court-says-lehman-derivatives-contracts-are-unenforceable

Court says Lehman derivatives contracts are unenforceable

A Lehman ruling creates a discrepancy in enforceability between US and non-US bankruptcy courts.

Counterparties to derivatives transactions may think twice about contracting with US-based dealers after an American court handling Lehman's bankruptcy has found that a provision in the master agreement used in most derivatives transactions is unenforceable.

At issue is the way in which creditors treat their claims against an insolvent counterparty -- only a minor concern 18 months ago, but a multi-billion dollar worry today. When Lehman went broke a year ago, counterparties holding 900,000 separate derivatives contracts with the failed bank found themselves in an unusual position.

Some were aggrieved -- they were in the money and winning when Lehman went under, which meant they had to terminate their contracts...

¬ Haymarket Media Limited. All rights reserved.

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