The type of legal document known as an ISDA and CSA Replication and Amendment Agreement is used in the over-the-counter (OTC) derivatives market, typically in the context of novation or transfer of derivatives portfolios.
This form of agreement is most frequently seen when a trade or portfolio of trades is being transferred, or “novated”, from one counterparty to another, and the parties wish to replicate the economic terms of the existing ISDA Master Agreement and Credit Support Annex (CSA), at the same time as making targeted amendments.
What are the key components of this type of agreement?
For ease of understanding, here are the fundamental elements of an ISDA and CSA Replication and Amendment Agreement:
- The ISDA Master Agreement – the initialism standing for International Swaps and Derivatives Association – is the core bilaterial framework agreement governing OTC derivatives transactions.
- A CSA, or Credit Support Annex, is a legal document that usually forms part of the ISDA Master Agreement. It governs collateral arrangements for OTC derivatives trades, defining how parties post collateral (cash or securities) to mitigate counterparty credit risk when the value of their derivatives positions changes.
- The mention of replication refers to how the agreement “replicates” (in other words, copies over) the substantive terms of the existing ISDA Master Agreement and CSA that applied between the original parties.
- The amendment aspect, meanwhile, is about enabling the parties to make specific changes to the replicated terms. The parties to the given agreement might, for example, be looking to update the governing law, change the address for notices, or amend the collateral terms, among other possibilities.
Is a process agent in the UK necessary for an ISDA and CSA Replication and Amendment Agreement?
At first inspection, it might seem to some observers that the answer to this question would be “no”. The ISDA Master Agreement or CSA do not, in and of themselves, strictly require a UK process agent to be appointed.
Certainly, the most common version of the ISDA Master Agreement, the 2002 edition, does not stipulate that a process agent in the UK must be appointed for the document to be valid or enforceable.
In practice, however, a UK process agent typically is required for an ISDA and CSA Replication and Amendment Agreement, if the underlying agreement is governed by English law and at least one of the parties lacks a physical presence, registered office, or address in the UK or England.
In the event, then, that you are looking to enter this type of agreement across national borders and the aforementioned two things are true – with you being the “non-UK” party – you can expect that you will need to put in place a UK process agent.
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