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Template:Isda 2(a)(iii) summ: Difference between revisions
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===No notice of suspension required=== | ===No notice of suspension required=== | ||
Leaving for a few moments when | Leaving for a few moments the question of ''when'' one would ever need, let alone want to invoke Section {{{{{1}}}|2(a)(iii)}} other than in the strangest of days, let’s consider the mechanics. | ||
Notice there are ''none''. | |||
Section {{{{{1}}}|2(a)(iii)}} just ''sits'' there, and has effect, without anyone’s particular by-or-leave. No notice is required: no-one need look out for envelopes being delivered to the physical address the firm occupied seventeen years ago when someone filled out Part IV of the schedule. Section {{{{{1}}}|2(a)(iii)}}doesn’t even say an {{{{{1}}}|Innocent Party}} is ''entitled'' to withhold payment: rather the conditions are not met and ''payment is not therefore due''. The effect of Section {{{{{1}}}|2(a)(iii)}} just ''happens''. | |||
This poses some rather intriguing questions. | |||
First, a ''conceptual'' one: at what point do we know — when even do ''I'' know — whether I have “suspended” my payment and not just simply ''failed'' on it? Is there a difference? The payment arrangements under a modern ISDA are a blizzard of electronic impulses, across multiple booking systems, product silos and other arrangements. The various operatives will have no idea of the status of other payments — sometimes these things fail for explainable reasons. So if, for some reason {{{{{1}}}|2(a)(iii)}} applies, the conditions precedent do not exist, but I make my payment anyway, then what? Is that a mistaken payment? Is it supported by [[consideration]]? Is there a potential claim for [[money had and received]]? | |||
What, for the purpose of close-out valuations, is the status of payments that ''were'' made, but that were not ''required'' to be made? Are these some kind of negative energy in the close-out spacetime; dark matter, a kind of inverted {{isdaprov|Unpaid Amount}}?<ref>Okay I am having a bit of fun with you here I confess.</ref> | What, for the purpose of close-out valuations, is the status of payments that ''were'' made, but that were not ''required'' to be made? Are these some kind of negative energy in the close-out spacetime; dark matter, a kind of inverted {{isdaprov|Unpaid Amount}}?<ref>Okay I am having a bit of fun with you here I confess.</ref> | ||
Secondly, a ''practical'' one: in times of market dislocation ''all kinds of things do go wrong''. People suddenly resort to manual processes where things have been automated till now. They start frisking all money payments on their way out the door. For all you know ''your correspondent banks and agents may be doing the same thing without your knowledge''. Payments you ''thought'' you had made may not have got to your counterparty.<ref>This is not nearly as unlikely as it seems: in a widespread market dislocation, for example, where sanctions are involved (hello Ukraine conflict!) expect ''everyone'' to be terrified of getting anything wrong. ''Everything'' will slow down.</ref> Counterparties make oral arrangements to check payments in before sending anything out — expect all kinds of paranoia, fear & loathing. It’s great. Sometimes payments — going in either direction — can get hung up, stuck, blocked, sanctioned, or — who knows? — waived, or suspended by mutual consent, or even suspended by ''implication'': the parties may agree (or ''think'' they have agreed) to net settle payments usually made gross. If there is a misunderstanding — | |||
In short, it is not always certain whether payments have, in fact, been made, or missed. You would think this sort of thing would be determinate, but it isn’t. And this kind of uncertainty is more likely ''exactly at a time of stress''. | In short, it is not always certain whether payments have, in fact, been made, or missed. You would think this sort of thing would be determinate, but it isn’t. And this kind of uncertainty is more likely ''exactly at a time of stress''. | ||