United States: Camp’s Market Discount Proposal Is A Mixed Bag For Distressed Debt

Are distressed debt investors required to treat their speculative investment gains as ordinary interest income under the market discount rules, while continuing to treat their investment losses as capital losses? Or can they rely on the common law "doubtful collectibility doctrine" to stop accruing market discount as interest income, notwithstanding an IRS memorandum that seems to reject this approach? The recent economic downturn underscores the need for clear, consistent rules that do not artificially deflate investor demand. This article examines the current state of the law, and considers whether House Ways and Means Committee Chairman Dave Camp's proposal to reform the market discount rules (which parallels one of President Obama's revenue proposals) would be a step in the right direction.


When interest rates rise, secondary market bond prices decline to compensate investors for accepting a below-market stated interest rate. In response to this phenomenon, Congress enacted the market discount rules of the Internal Revenue Code.1These rules recharacterize principal payments as deferred interest to the extent of a bond's market discount, so that economic gain on the maturity or sale of a discounted bond is taxed as interest income.

Secondary market bond prices also decline when an issuer's credit deteriorates, to compensate investors for increased risk of non-repayment. The market discount rules do not differentiate between discount that is attributable to a rise in general interest rates and discount that is attributable to credit risk.

Because principal payments on distressed debt lack the predictability and security that typify interest payments on performing debt, it is inappropriate to require taxpayers to treat market discount as interest income if the discount is attributable to an issuer's financial deterioration, and not a rise in interest rates. Moreover, it is implausible that Congress intended to tax bond investors (but not other investors) at ordinary income rates on their speculative gains, while still requiring them to treat their losses as capital losses that can offset only up to $3,000 of ordinary income each year.2

Investors in distressed debt therefore have to make a tough decision. They can comply with the letter of the law, and suffer adverse (and probably unintended) tax consequences. Alternatively, they can take the position that the market discount rules do not apply to distressed debt.

The most obvious basis for treating accrued market discount as capital gain rather than as interest income is that the common law "doubtful collectibility doctrine" generally permits a taxpayer to stop accruing interest if it is unlikely that the interest will ever be collected. Some taxpayers have taken the position that an analogous rule applies to permit them to stop accruing a bond's market discount as interest income if there is no reasonable expectation that the issuer will fully repay the bond's principal amount.3

Unfortunately, in 1995, the IRS issued a Technical Advice Memorandum (the "1995 TAM") in which it concluded, based on highly fl awed reasoning, that the doubtful collectibility doctrine does not apply to original issue discount (OID).4OID is economically identical to market discount; accordingly, the 1995 TAM's existence is a problematic detail for distressed debt investors.

The recent financial crisis underscored the need for sensible market discount rules that differentiate between discount that is attributable to a rise in interest rates and discount that is attributable to credit risk. Without such rules, prospective debt investors who are uncomfortable disregarding the 1995 TAM could shy away from buying discounted bonds. A lack of investor appetite could add undesirable momentum to a downward spiral of ratings downgrades, capital calls, and defaults, and unnecessarily prolong an economic downturn.

On February 26, 2014, Representative Dave Camp, Chairman of the House Committee on Ways and Means, released a discussion draft of a bill that would dramatically change the market discount rules.5The bill would:

  • Require investors to accrue market discount currently under a constant yield method, in the same manner as OID; and
  • Limit market discount accruals in a manner intended to approximate the market discount that is attributable to increases in interest rates (and not to the issuer's financial deterioration).6

Under this proposal, every taxpayer who purchases discounted debt on the secondary market would have phantom taxable income each year, and broker-dealers would have to develop complex systems for reporting this income to their customers. Accordingly, the proposal could be highly disruptive for the secondary debt markets.

Moreover, although the proposed cap on market discount inclusions is a step in the right direction, it fails to provide definitive guidance as to whether the doubtful collectibility doctrine can apply to OID and market discount, and therefore may raise more questions than it answers.

This article first discusses the doubtful collectibility doctrine, and then discusses Camp's market discount proposal.

The Doubtful Collectibility Doctrine

Overview. A taxpayer on the cash method of accounting generally includes interest in income upon receipt.7A taxpayer on the accrual method of accounting includes interest in income when all events have occurred that fi x the taxpayer's right to receive the interest and the amount of the interest can be determined with reasonable accuracy.8Accordingly, an accrual method taxpayer generally will accrue "qualified stated interest"—interest that is unconditionally payable at least annually—ratably over the accrual periods to which the interest relates.9

However, under longstanding common law precedent, an accrual method taxpayer is not required to accrue qualified stated interest in advance of receipt if the interest "is of doubtful collectability or it is reasonably certain that it will not be collected."10

For example, assume that an investor using the accrual method of accounting purchases a 10-year bond at initial issuance, and that the bond has a $100 issue price, a $100 face amount, and provides for annual interest payments of $3.64. Five years later, the issuer suffers a financial setback and, as a result, is unable to continue servicing its debt. Under the doubtful collectibility doctrine, the investor is not required to continue to accrue interest on the bond.

The contours of the doubtful collectibility doctrine are fuzzy.11Some courts have required taxpayers to demonstrate the absence of any reasonable expectation that interest would be received in order to stop accruing the interest.12Other courts have required taxpayers to demonstrate only reasonable doubt as to future receipt.13However, courts and the IRS agree that at some point in an issuer's fi nancial decline an investor can stop accruing interest income.

Applicability of Doubtful Collectibility Doctrine to OID. OID is economically identical to interest, and is taxed similarly to interest, so there is no obvious reason for the doubtful collectibility doctrine to apply differently to OID than to interest.

For example, assume that an investor purchases a 10-year zero- coupon bond at initial issuance, and that the bond has a $70 issue price and a $100 face amount. Under Section 1272, the investor is required to include the bond's $30 of OID in income over the term of the bond, under a constant yield method.14This requirement arises from Congress's recognition that OID is economically indistinguishable from interest:15the $30 of discount from the bond's issue price reflects an unstated interest rate of 3.64 percent, compounded annually. In fact, the zero-coupon bond has the same yield to maturity, and thus has the same net present value, as the 10-year current-pay bond described in the prior example.

Misguided IRS Guidance. Even though OID is economically identical to interest, the IRS concluded in the 1995 TAM that the doubtful collectibility doctrine does not apply to OID.16Thus, the investor in the zero-coupon bond described above must continue to accrue OID in income after principal on the bond becomes uncollectible, even though the investor in the current-pay bond described above may stop accruing interest once the interest becomes uncollectible.

The conclusion in the 1995 TAM is premised on a deeply fl awed analysis and has been heavily criticized.17

Analysis of IRS Rationales. As discussed below, the IRS's four rationales for requiring current income accruals on a distressed OID bond are unpersuasive.

IRS Rationale #1: OID Is Different From the Accrual Method. According to the IRS, whereas the accrual method of accounting requires income inclusions "in advance of receipt," and therefore does not require income inclusions when there is no reasonable expectation of receipt, Section 1272 requires income inclusions " in lieu of receipt," and therefore requires income inclusions even when there is no reasonable expectation of receipt.

This effort to divorce the OID rules from the accrual method of accounting ignores the legislative history of the OID rules, which provides unequivocally that "the application of the OID rules will require the issuer and the holder of the debt instrument to use the accrual method of accounting for any interest (whether stated or imputed) that is not paid currently."18

IRS Rationale #2: Imputed Receipt Through Circular Cash Flow. According to the IRS, the OID provisions impute receipt by treating OID inclusions as a two-step process:

1.Interest is deemed paid to the investor; and

2.The investor is deemed to re-lend the interest to the issuer.

In support of this theory, the IRS cited prefatory language in legislative history published 15 years after the OID rules were enacted. This same legislative history, however, goes on to provide that investors purchasing OID bonds must account for the OID "on an economic accrual basis."19Thus, it is more likely that the circular-cash-flow theory was intended merely as an unsophisticated explanation of compound interest.

IRS Rationale #3: Preventing Whipsaw. Under Section 163, an issuer that uses the accrual method of accounting generally may deduct interest whether or not the issuer is able to service its debt. The IRS expressed concern that allowing investors to stop accruing OID under the doubtful collectibility doctrine, without simultaneously requiring issuers to stop accruing OID deductions under Section 163, would be inconsistent with one of the principal purposes of the OID regime expressed in the legislative history—namely, matching investors' interest inclusions with the issuer's interest deductions.

The IRS's reliance on legislative history in support of this justification was disingenuous. The "mismatch" that concerned Congress occurred when accrual-method issuers were permitted to deduct OID on a current basis, while cash-method investors did not include the discount in income until they received it.20Section 163 existed when the OID rules were enacted, and there is no suggestion in the legislative history that Congress was concerned about the different legal standards that apply to determine when an accrual method issuer must stop accruing deductions and when an accrual method investor may stop accruing income. Moreover, if Congress were, indeed, concerned about these different standards, it is improbable that Congress would have addressed this concern only for instruments issued with OID and not for current- pay instruments.

IRS Rationale #4: Preemption. According to the IRS, the Tax Court had already ruled that "general accrual method principles," such as the doubtful collectibility doctrine, should not trump "more specifi c rules," such as the OID regime.21

However, in both cases cited by the IRS, the Tax Court had been asked to decide which of two statutes applied to the facts before it, and not—as the IRS suggested—whether a statute could overrule a common law doctrine by remaining silent on the doctrine's applicability. The Supreme Court has addressed the latter question and concluded that "statutes which invade the common law . . . are to be read with a presumption favoring the retention of long established and familiar principles, except when a statutory purpose to the contrary is evident."22Under this analysis, Congress's silence with respect to the doubtful collectibility doctrine should be construed not as preemption, but as acquiescence.

An Unwarranted Obstacle. Though its reasoning is unsound, and it lacks precedential value,23the 1995 TAM reflects the IRS's published view on the applicability of the doubtful collectibility doctrine to OID.24Adopting a contrary position could be perilous for a taxpayer.

Market Discount

In General. When market interest rates rise, the prices of outstanding bonds fall. As noted previously, this price reduction compensates purchasers of outstanding bonds for accepting below-market stated interest rates. For example, assume that an investor purchases a fi ve-year zero-coupon bond at initial issuance, and that the bond has a $70 issue price and a $100 face amount. The bond's yield-to-maturity is 7.39 percent, and the investor must include the bond's $30 of OID in income under a constant yield method. Assume that, immediately after issuance, market interest rates rise by 2 percent. In an efficient market, the bond's price would drop to $63.83, so that its yield to-maturity is now increased to 9.39 percent (i.e., the bond's original yield to maturity, plus 2 percentage points).

Congress enacted the market discount rules because it recognized that market discount arising as a result of interest rate fluctuations—such as the bond devaluation described immediately above—is indistinguishable from OID, and is a substitute for stated interest income.25Under Section 1276, an investor must treat any gain on the sale or retirement of a bond as ordinary income to the extent of accrued market discount.26

The Section 1276 regime differs from the OID regime in two respects:

1. The investor is not required to recognize any accrued market discount until he or she sells the bond or receives principal payments under the bond.

2. Market discount accrues ratably over the remaining term of the bond (in contrast to accrual under a constant yield method that refl ects the principle of compound interest).

These distinctions exist only to avoid administrative complexity.27Because OID is calculated by reference to issue price, an issuer can report OID accruals for an entire debt issuance.28By contrast, the amount of a bond's market discount depends on the bond's purchase price, and therefore differs from holder to holder. Because the amount of market discount accruals must be made at the investor level, and not the issuer level, Congress apparently preferred to adopt a less complicated accrual calculation method, and to permit holders to avoid having to calculate accruals entirely if they hold their bonds to maturity (because, in that case, the amount of gain that is converted to ordinary income under the market discount rules is simply the discount from the issue price at which the bond was purchased).

Applicability of Market Discount Rules to Distressed Debt. One of the hallmarks of debt is an unconditional right to repayment, and an instrument the repayment of which is speculative when it is issued may not be characterized as debt for tax purposes, even if the parties refer to the instrument as "debt."29However, an instrument's debt or equity characterization for tax purposes generally is not retested after issuance.30

As a result, by their terms, the market discount rules apply to distressed instruments that would not be treated as debt for tax purposes if they were issued on their acquisition date. The rules thus subject equity-like, risk-based returns to taxation as if those returns were interest. In so doing, the rules give rise to several inappropriate and unintended consequences.

