ISDA Master Agreement: High Court interprets Section 2(a)(iii)

Introduction

For all of the legal difficulties which market participants are facing in light of the insolvency of Lehman Brothers, the insolvency is providing the Courts with the opportunity to pass judgment on many of the tricky provisions of the 1992 and 2002 versions of the ISDA Master Agreement (together the "Agreements").

Filed under:
United Kingdom, Derivatives, Insolvency & Restructuring, Litigation, Reed Smith LLP, Contractual term, Condition precedent, Statutory interpretation, Concession (contract), Default (finance), International Swaps and Derivatives Association, Lehman Brothers
Authors:
Paul M. Dillon , Nicholas Horsfield
Location:
United Kingdom
Firm:
Reed Smith LLP
US Bankruptcy Court limits ISDA counterparty rights upon a bankruptcy event of default

In re Lehman Brothers Holdings, Inc., Case No. 08-13555 et seq. (JMP)(jointly administered)

In this US decision, the Bankruptcy Court held that the "safe harbour" protections of the US Bankruptcy Code only protect a non-defaulting party's right to liquidate, terminate or accelerate a swap, to offset and to net termination values and payment amounts and to foreclose on collateral, but do not permit the withholding of performance under a swap if the swap is not terminated.

Filed under:
USA, Derivatives, Insolvency & Restructuring, Litigation, Reed Smith LLP, Bankruptcy, Debtor, Collateral (finance), Interest, Swap (finance), Foreclosure, Withholding tax, Concession (contract), Liquidation, Sunset provision, Default (finance), International Swaps and Derivatives Association, Lehman Brothers, Title 11 of the US Code, United States bankruptcy court
Authors:
Siân C. Fellows , Nicholas Horsfield
Location:
USA
Firm:
Reed Smith LLP