UBS terminated its ISDA Master and FX transactions with Lehman Brothers Inc., was obligated to return about $23 million in collateral, wanted to set-off against that $23 million amounts owing by LBI to UBS affiliates as contemplated by the cross-affiliates set-off provision.

The Alberta Court of Appeal recently denied an application by Celtic Exploration Ltd. ("Celtic") for leave to appeal a decision from a Companies’ Creditors Arrangements Act (Canada) ("CCAA") proceeding involving Celtic and SemCAMS ULC ("SemCAMS"). The CCAA court found that the parties’ gas purchase agreement had been suspended as of July 2008, and as a result, Celtic could not set off amounts it owed to SemCAMS after that date against indebtedness arising under the agreement.

If you were waiting to hear what the English Court of Appeal had to say about the lower court decision in Marine Trade S.A. v. Pioneer Freight Futures Co. Ltd. you’ll be disappointed, as the appeal was dismissed by consent of the parties on October 22, 2010.

That darn Lehman Brothers bankruptcy sure is raising some interesting insolvency issues for derivatives market participants (and their lawyers of course). It’s interesting (at least for us insolvency nerds) to think about how some of those issues might play out under Canadian insolvency laws. Here are some thoughts on one of the recent cases with my Canadian spin.

Triangular (or cross-affiliate) set-off has been at issue recently in the Companies' Creditors Arrangements Act (Canada) (CCAA) proceedings with respect to SemCAMS ULC (SemCAMS) (and certain other of its Canadian affiliates). In one application, SemCAMS successfully challenged Nexen Marketing's (Nexen) attempts to effect triangular set-off where Nexen lacked a contractual right to do so.

Nexen Marketing was a party to a number of agreements with SemCAMS and certain of its affiliates: