01 Jan 2016

To swap or not to swap? Considerations in the face of counterparty insolvency

Considers what happens when, in the absence of ISDA or other governing legal terms, a counterparty to a swap becomes insolvent before the final exchange date.

A swap involving an initial exchange of value (such as a cross currency swap) is a form of executory contract. This is a contract with terms that are set to be fulfilled by both parties at a later date before it is deemed fully executed. The unique characteristics of such swap contracts, when performance is simultaneous, present distinct problems if one party becomes insolvent between the initial and final exchange dates and there has been no prior agreement as to the parties’ rights and obligations in that scenario.

This article was originally published in Butterworths Journal of International Banking and Financial Law in January 2016.


This material is provided for general information only. It does not constitute legal or other professional advice.

Contact Information
Jonathan Clark
Partner at Slaughter and May