Early termination of derivative transactions – legal aspects

The work is dedicated to the legal regulation of early termination of obligations under derivative financial instruments. The first chapter is devoted to types and classification of derivatives, as well as international and Russian documentation. The second chapter contains provisions regarding the grounds, procedure, and legal qualification of early termination of obligations under the 2002 ISDA Master Agreement and the 2011 Standard Terms for Derivative Transactions. The third chapter summarizes the international and Russian approaches to automatic early termination of obligations in case of bankruptcy. Standard derivative documentation aims to establish a legal framework for conducting various transactions, including the conclusion of a master agreement – a single contract that allows the application of early termination tools and the use of close-out netting. Currently, Russian practice is being formed regarding the recalculation of the amount of monetary obligation upon termination, which contradicts the terms of derivative transactions. The permissibility of using another underlying asset for calculation is a unique solution, while verification of the close-out amount calculation is permissible under the ISDA Master Agreement. Russian legal regulation of the close-out netting mechanism largely corresponds to international recommendations.