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