

}}

{{isdasnap|Terminated Transactions Definition Protocol}}

{{isdaquote|{{ISDA Master Agreement 2002 Condition End Date Definition Protocol}}|Condition End Date Definition|2002}}

{{isdaanatomy}}