Disproportionate Effect on Short-Term Bonds. Because discount on distressed debt reflects increased risk, not the time value of money, two bonds with the same level of priority in a financially distressed issuer's capital structure generally will have the same price, regardless of their maturity dates.31Stated differently, when an issuer is in distress, the reduction in the price of its debt on the secondary market reflects the debt's rank in the issuer's capital structure—in effect, the investor's place in line in a hypothetical bankruptcy proceeding—and is not closely correlated to fluctuations in prevailing interest rates. However, because the market discount rules treat market discount as a return that is pegged to the time value of money, they require investors to accrue the discount based on the remaining number of years to the debt's maturity. The market discount rules thus disproportionately affect secondary market purchasers of shorter-term debt by requiring them to accrue market discount faster than purchasers of longer-term debt.

For example, suppose that an issuer issues two $100 unsecured bonds at par on the same day, and that one bond matures in five years and the other in 10 years. At the beginning of Year 3, when the issuer is in financial distress (and interest rates remain unchanged), two secondary market purchasers buy the bonds for $40 each. The issuer makes a full recovery so that, at the end of Year 5, the purchaser of the five-year bond receives $100 of principal, and the purchaser of the 10-year bond sells the bond for $100. Each purchaser has $60 of economic gain. However, the purchaser of the five-year bond must treat the entire $60 as ordinary income under Section 1276, whereas the purchaser of the 10-year bond must treat $34.29 as ordinary income, and will treat the remaining $25.71 as long-term capital gain.32The $60 of discount reflects a risk-based price adjustment for both investors, so there is no obvious reason to tax the discount on the two bonds differently.

Mismatch Between Investment Gains and Losses. The market discount rules treat investment gains differently from investment losses: investment gains are characterized as ordinary income, but investment losses are characterized as capital losses.

To view the full article please click here.


1 IRC §§ 1276, 1278. All "Section" references are to the Internal Revenue Code of 1986, as amended (the IRC), or to Treasury regulations promulgated there under. To differentiate Camp's proposals from the current Code, we refer to his proposed new sections as "Proposed Sections."

2 Under IRC § 1211, corporations may use capital losses to offset only capital gains, and individuals may use capital losses to offset only capital gains and up to $3,000 of ordinary income.

3 See generally New York State Bar Ass'n, Report of the Tax Section of the New York State Bar Association on the Taxation of Distressed Debt (Nov. 22, 2011), available at http://old.nysba.org/Content/ContentFolders20/TaxLawSection/TaxReports/1248report.pdf .

4 TAM 9538007 (Sept. 22, 1995).

5 Camp's market discount proposal is consistent with a proposal contained in President Obama's Fiscal Year 2015 Revenue Proposals. See General Explanations of the Administration's Fiscal Year 2015 Revenue Proposals, at 175 (Mar. 2014), available at http://www.treasury.gov/resourcecenter/tax-policy/Documents/General-Explanations-FY2015.pdf . Camp's draft bill is available at http://waysandmeans.house.gov/uploadedfiles/statutory_text_tax_reform_act_of_2014_discussion_draft__022614.pdf . The Committee on Ways and Means released a section-by-section summary of the draft, and the Joint Committee on Taxation released a technical explanation of the draft. See Committee on Ways & Means, Tax Reform Act of 2014 Discussion Draft Section-by-Section Summary (Feb. 26, 2014), available at http://waysandmeans.house.gov/uploadedfi les/ways_and_means_section_by_section_ summary_fi nal_022614.pdf ; Staff of Joint Committee on Taxation, Technical Explanation of the Tax Reform Act of 2014, A Discussion Draft of the Chairman of the House Committee on Ways and Means to Reform the Internal Revenue Code: Title III—Business Tax Reform (Feb. 26, 2014), available at http://waysandmeans.house.gov/uploadedfiles/jct_technical_explanation__title_iii___business_jcx_14_14__022614.pdf.

