LEGAL FAQs
So as to assist FFABA 2007 counterparts, we have compiled a list of 10 frequently asked questions and brief answers.
1. Does the FFABA 2007 constitute an ISDA Master Agreement?
Yes, when you agree FFABA terms 2007 for the first time, a 1992 ISDA Master Agreement (with specific modifications and elections) is constituted.
2. If I have done business on a FFABA 2005 and then one swap contract on an FFABA 2007 basis, which terms prevail?
The FFABA 2007 has been drafted to essentially provide that the FFABA 2007 terms "sweep up" earlier FFABA 2005 confirmations.
The new 1992 ISDA Master Agreement is Constituted. Subsequent FFABA 2007 Confirmations fall under that new ISDA Master Agreement.
3. If a counterpart does not pay, can I immediately put him in default?
No, the 1992 ISDA Master Agreement provides a precise mechanism for dealing with non payment, which must be followed.
4. If a counterparty does not pay and does not pay within the cure period as laid down by the 1992 ISDA Master Agreement can I then put them in default?
Assuming that non payment continues, yes.
5. If I put them in default for non payment, will all outstanding FFA transactions terminate, and will I therefore need to compile a net overall financial position?
Yes, that is correct.
6. Under the FFABA 2007 terms if a counterpart becomes insolvent or bankrupt, do all my outstanding transactions automatically terminate?
Yes, that is correct. This was one of the material changes made in the 2007 revision. Again, it will be necessary to work out the net overall financial position.
7. Are the FFABA terms 2007 governed by English law?
Yes.
8. Is it possible for my FFABA terms to be guaranteed by a parent or associated company?
Yes, this is correct, but we advise a degree of formality and preferably the guarantor's signature.
9. Are all payments under the FFABA made in US dollars?
Invariably yes; the FFABA 2007 payment terms stipulate US dollars and the Termination Currency also specifies US dollars. The parties can, of course, subsequently agree on a different currency.
10. Does it matter that my FFABA Confirmation is unsigned?
Naturally, our preference is to see a signed Confirmation. However, as a matter of practice many are not. The existence of a Confirmation and, if necessary, disclosable telephone records should aid, if need be, the existence or non existence of an agreement.
As always these answers are no substitute for informed and tailored legal advice which should be obtained.
