Which version of the ISDA Master Agreement should be used?

In June 1992 ISDA published two new versions of its Master Agreement - the Multicurrency Cross Border version and the Local Currency - Single jurisdiction version.  They were substitutes for the 1987 version known as the "Interest Rate and Currency Exchange Agreement". The principal changes in the 1992 ISDA Master Agreement are set out in 6.2 "History".  In January 2003 ISDA published a new version of its Master Agreement known as the "2002 ISDA Master Agreement".  The principal changes in the 2002 ISDA Master Agreement are set out in "Differences between 1992 and 2002 ISDA Master Agreements".

Transactions governed by a 1987 or 1992 version ISDA Master Agreement continue to be governed by that agreement unless the parties expressly agree to adopt the 2002 version. 

The Guide is prepared on the assumption that parties newly entering into an ISDA Master Agreement, do so using the 2002 ISDA Master Agreement. Unless the contrary intention appears, a reference to a "Section" in this Guide is a reference to that section in the 2002 ISDA Master Agreement.

Although it remains possible to enter into a 1987 version of the ISDA Master Agreement, this is not recommended.

It also remains possible to enter into a 1992 version of the ISDA Master Agreement.  Before the update to the Guide on 28 March 2003 (see 6.2 "History"), the Guide provided commentary on the 1992 ISDA Master Agreement. By this update, AFMA is not to be taken to be recommending that parties redocument existing 1992 ISDA Master Agreements or that it is no longer appropriate to enter into a 1992 ISDA Master Agreement.  AFMA recognises that parties may have commercial and legal reasons for wanting to retain or enter into new 1992 ISDA Master Agreements. Commentary referencing the 1992 ISDA Master Agreement can be found in the history versions of this Guide replaced on 28 March 2003 (see 6.2 "History").  Of course, care needs to be taken when using historical commentary to ensure that all relevant legal issues are taken into account. For example, it is recommended that the decision in Enron Australia Pty Limited (In Liquidation) v Integral Energy Australia [2002] NSW SC 753 be considered in the context of any new or existing 1987, 1992 or 2002 ISDA Master Agreement.

Generally, and subject to the comments in the previous paragraph, given that there are a number of improvements in the 2002 version, AFMA recommends that it is preferable for parties to agree to adopt the 2002 version.

In earlier versions of the Guide, there was material containing suggested wording for amending agreements if parties wanted to update existing ISDA Master Agreements to reflect changes made in earlier versions of the Guide. Given the time which has elapsed and the unlikelihood that this material is still being used, it has been deleted from the Guide. See 6.2  "History" for the deleted provisions. ISDA has also published a "Form of Amendment to 1992 ISDA Master Agreement" which allows participants to amend various sections of the 1992 ISDA Master Agreement, including adding Close-Out Amount, the new measure of damages in the 2002 ISDA Master Agreement. This can be found at www.isda.org.

Last Update Date 28 Jun 2011