Template:M summ EUA Annex Original Affected Party

The emissions trading world is still haunted by the widescale fraud that beset it in 2010. For more on the history, see the article on emissions allowance theft.

Its reaction was to tighten up the registry system to stop miscreants nicking {{{{{1}}}|Allowance}}s, and tighten up the terms in the documentation to make it harder to pass stolen {{{{{1}}}|Allowances}}, and to be more specific about the consequences of doing so.

The documentation effort led to a lot of tedious specificity around designated {{{{{1}}}|Holding Account}}s, but also this No Encumbrance regime, where a {{{{{1}}}|Delivering Party}} is meant to represent that the {{{{{1}}}|Allowances}} being delivered are free and clear of all competing claims, including the sort of claim, notably, that they are owned by someone other than the person purporting to have transferred them, and who now wants them back.

Now, trading as they do in a slick, modern electronic system, and being, as they are, fungible financial instruments, “hot” {{{{{1}}}|Allowances}} can quickly change hands and make it into the possession of bona fide purchasers for value without notice of the fraud. They, should they come to themselves transfer the {{{{{1}}}|Allowances}} and then be called upon to compensate, are potential victims too. Hence this ghastly confusion about {{{{{1}}}|Encumbrance Loss}}es. (Now, whether a claim could be mounted against such a bona fide purchaser who has then, Q.E.D., changed its position in reliance on the transfer, is another question which we will leave for wiser minds to speculate on.)

The {{{{{1}}}|Original Affected Party}}, in this context, is the original victim of such a crime: the one who originally had good title to the {{{{{1}}}|Allowances}} before they were nicked. This person will not be a party to the {{{{{1}}}|Transaction}}, and in this regard the label “{{{{{1}}}|Original Affected Party}}” is, we think, a little unfortunate. But that’s as may be.

A subsequent bona fide receiver and then on-seller of the {{{{{1}}}|Allowances}}, who was not implicated in the theft but who did suffer a compensation claim in any case (assuming this is possible), is a “third party” who might also make a claim on the {{{{{1}}}|Receiving Party}} to this Transaction to account for its loss.