On 15 September 20091 the judge responsible for the Lehman bankruptcy proceedings in the United States held that Metavante Corporation (“Metavante”) could not rely on Section 2(a)(iii) of the ISDA Master Agreement to suspend payments to Lehman Brothers Special Financing, Inc. (“LBSF”). Specifically, Judge Peck held that the safe harbour provisions in the US bankruptcy code protected a non-defaulting party’s contractual rights to liquidate, terminate or accelerate swaps and to net termination values but did not provide a basis to withhold performance under a swap if it did not terminate.

A recent application to the British Virgin Islands courts has sought to blur the lines between directors’ general duties to act for the benefit of an insolvent company’s creditors, and the statutory clawback associated with unfair preferences entered into in the twilight period prior to a company going into liquidation.