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Court Serves Notice About ISDA Notices

On 14 April 2012, the High Court ruled in the case of Greenclose Limited v. National Westminster Plc that email is not a valid method for delivery of notifications under the 1992 ISDA Master Agreement. The case is notable for a number of other findings, including that:

  • Amendments to the notifications section of an ISDA Master Agreement regarding valid methods and their effectiveness should not be deemed or assumed on the basis of courses of conduct but rather explicitly agreed and properly documented by the parties;
  • Where email is a valid form of notification (for example under the 2002 ISDA Master Agreement), it is not subject to the postal rule and is therefore only effective upon delivery – the burden of which is on the sender – but that a simple “read receipt” notification would suffice in this regard;
  • It is the correct use of the contact details specified in the schedule to the ISDA Master Agreement, rather than the names specified in the schedule which determines the effectiveness of a notification; and
  • There is no need for a party to act in “good faith” and/or in accordance with the principles of fair dealing in deciding whether to extend the terms of a derivatives transaction.

There are several lessons which can be learned from this case – the most relevant of which is that even seemingly innocuous provisions can have material consequences.  The case also highlights the need for firms to be keenly aware of the terms contained within their derivative documentation portfolios to avoid, to the greatest extent possible, blind spots in the their data.

For an extended analysis of the case please refer to our article here.

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