Section 2(a)(iii): The Suspense Continues

Anyone with a passing knowledge of derivatives law will be aware of the controversy created by section 2(a)(iii) of the ISDA Master Agreement.¹ Differing interpretations of 2(a)(iii) have emerged in litigation in London and the United States since the collapse of Lehman Brothers. The recent judgement of the Court of Appeal in London in Lomas v. JFB Firth Rixson Inc² brings significant clarity from the English perspective. The decision upholds the interpretation of section 2(a)(iii) favoured by the derivatives market. This article puts the case in an international context, considers the impact on other agreements, and looks at how changes to the regulatory framework and proposed changes to section 2(a)(iii) may also affect the decision's long-term significance.