6 Camp's discussion draft contains four other major proposals to reform the taxation of fi nancial products. First, the bill would require all investors to treat their derivatives and other investments that are hedged with derivatives as sold for fair market value at the end of each year and to pay tax on any resulting paper gains at ordinary income rates. We discussed this proposal in an earlier article. See Jason Schwartz, Mark Howe & Daniel Mulcahy, "Missing the Mark: The Tax Reform Act of 2014 Would Hurt Ordinary Investors and Businesses and Complicate Taxation of Financial Products," 31(4) J. Tax'n Invs. 15 (Summer 2014). Second, the bill would limit the amount of phantom income incurred by investors and obligors in debt restructurings. Third, the bill would expand the ways that taxpayers can designate transactions as hedges for tax purposes by including certain financial accounting and other hedge designations. Finally, the bill would expand the "wash sale" rules by denying tax losses to an investor who disposes of a position if a "related party" reestablishes the position within the 61-day period beginning 30 days before the disposition.

7 Treas. Reg. § 1.446-1(c)(1)(i).

8 Treas. Reg. § 1.446-1(c)(1)(ii).

9 Treas. Reg. § 1.446-2(b).

10 Corn Exchange Bank v. U.S., 37 F2d 34 (2d Cir. 1930); see also Clifton Mfg. Co. v. Comm'r, 137 F2d 290 (4th Cir. 1943); Rev. Rul. 80-361, 1980-2 CB 164; Comm'r v. Liftin, 317 F2d 234 (4th Cir. 1963).

11 See generally New York State Bar Ass'n, supra note 3; New York City Bar Ass'n, Report Regarding Proposals for Accounting Treatment of Interest on Non-Performing Loans (July 23, 2008), available at http://www.nycbar.org/pdf/report/ABCNY%20CityBar_%20Dis tressed_debt.pdf .

12 See, e.g., Harrington v. Comm'r, 31 TCM (CCH) 888, 893 (1972) (taxpayers must show that there is no "reasonable expectancy" of receiving the interest); Buhl Land Co. v. Kavanagh, 131 F. Supp. 136, 142 (E.D. Mich. 1954) (taxpayers must show that there is no "reasonable expectation that payment will be made"), aff'd per curiam, 223 F2d 265 (6th Cir. 1955); O'Sullivan Rubber Co. v. Comm'r, 42 BTA 721, 723 (1940) (taxpayers must show that there is "no reasonable anticipation" of payment); Rev. Rul. 2007-32, 2007-1 CB 1278 (taxpayers must show that there is "no reasonable expectancy of payment").

13 See, e.g., Jones Lumber Co. v. Comm'r, 404 F2d 764 (6th Cir. 1968) (taxpayers must establish "reasonable doubt as to . . . collectibility" ); Hoffman v. Comm'r, 57 TCM (CCH) 51, 54 (1989) (same); Am. Fork & Hoe Co. v. Comm'r, 33 BTA 1139, 1149 (1936) ("A taxpayer on the accrual basis cannot be charged with income if there exists good reason for believing that the income cannot be collected.").

14 See IRC § 1272(a)(3).

15 H.R. Rep. No. 98-432, at 1170 (1984) ("[F]rom the standpoint of the holder of a bond, market discount is indistinguishable from original issue discount (OID). In each case the discount is a substitute for stated interest."); S. Rep. No. 98-369 (1984) (same). See also U.S. v. Midland-Ross Corp., 381 U.S. 54, 58 (1965) (OID is "precisely like" stated interest). 16 TAM 9538007 (Sept. 22, 1995).

17 See generally Andrew W. Needham, "Do the Market Discount Rules Apply to Distressed Debt? Probably Not," 8 J. Tax'n Fin. Instruments 19 (Apr. 1, 2009); David C. Garlock, "How to Account for Distressed Debt," 127 Tax Notes 999 (June 2, 2010).

18 S. Rep. No. 99-83, at 5 (1985) (emphasis added).

19 See H.R. Rep. No. 98-432, at 1034 (1984). A footnote in the legislative history provides (inaccurately) that the circular-cash-fl ow mechanism "is often referred to as the 'economic accrual' of interest or interest 'compounding.'"

