Force Majeure - IETA Provision

IETA Emissions Trading Master Agreement A Jolly Contrarian owner’s manual™ Force Majeure in a Nutshell™ The JC’s Nutshell™ summary of this term has moved uptown to the subscription-only ninja tier. For the cost of ½ a weekly 🍺 you can get it here. Sign up at Substack. Force Majeure in all its glory “Force Majeure” means the occurrence of any event or circumstance, beyond the control of the FM Affected Party, that is not a Suspension Event, and that could not, after using all reasonable efforts, be overcome and which makes it impossible for the FM Affected Party to either (a) deliver the Period Traded Allowances from any Holding Account in any Registry (or if one or more Delivering Party's Holding Accounts are specified, from such Delivering Party's Holding Account(s)) or (b) accept the Period Traded Allowances into the Receiving Party's Holding Account(s), in accordance with the EU ETS. The inability of a Party to perform a relevant delivery or acceptance obligation as a result of it having insufficient Period Traded Allowances in the relevant Holding Account (whether caused by: the low or non-allocation of Allowances from a Member State, non-Member State or Central Administrator; the delay or failure of a Member State or Central Administrator to replace Allowances with Allowances for the subsequent Validity Period; or the failure of that Party to procure sufficient Allowances to meet its delivery obligations) shall not constitute a Force Majeure; provided, however, that this is not an exhaustive list of events which will not constitute a Force Majeure and is provided for the avoidance of doubt only. edit Comparison See our natty emissions comparison table between the IETA, EFET and ISDA versions of emissions trading docs Resources and Navigation Emissions trading documentation ISDA: EU Anatomy • EU Wikitext • EU Nutshell (premium) • UK Anatomy • UK Wikitext (to be merged into EU Anatomy) IETA: IETA Master Agreement • IETA Wikitext • IETA Nutshell (premium) EFET: EFET Allowances Appendix • EFET Allowances Wikitext • EFET Nutshell (premium) Index: Click ᐅ to expand: ISDA Emissions TOC EUA Annex - Premium Emissions Pro tip: for tons of information about EU ETS and EU financial services regulation see Michał Głowacki’s magnificent emissions-euets.com website. Premium version of this page

Overview

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This is the IETA Master Agreement’s equivalent of a Settlement Disruption Event in the ISDA EU Emissions Annex. It is broadly the same, so you do wonder whose idea it was to call it something different.

Let us speculate: the IETA was written first, is independent of the ISDA universe, and for reasons best known to IETA’s crack drafting squad™, they decided to call this a Force Majeure. Being beyond the reasonable control of the affected party this is not entirely unreasonable.

ISDA’s crack drafting squad™ was, as usual, late to the “novel asset class” party and, as it couldn’t find a spot, decided to park its tanks on IETA’s lawn, borrowing much of the technology wholesale but unable to call this event a Force Majeure because the ISDA Master Agreement already has a Force Majeure Event, this is quite different, and that would confuse people even beyond ISDA’s tolerance for confusing people.

So ISDA’s crack drafting squad™ went with its product specific “stuff happens” label, Settlement Disruption Event.

Summary

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As per the overview, Force Majeure is substantially the same idea as “Settlement Disruption Event” in the ISDA EU Emissions Annex.

It is an event that, in each format:

• Is beyond the “affected party’s” reasonable control (having taking “all reasonable steps” to control it)
• Renders the delivery impossible to perform, acknowledging that this might be a problem at either end
• It excludes simply not having enough Allowances in your account, even if that is a result of some failure by a responsible official agency to issue Allowances in your account (as part of your annual allocation) or to replace stale allowances with fresh ones
• The hierarchy of Events of Default, Suspension Events and Force Majeure/Settlement Disruption Events is also the same.

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• The JC’s famous Nutshell™ summary of this clause
• Deeper comparison of Force Majeure with ISDA’s Settlement Disruption Event
• Comparison of Loss and Market Quotation with the 1992 ISDA equivalents.

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See also

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• Settlement Disruption Event under the ISDA EU Emissions Annex
• Loss and Market Quotation under the 1992 ISDA