Template:M summ 1992 ISDA 4

A hodge-podge of “state the bleeding obvious” rules, breach of some of which justifies (eventual) close-out as a “breach of agreement” — agreeing to provide the credit information you have patiently listed in your schedule, flagrantly breaking the law, carelessly losing one’s regulatory authorisations — and random tax provisions and indemnities (providing the necessary tax forms to minimise tax, and pay tax if you don’t) .

These are the dull agreements — which by and large don’t justify close-out.

Section 4(a)

“Specified information” is not actually a defined term under the ISDA Master Agreement but merely a capitalised heading. In the JC’s book, capitalising a heading is borderline illiteracy, but ISDA’s crack drafting squad™ feels differently about it and we have learned which battles to pick. At any rate, the “Specified Information”, so called, is that stuff set out in the Schedule at Part 3. These are the documents that the parties agree to deliver to each other at certain times. Part 3 itemises what must be delivered, by whom, by when, and whether the Specified Information in question is covered by the Section 3(d) representation as to its accuracy and completeness. (What good would any information be that was not covered by that representation? We will let you amble over to the article on Section 3(d) to consider that.)

The Part 3 table will also totally bugger up the formatting in your document: it is a well-known fact that no ISDA negotiator on the face of the earth knows how to format a table in Microsoft Word.

Then again, nor does anyone else.

Section 4(b)

The counterpart to the “Consents” representation of Section 3(a)(iv), only about the future, neatly illustrating the difference between a representation, being a declaration of fact about the state of the world in the present or past, and a covenant, being a solemn promise to do something about it in the future. Neither the past nor the future is, as regards governmental consents, tremendously controversial, or even interesting, so we do not propose to say anything more about it.

Section 4(c)

Hardly controversial that one must obey the law, but note this apparently inoffensive covenant converts that general public obligation into a private civil one, with definitive commercial consequences to your counterparty, hence the couching of the language in terms of materiality (twice) and specific ability to perform obligations under the ISDA Master Agreement.

Section 4(d)

These reps allow the other party to pay without deduction for certain taxes. This covenant puts the onus on the payee (beneficiary) to ensure the other party (who is subject to the authority of the taxing authority in question) is not erroneously passing through moneys that it should withhold and for which it will be personally liable to account to the tax authority. It also gives the aggrieved payer a direct right of action to claim those amounts back off the forgetful payee.

Section 4(e)

Basically, if there is any Stamp Tax imposed because of my existence or residence in a certain jurisdiction, whether imposed on me or you, I’ll pay it, unless it would have been imposed on you too. If we’re both in the same Stamp Tax Jurisdiction, the liability lies where it falls.