The following additional clause states that the parties agree that transactions of a particular type (whether or not entered into before or after the commencement of the ISDA Master Agreement) are governed by the ISDA Master Agreement whether or not the parties state in their Confirmation that the transaction is governed by any other master agreement.
The clause is drafted on the assumption that once two parties agree to adopt the ISDA Master Agreement for a range of derivative transactions, all past or future like transactions between them are intended also to be governed by the ISDA Master Agreement.
The clause recognises that at an operational level, there may still be instances, after the changeover, when Confirmations for transactions either do not refer to the ISDA Master Agreement or continue to state that transactions are governed by another master agreement. The clause states that even in those circumstances the transaction will be governed by the ISDA Master Agreement and not the other master agreement.
If a party has more than one master agreement with a particular counterparty each of which is intended to govern different types of transactions (eg they may have one for secured transactions and one for unsecured transactions), then they should amend the clause to reflect their intention. One possible way of doing this is to preface the clause with the words "Except in the case of a transaction which is identified in its Confirmation as being governed by a master agreement between us dated [ ],". It would then be essential to refer to the other master agreement in those Confirmations intended to be governed by the other master agreement.
The recommended wording to insert in Part 5 of Schedule to an ISDA Master Agreement is as follows:
"Add a new Section [15] as follows:
[15] Existing transactions and transactions not expressed to be subject to ISDA Master Agreement
The parties agree that every transaction between them is a Transaction governed by this Agreement unless the terms of this Agreement have been expressly excluded.
This applies whether or not the parties:
(a) refer to this Agreement; or
(b) state that a transaction is governed by the terms of any other master agreement
when entering into or confirming the transaction.
For the purpose of this clause, "transaction" means a transaction between the parties, whether entered into before, on or after the commencement of this Agreement, in the nature of [insert range of transactions such as Swap Transaction as defined in 2006 ISDA Definitions etc]."
Last Update Date 29 Jun 2011