Traders and demanding end-users who wish to adopt the new agreement can look forward to several months of internal meetings, as the content is digested. Changes have been made not only to legal issues, but also to trade, credit and operational issues. Unfortunately, to the letter, any amendment to the agreement has some meaning that must be understood and weighed before the treaty is used. If past experience is a guide, the use of the agreement on a consistent basis can take from six months to a year. The 2002 agreement significantly expands the Credit Event Upon Merger Termination Event. For a credit event to occur after the merger, the party concerned must be “much weaker” after the appearance of one of the three “organized events.” Once again, the authors chose not to define what is meant by “much weaker.” It is likely that the party not concerned, had it been “much weaker” before the conclusion of the framework agreement, would not have entered into the agreement. At the same time as the timetable, the framework agreement defines all the general conditions necessary for the proper distribution of the risks of transactions between the parties, but does not contain specific terms and conditions for a particular transaction. Once the framework agreement has been concluded, the parties can enter into numerous transactions by agreeing to the essential terms and conditions over the telephone, as confirmed in writing, without the need to re-consider the terms of the framework agreement. The new agreement significantly expands the data that constitutes a particular transaction. New forms of transactions added to the definition include credit derivatives, repurchase agreements, repurchase/buyback transactions, securities lending operations, climate derivatives, and security and futures transactions. This expansion includes many types of commercial transactions in the capital market, such as rest, which have had no impact on the agreement before. Although the architecture of the 1992 agreement was maintained, each material provision was literally rewritten to reflect all additions, revisions and clarifications. The 2002 document also came into force: it went from 18 to 27 pages of detailed provisions.
The provision of the “comprehensive agreement” contained in the 2002 form was supplemented by (i) an explicit recognition of the absence of assurances (other than those provided under the captain`s contract) and (ii) an explicit waiver of all rights and remedies (except fraud). This uniform approach to the agreement is an integral part of the structure and part of the network-based protection offered by the framework agreement. The fact that all transactions are the sole contract enhances the ability to close these transactions and obtain a one-time net amount payable in the event of default. The master`s agreement was updated in 2002 (known as ISDA Masteragrement 2002). The updated phase of the 1992 agreement has its roots in the succession of crises that affected global financial markets in the late 1990s. These events, including the liquidation of Hong Kong broker Peregrine Investments Holdings Holdings and the 1998 Russian financial crisis, tested ISDA documentation to an extent unknown to date. Although the ISDA documentation withstood this test, ISDA decided to put in place a strategic review of its documentation to see what lessons could be learned from these events.