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RUC Master Agreement of the International Swaps and Derivatives Association Essay

RUC Master Agreement of the International Swaps and Derivatives Association Essay

Question Description

I’m working on a law report and need support to help me study.

Financial law distinction exam model answer required for the following question, between 1000-1200 words, OSCOLA referencing:

Sukothai and Ayuthya Bank (SAA) ,a Bank incorporated in Taipanbodia, had entered into an ISDA Master Agreement under English law with Samurai & Ronin (SR), a Japanese financial institution which operates globally. The transactions being entered into under the ISDA Master were currency and commodity swaps and options as well as equity options; interest-rate derivatives and credit default swaps were excluded from the transactions to be entered into between the parties.
SR was entering into such transactions both from its head office in Tokyo and its offices in Singapore, Marmara in Cappadoccia, and Mumbai in India while SAA was transacting business from its offices in Taipan the Tapanbodian capital, London, New York and Singapore. All such “Offices” have been designated under Section 10 of the ISDA Master.
SR’s office in Mumbai was severely damaged yesterday by a terrorist bomb incapacitating all electronic operations there. It was due to make a payment on a cash settled oil option in two days which it had exercised.
In Cappadoccia, the Government has today prohibited all financial transactions to be entered into or performed involving the payment of foreign currency to any foreign incorporated entity including payments to their office in Cappadoccia. SR’s office in Cappadoccia was required to deliver US dollars in five days under two currency swaps to the Singapore office of SAA.
SAA in the meantime has been placed on a “red list” of banks subject to US Government sanctions for allegedly transacting financial business on behalf of certain Russian investment funds which had been “red listed” by the US Treasury. In consequence of these sanctions, banks have refused to make any transfer of funds by SAA which requires use of US payment systems to transfer dollars out of New York. US dollar payments are due to SR’s office in Singapore from SAA’s office in London in ten days under currency swap transactions. SAA has informed SR that it will be unable to deliver the Dollars in Singapore due to the US sanctions.

Advise SR with regard to its legal position under the ISDA Master in respect of the above circumstances. The NDFs and currency derivatives transactions had incorporated the FX and Currency Options Definitions of ISDA.

SR is also concerned about the disastrous impact of the Corona virus pandemic on the Taipanbodian economy and in particular, on SAA’s financial strength to perform its obligations. The Taipanbodian Central Bank has now introduced emergency legislation to protect banks incorporated there including, a provision that netting will not be enforceable against Taipanbodian banks under Taipanbodian law. Advise SR on the importance of netting being effective under Taipanbodian insolvency law in the context of the financial difficulties faced by SAA. SR’s in-house counsel has advised that in order to mitigate the unenforceability of netting, SAA should be required to enter into a CSA under English law. You are asked to advise whether such a CSA would eliminate SR’s exposure if SAA were to default under the ISDA Master.

SR is considering entering into interest rate swaps as well with SAA through SRs London subsidiary. SR has required your advice on the consequences of the applicability of the EMIR Regulation of the EU in consequence of doing interest rate swap transactions to which the EMIR Regulation applies [You are not required at present to advise on documentation
necessary to implement EMIR ]

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