Key Point

Where a party is required "on or as soon as reasonably practicable" following an Early Termination Date under an ISDA Master Agreement to serve a notice containing a calculation of the sum due from the relevant counterparty late service of that notice does not mean the obligation of the counterparty to pay the sum on termination is released.


GS a bank entered into a series of swaps with a company V. V failed to pay margin calls and GS terminated the swaps on 2 December 2011. On 14 December it served a notice on V showing a calculation of the sum it claimed V owed GS. That notice was held to be deficient in detail in proceedings in September 2013. On 7 March 2014 GS served a second notice with more detail of the calculation of the relevant sums due from V to GS.

GS then sought summary judgment for the amount it claimed under the swap.

V argued that GS had not served the notice "on or as soon as reasonable practicable" following the Early Termination Date and that therefore V had no obligation to pay the sum to GS. Quite a bold argument to run.


The Court held that GS was entitled to the sum claimed even though the first notice was ineffective and the second notice was served 2 years and 3 months after the Early Termination Date and so on no view could be said to be compliant in that respect with the terms of the ISDA Master Agreement requiring it to be served "on or as soon as reasonably practicable" after the Early Termination Date.


The Court considered that V's suggested construction of Clause 6(d) of the ISDA Master Agreement which would have meant that a failure to serve a notice "on or as reasonably practicable" after an Early Termination Date effectively extinguished the counterparty's obligation to pay was one which was:

"so lacking in commercial sense that it cannot have been the meaning which a reasonable person with the background knowledge available to the parties would have understood the clause to bear. Indeed, it is difficult to conceive of a reason why the parties would have intended that a late notice should be an ineffective notice".

The late notice was not without legal consequence. If the counterparty could prove that the late service of the notice by GS had caused V loss then there would be a counterclaim for damages.

Goldman Sachs International v Videocon Global Limited