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Abstract
This article considers the unanimous Court of Appeal decision in Lomas v JFB Firth Rixson, Inc [2012] EWCA Civ 419, [2012] 2 All ER (Comm) 107, which dealt with four appeals, each concerning the interpretation and effect of the ISDA Master Agreement following an Event of Default. The Court of Appeal confirmed that payment obligations of a Non-defaulting Party suspended by Section 2(a)(iii) of the ISDA Master Agreement are not extinguished on their due date or extinguished on the maturity of the Transaction, but may exist indefinitely. The Court of Appeal also confirmed that the effect of Section 2(a)(iii) is not limited by any implied term, such as that it only applies for a reasonable period. In relation to the second appeal, the Court of Appeal confirmed that Section 2(a)(iii) did not offend the anti-deprivation rule or the pari passu rule. The Court of Appeal also addressed issues concerning the interpretation of the default provisions of the 1992 ISDA Master Agreement and the scope of close-out netting. The effect of the decision was to reconcile conflicting first instance decisions and to bring English case law on the ISDA Master Agreement back in line with the orthodox market view of these issues prior to the judgment of Flaux J in Marine Trade SA v Pioneer Freight Futures Co Ltd [2009] EWHC 2656 (Comm), [2010] 1 Lloyds Rep 631.