Template:M summ 2002 ISDA 5(b)(i)

A comparison between the 1992 ISDA and the 2002 ISDA can be found on the ISDA Comparison page.

Illegality vs. Force Majeure smackdown

Under the 2002 ISDA, Illegality trumps Force Majeure. Given that Illegality is no longer subject to the "two Affected Parties" delay on termination (as it was in the 1992 ISDA), this is significant.

2002 User Guide

Illegality. Section 5(b)(i) provides that a Termination Event will occur if (after a Transaction is entered into and other than due to any action taken by a party or, if applicable, its Credit Support Provider or a breach by the party of its obligations under Section 4(b)) it becomes unlawful under any applicable law (i) for the Office through which a party makes and receives payments or deliveries with respect to such Transaction to make or receive a payment or 4 The two Tax-related Termination Events are addressed in Section IV below.

16 delivery under such Transaction or to comply with any material provision of the 2002 ISDA with respect to such Transaction; or (ii) for a party or its Credit Support Provider to perform under a Credit Support Document (whether to make or receive a payment or delivery or to comply with any other material provision of such Credit Support Document). Illegality, like Force Majeure Event (see Section II.F.3.b.below) but unlike other Termination Events, is anticipatory in that it may be triggered if it would be unlawful to make a payment or delivery or to comply on a day if the relevant payment, delivery or compliance were required on that day, even if no such payment, delivery or compliance is in fact required on that day. The party in respect of which the Illegality has occurred will be the Affected Party (although both parties could be Affected Parties depending on the circumstances).

Where performance under a Transaction is concerned, note that, by focusing on the ability of a party’s Office through which it makes and receives payments or deliveries with respect to such Transaction to perform, an Illegality could still occur despite the fact that the party may be able to satisfy its obligations by making or receiving a payment or delivery through another of its Offices. In the 1992 ISDA, Illegality focused simply on the ability of “a party” to perform.

Like a Force Majeure Event, an Illegality may only be triggered after exhausting the fallbacks and remedies specified in the 2002 ISDA.

The obligation of the Affected Party under the 1992 ISDA to use all reasonable efforts to transfer Affected Transactions in order to avoid the occurrence of the Termination Event is not included in the 2002 ISDA. Deferral of payments and deliveries after an Illegality occurs is discussed in Section II.F.3.b.1. below.