Subject of Agreement - IETA Provision

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IETA Emissions Trading Master Agreement

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1 Subject of Agreement

1.1 This Emissions Trading Master Agreement (which includes its Schedules) (the “Agreement”) governs all oral or written agreements between the Parties to enter into one or more Transactions.
1.2 Each Transaction (as defined in Schedule 1 (Definitions) below) is entered into in reliance on the fact that this Agreement (including, for the avoidance of doubt, all of its Schedules), all Confirmations and all other Transactions form a single agreement between the Parties (together, the “Agreement”), and the Parties acknowledge and agree that they would not otherwise enter into any Transaction.


See our natty emissions comparison table between the IETA, EFET and ISDA versions of emissions trading docs

Resources and Navigation

Emissions trading documentation Index: Click to expand:

Pro tip: for tons of information about EU ETS and EU financial services regulation see Michał Głowacki’s magnificent website.



The IETA Master Agreement gets off to a flier with this, the single agreement clause. You will start to notice some similarities with the 1992 ISDA. So many, in fact, that you may start to wonder why they didn’t just use a 1992 ISDA, and make this into a specific definitions booklet. Perhaps the pioneering emissions traders weren’t ISDA ninjas, didn’t want to pay ISDA membership fees, something like that? Hard to know.

If you are an ISDA ninja, you won’t need me to tell you that this is a single agreement, or what it is for.



The “single agreement” concept

Here several pieces of magic come together to create the capital foundation of the modern master trading agreement. The challenge, originally solved by the First Men, was to create an architecture that allowed discrete, unitary, complete Transactions, such that creating a new one or terminating an old one didn’t upset the economic or legal integrity of other Transactions that were currently on foot, while at the same time creating an umbrella framework so that, should something regrettable happen to either party, all Transactions can be quickly rounded up, evaluated, stopped and then collapsed down — “netted” — to a single amount, payable by one party to the other.

This involved some canny financial engineering. The general rules of set-off require not just a mutuality of parties to the off-setting debts, but also amounts falling due on the same day and in the same currency — neither of which was necessarily true of the independent Transactions executed under an multi-currency, cross-border ISDA Master Agreement.

The answer was this concept of the “Single Agreement”: the over-arching agreement that, however independent and self-contained Transactions are for any other purpose, when it comes to their early termination they transmogrify themselves into the single host agreement, and are reduced to calculation inputs to the final amount which one party must pay the other. Thereby the process is not one of “set-off” at all, but of calculating a single net amount, payment of which would sort out all matters outstanding under the relationship.

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  • The JC’s famous Nutshell summary of this clause

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See also