On January 26, 2009, NPC submitted a calculation submission requiring a payment of approximately US$3.5 million to Lehman based on the transaction actually made with UBS. Mr. Lehman disputed this calculation and found that NPC had not used “commercially acceptable procedures” and had not resulted in a “commercially reasonable result” as requested by ISDA-Master 2002. Lehman then launched legal proceedings to claim NPC`s payment of approximately $13 million. In 2016, after the opening of legal proceedings, NPC claimed to withdraw its statement of calculation and comply with a revised statement. The verdict “All transactions are made with reference to the fact that this control agreement and all confirmations constitute a single agreement between the parties … and the parties would not make transactions otherwise. The case is the first english-ed that focuses on the interpretation of the close-out rules under the 2002 ISDA Executive Contract and provides valuable guidance in this regard. When they decide to enter into a contract on the basis of the 1992 ISDA Masters or the 2002 ISDA Masters, the parties should carefully consider whether they wish that, after the closing of the transaction, the determining party would be linked to an objective standard of commercial adequacy (under the 2002 ISDA master) or to the lower standard for claims calculations under the 1992 ISDA Masters. Any branch, institution or fund established in the Union and acting with documents of the English rule of law is confronted with these problems. These new framework contracts are therefore not used to document domestic transactions in the French and Irish markets. The new framework contracts will be contractual instruments designed to meet the needs of market users throughout the EU to document their transactions and relationships, even if no French party is involved.
The Captain`s Agreement is a document agreed between two parties, which sets standard conditions for all transactions between these parties. Each time a transaction is concluded, the terms of the framework agreement should not be renegotiated and applied automatically. It is difficult to predict how the market will use these new master`s contracts. But it is not unreasonable to think that European banks and counterparties will find advantages in using the new contractual instruments offered by isDA for their intercontinental activities in Europe, particularly because the master agreement also helps to reduce litigation by providing significant resources that define its contractual terms and explain the intent of the contract, thus preventing the start of litigation and providing a neutral resource to interpret standard contractual terms. Finally, the framework agreement provides significant assistance in managing risks and credit for the parties. While the ISDA master contract may seem scary at first glance with its long text (28 pages in its 2002 version) and several defined cross-cutting terms and references, it is an important document that outlines the general contractual relationship between the parties and should be used to ensure that the most important points for you have been addressed.