Joshua Crow

ISDA Definitions 2021: Calculation Agent now required to produce objectively reasonable result

The recent amendments to the ISDA Definitions now require the Calculation Agent to perform its functions “in good faith and using commercially reasonable procedures to produce a commercially reasonable result”. This requires an objectively reasonable result, a more restrictive requirement than under the 2006 Definition. In turn, this means that determinations of the Calculation Agent are likely to be more open to challenge than under the previous definitions, which may generate an increased number of disputes. However, the additional protection offered by the requirement of a “reasonable result” should provide additional comfort to all parties. In any event, the amendments should encourage market participants to give careful consideration to whether they are willing to specify one of the parties to the transaction as Calculation Agent.