Dear All,

David Minns has obtained local counsel (ISDA's counsel) on this issue (see 
email below).  It appears that we can retain the additional wording without 
affecting the effectiveness of the close-out netting under the ISDA Master.

Regards, Edmund

---------------------- Forwarded by Edmund Cooper/LON/ECT on 02/28/2001 02:20 
PM ---------------------------


David Minns@ENRON_DEVELOPMENT
02/27/2001 11:57 PM
To: Edmund Cooper@ECT
cc: Alan Aronowitz/HOU/ECT@ECT 

Subject: Re: Change to standard ISDA Schedule  

Edmund let me compliment you on your thoroughness in picking up the issue 
with the standard Clause 2(a)(iii) alteration and the Australian Payments 
Systems and Netting Act.  

The good news is that you may retain  your standard wording with Australian 
counterparties and not sustain additional exposure.   I asked external 
counsel to provide a second opinion  to confirm my analysis,  which I enclose 
for your records. 


Alan Aronowitz/HOU/ECT@ECT

Hope you find it of assistance.   

David Minns
Senior Legal Counsel
Enron Australia
Phone 612 9229 2310
   


From: Alan Aronowitz@ECT on 21/02/2001 05:35 PM CDT
To: David Minns/ENRON_DEVELOPMENT@ENRON_DEVELOPMENt
cc:  

Subject: Change to standard ISDA Schedule

FYI.
----- Forwarded by Alan Aronowitz/HOU/ECT on 02/21/2001 04:35 PM -----

	Edmund Cooper
	02/21/2001 12:23 PM
		 
		 To: ECT London European Trading, T Paul Johnson/EU/Enron@Enron, Janet 
Wood/EU/Enron@Enron, Matthew Dawson/LON/ECT@ECT, Michael Slade/LON/ECT@ECT, 
Jonathan Marsh/EU/Enron@Enron, Mark Evans/Legal/LON/ECT@ECT
		 cc: 
		 Subject: Change to standard ISDA Schedule

Dear All,

In the course of current ISDA Master Agreement negotiations with an 
Australian counterparty it has come to my attention that the ISDA netting 
opinion for Australia specifies that certain Sections of the ISDA Master 
should not be altered; otherwise reliance on the opinion, and close-out 
netting, could be jeopardised.  In particular the opinion specifies that 
Section 2(a)(iii) should not be altered.  

Enron has a standard alteration to Section 2(a)(iii) in Part 5 of its 
standard form Schedule, viz.  

"(a) Conditions Precedent.  The condition precedent set forth in clause (1) 
of Section 2(a)(iii) shall not apply to payments owed by a party if the other 
party shall have satisfied in full all its payment obligations under Section 
2(a)(i) and shall at the relevant time have no future payment obligations 
whether absolute or contingent, under Section 2(a)(i)."

Obviously, in the case of Australian counterparties this condition precedent 
should not be included in our documentation.

In addition, there are a number of other countries (including Germany, Italy, 
South Korea and Switzerland) where the effectiveness of the ISDA netting 
opinion presupposes that certain Sections of the Master, including Section 
2(a)(iii), are not altered in any material respect. To that end I would 
suggest that our standard condition precedent does make a material alteration 
and that it should not be included in ISDA Master Agreements with 
counterparties trading from these jurisdictions.

Certainly from the London end, I think that when we start negotiations with a 
new counterparty we should check the ISDA opinions to ensure that we don't 
trip ourselves up.

Regards, 

Edmund