20 See H.R. Rep. No. 91-413, at 109 (1969) ("The present treatment of original issue discount results in a nonparallel treatment of the corporation issuing the bond and the person acquiring the bond. The corporation is allowed a deduction each year with respect to the discount. On the other hand, the holder is not required to report any income with respect to the original issue discount until he disposes of the bond."); S. Rep. No. 91-552, at 146-47 (1969) (same); see also Staff of Joint Committee on Taxation, General Explanation of the Revenue Provisions of the Tax Reform Act of 1984, 98th Cong., 2d Sess. 93, 110 (1985) [hereinafter "Joint Committee on Taxation TRA 1984 Explanation"] ("Enacted in 1969, the OID rules were designed to eliminate the distortions caused by the mismatching of income and deductions by lenders and borrowers in discount lending transactions. Prior to that time, an accrual method borrower could deduct deferred interest payable to a cash method lender prior to the period in which the lender included the interest income.").

21 TAM 9538007 (Sept. 22, 1995), citing Weis v. Comm'r, 94 TC 473, 478 (1990) and Williams v. Comm'r, 94 TC 464, 470 (1990).

22 Isbrandtsen v. Johnson, 343 U.S. 779, 783 (1952); see also U.S. v. Texas, 507 U.S. 529, 541 (1993) ("In order to abrogate a common-law principle, the statute must 'speak directly' to the question addressed by the common law.").

23 See IRC § 6110(k)(3) (private letter rulings "may not be used or cited as precedent").

24 See Hanover Bank v. Comm'r, 369 U.S. 672, 686 (1962) ("[A]lthough the petitioners are not entitled to rely upon unpublished private rulings which were not issued specifically to them, such rulings do reveal the interpretation put upon the statute by the agency charged with the responsibility of administering the revenue laws.").

25 See Joint Committee on Taxation TRA 1984 Explanation, supra note 20, at 97-98 ("[F]rom the standpoint of the holder of a bond, market discount is indistinguishable from OID," and is a "substitute for stated interest.").

26 IRC § 1276(a). Holders may elect to accrue market discount currently, either under a straight-line or constant yield method. IRC § 1276(b).

27 See Joint Committee on Taxation TRA 1984 Explanation, supra note 20, at 93 ("[T]he theoretically correct treatment of market discount . . . would involve administrative complexity.").

28 See Treas. Reg. § 1.1275-3 (OID information reporting requirements). Issuers report OID on publicly offered debt instruments on IRS Form 8281.

29 Gilbert v. Comm'r, 248 F2d 399, 402 (1957) ("The classic debt is an unqualifi ed obligation to pay a sum certain at a reasonably close fi xed maturity date along with a fi xed percentage in interest payable regardless of the debtor's income or lack thereof."); Fin Hay Realty Co. v. U.S., 398 F2d 694, 696 (3d Cir. 1968) (label given to an instrument is just one of many factors relevant to the debt-for-tax analysis); Estate of Mixon v. U.S., 464 F2d 394, 402 (5th Cir. 1972) (same).

30 See, e.g., IRC § 385(c) (characterization by the issuer at "time of issuance" binds the issuer and investors); Jack Daniel Distillery v. U.S., 379 F2d 569, 580 (Fed. Cir. 1967) ("[D]id the parties intend, at the time of the issuance of the instrument, to create a real debtor-creditor relationship?") (emphasis added); Treas. Reg. § 1.1001-3(f)(7)(ii) (in determining whether a modification of a debt instrument results in an instrument that is not debt for tax purposes, "any deterioration in the financial condition of the obligor between the issue date of the debt instrument and the date of the alteration or modification (as it relates to the obligor's ability to repay the debt instrument) is not taken into account").

31 See Needham, supra note 17, at 21.

32 As mentioned above, market discount accrues ratably over the remaining term of the debt instrument. Because the remaining term of the 10-year bond is seven years at the time the bond is purchased, the purchaser must accrue one-seventh of the $60 market discount each year.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.