Negotiating Section 2(a)(iii) In The ISDA Master

The bankruptcies of several large institutions have highlighted a potential ambiguity within the International Swaps and Derivatives Association’s Master Agreement relating to Section 2(a)(iii). Specifically, several courts have addressed the issue of whether a party can exercise its rights under Section 2(a)(iii) to withhold payment indefinitely following the bankruptcy of its counterparty without declaring an Early Termination Date. This article compares the recent rulings and offers some negotiating options for counterparties to consider.