Scope of the ISDA Master Agreement—Sections 1 (Interpretation) and 2 (Obligations)
Scope of the ISDA Master Agreement—Sections 1 (Interpretation) and 2 (Obligations)

The following Banking & Finance practice note provides comprehensive and up to date legal information covering:

  • Scope of the ISDA Master Agreement—Sections 1 (Interpretation) and 2 (Obligations)
  • Introduction to negotiating ISDA documents
  • Which transactions will be governed by the ISDA master agreement?
  • Section 1—Interpretation
  • Inconsistency
  • A single agreement
  • Section 2—Obligations (netting, gross-up and default interest)
  • Obligations
  • Netting
  • Withholding tax
  • More...

Introduction to negotiating ISDA documents

The 1992 and 2002 ISDA Master Agreements (the Master Agreements) are standard form documents produced by the International Swaps and Derivatives Association, Inc. (ISDA). Amendments and elections to the Master Agreements are made in a schedule to that Master Agreement. The Master Agreement governs the credit relationship between two parties who are trading derivatives with each other. The terms of each transaction are set out in trade confirmations which will be subject to the terms of the Master Agreement, as may be amended by the schedule. It is important to note that the Master Agreement and schedule do not relate to the terms of any particular transaction but instead relate to the credit terms on which two parties agree to do business with each other.

Users of the Master Agreements are free to choose to between the 1992 or 2002 versions. See Practice Note: ISDA documentation—comparison of the 1992 and 2002 master agreements for the key differences between the two ISDA master agreements.

It is open to the parties to an Master Agreement to make substantial amendments through the schedule. For information on negotiating the Schedule, see Practice Notes: A negotiation guide for the 2002 ISDA Schedule and Guide to completing the ISDA Schedule. However, if a party wishes to rely on the close-out netting legal opinions issued by ISDA, it

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