In June 2014, the International Swaps and Derivatives
Association, Inc. ("ISDA") published a form of amendment
relating to Section 2(a)(iii) of the preprinted form of ISDA Master
Agreement. Section 2(a)(iii) generally permits a contracting
party to withhold performance indefinitely if an event of default
or potential event of default has occurred and is continuing (or an
early termination date has been designated) with respect to its
counterparty. ISDA initially announced an initiative to
evaluate and address issues arising under Section 2(a)(iii) in
2011.
As previously discussed in
Derivatives in Review, Section 2(a)(iii) has been treated
inconsistently by courts across various jurisdictions in recent
years, leading to market uncertainty regarding the ability of a
non-defaulting party to indefinitely withhold performance.
The form of amendment effectively allows a defaulting party to
impose a limit on the non-defaulting party's right to suspend
performance by
