Interpretation Of Section 2(a)(iii) Of The ISDA Master Agreement

In Lomas and Others v JFB Firth Rixson, Inc and Others [2010] EWHC 3372 (Ch), the High Court considered the meaning and effect of Section 2(a)(iii) of the ISDA Master Agreement (1992 and 2002 versions), which provides that the payment obligations of the parties are subject to the condition precedent that no event of default is continuing with respect to the other party.

The joint administrators ("the Administrators") of Lehman Brothers International Europe ("LBIE") applied for directions as to the true construction and effect of five interest rate swap agreements pursuant to which LBIE was the floating rate payer. Each swap incorporated the terms of either the 1992 or the 2002 version of the ISDA Master Agreement.