Steven Friel & Michael Williams predict an upsurge in derivatives litigation in the English courts
Notwithstanding the current financial crisis, the international derivatives market is worth an estimated $600trn, of which the majority are traded over-the-counter (OTC), ie traded bilaterally and privately rather than on an exchange. The largest market for OTC derivatives is the City of London. Given the magnitude of the derivatives market and the significant credit exposure arising under derivative contracts, it is perhaps surprising how few cases involving derivatives disputes have come before the English courts. There may be a number of reasons for the relative paucity of derivatives litigation.
ISDA standard forms
The International Swaps and Derivatives Association (ISDA) was set up to provide uniform standards in derivatives documentation and aims to reduce risk in the derivatives industry. The growth in OTC transactions has fuelled a growing demand for ISDA standard-form contracts which have dominated the legal rules in the derivatives market. The ISDA Master Agreement is the most widely accepted standard form of documentation in
