No Second Bite at the ISDA Valuation Cherry: Lehman Brothers Special Financing Inc v National Power Corporation
A party closing out a 2002 ISDA Master Agreement must use commercially reasonable procedures with a view to reaching a commercially reasonable result but what standard of reasonableness applies? Is it enough to show that there was no irrationality or bad faith or does the determination have to be justifiable on objective grounds? And if it turns out that an error was made, can the determining party correct it by providing a revised calculation statement? These were the issues faced in Lehman Brothers Special Financing Inc v National Power Corporation. Simon Firth discusses the implications of the decision for the derivatives market.
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