At the ISDA® Annual Legal Forum in London, I was excited to hear that work is underway on a new platform called the ISDA® Notices Hub – where technology can provide a solution to ensure certain and timely delivery of termination and default notices under an ISDA® Master Agreement.
The 2002 ISDA® Master Agreement provides that section 5 (default) and section 6 (early termination) notices may not be served by electronic messaging, but rather should be delivered in person by courier, by telex, by facsimile or registered mail. This antiquated requirement has led to all matter of problems, as it requires:
· physical address details to be kept current in the ISDA® schedule
· access to the correct and complete ISDA® document including any and all amendments
· physical access to the building specified in the address, and
· an ability to dispatch a courier, telex or fax to a recipient at the address.
When Lehman Brothers went insolvent in 2004, and market participants sent default notices out, it was found that many notices were delivered to an old address that Lehman Brothers had vacated years before.
If one’s legal documentation filing system is cumbersome or unreliable, then this too can cause delays and problems with accessing the correct address details to serve default or early termination notices to.
The pandemic and lockdown regulations meant that physical access into buildings was a challenge, as well as being able to find a recipient at the address who could take delivery of the notice. The same was found following the Russia/Ukraine conflict, where access to addresses in these hostile territories proved to be difficult if not impossible.
All these problems can cause delays or make it impossible to serve a termination or default notice on your counterparty, and all at a time when markets are likely to be volatile and when time is of the essence.
The ISDA® Notices Hub, which is planned to be released at the end of 2024, is an innovative and elegant solution which could put an end to these issues. It is an online platform which can provide users with a quick (almost instantaneous) delivery of notices, which will be time-stamped to evidence effective delivery and would not require access to a physical address. In addition, the ISDA® Notices Hub will maintain an updated source of physical notice details for all counterparties who make use of the service. Details may be updated on the platform which will in turn amend the details provided in the ISDA® Master Agreement, and thus current and correct details will be easily accessed.
The ISDA® Notices Hub will provide a much-needed update and revamp to the outdated notice procedure set out in the ISDA® Master Agreement. ISDA® plans to release protocol to streamline the process of adopting the ISDA® Notices Hub platform as a valid notice delivery method into the ISDA® Master Agreement.