Different in Denmark

Author: | Published: 1 Jul 2007

In the Australian (New South Wales) High Court decision in Enron, Australia v TXU Electricity (2003), the court found that, when a bankruptcy event of default occurred under an Isda master agreement between the two parties in respect of Enron, TXU (as the non-defaulting party) could, but was not obliged to, designate an early termination date.

The transactions entered into by the parties under the agreement had developed so that, had TXU terminated, it would have been required to compensate Enron's loss because Enron was in the money at the time of its default. TXU chose not to terminate.

On the basis of the condition precedent in Section 2(a)(iii) of the Isda Master Agreement, which states that no payments or deliveries need to be made by a party if the other party is in default, TXU was not obliged to, and did not, make any further payments or deliveries to...