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EU Emissions Allowance Transaction Annex to the 2005 ISDA Commodity Definitions
A Jolly Contrarian owner’s manual™
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Section (d)(xi) in a Nutshell™
Use at your own risk, campers!
Full text of Section (d)(xi)
(d)(xi) Failure to Deliver (Alternative Method) - EEP Applicable
If “Failure to Deliver (Alternative Method)” and “EEP” are specified to be applicable in the Annex to this Part or the Confirmation for the relevant EU Emissions Allowance Transaction, then, with regard to that EU Emissions Allowance Transaction, in the event that Receiving Party incurs an Excess Emissions Penalty directly caused by Delivering Party’s failure to deliver the Allowances to be Delivered on a Delivery Date falling within the EEP Risk Period other than as a result of the failure of Receiving Party to comply with the Requirements under the Scheme as specified above, the existence of an Illegality, the existence of a Settlement Disruption Event or the existence of a Suspension Event (the “EEP Non-delivery” and the amount of such Excess Emissions Penalty so caused, the “Indemnifiable EEP”), then Delivering Party shall pay to Receiving Party, in addition to the Receiving Party’s Replacement Cost (if any), an amount equal to the amount of the Indemnifiable EEP paid by Receiving Party (the “EEP Payment”), provided that such EEP Payment shall not exceed the product of the RPRC Shortfall for that EU Emissions Allowance Transaction and the maximum per Allowance rate of Excess Emissions Penalty applicable at the relevant time.
Delivering Party’s obligation to pay the EEP Payment in respect of the EEP Non-delivery shall be conditional upon Receiving Party demonstrating to the reasonable satisfaction of Delivering Party:
- (a) that Receiving Party has incurred and paid the EEP Payment consequent on a shortfall of Allowances as at the Reconciliation Deadline immediately succeeding the Delivery Date (the “Deadline Shortfall”);
- (b) the extent to which Receiving Party’s liability to make the EEP Payment resulted from Delivering Party’s EEP Non-delivery;
- (c) the extent to which Receiving Party’s liability to make the EEP Payment would have been incurred notwithstanding Delivering Party’s EEP Non-delivery; and
- (d) the extent to which Receiving Party’s liability to make the EEP Payment arose due to any third party’s failure(s) to deliver any Allowance to be Delivered to Receiving Party in accordance with the terms of any agreements between Receiving Party and such third party.
Receiving Party agrees to provide all other information to Delivering Party in order for Delivering Party to make a commercially reasonable assessment of the extent to which the Deadline Shortfall was directly caused by its EEP Non-delivery.
In the event that the Deadline Shortfall is directly caused by the failure of a number of parties (including Delivering Party and Receiving Party), then Delivering Party’s liability shall be to pay the EEP Payment in respect of its proportionate share of the Deadline Shortfall as determined by the parties in a commercially reasonable manner. In no circumstances shall Receiving Party seek to claim an EEP Payment from Delivering Party such that when aggregated with all the other claims made by Receiving Party to other parties in respect of its liability to make the EEP Payment and the liability caused by Receiving Party’s own action or inaction, it is more than Receiving Party’s liability to make the EEP Payment.
If Delivering Party disputes in good faith the amount of the EEP Payment claimed by Receiving Party, Delivering Party shall so notify Receiving Party stating the reasons for the dispute and the obligation to pay the EEP Payment shall be suspended until such dispute is resolved. The parties shall seek to settle the dispute regarding the EEP Payment as soon as reasonably possible.
Once the amount of the EEP Payment is agreed or any dispute in relation thereto resolved, Delivering Party shall pay such determined EEP Payment to Receiving Party within two (2) Business Days against Receiving Party’s VAT Invoice in respect thereof.
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Nothing compares to this. I know what you’re thinking —that’s heavy Sinead/Prince vibe right there — but you’re wrong.
Summary
Picture the scene: ISDA’s crack drafting squad™ as a group of ghost-hunting kids, miles out of their comfort zone, poking around with a flashlight in a dark, cobwebbed cellar, not sure whether they’ll find an imprisoned maiden down a well or Pennywise the Clown, opening doors, dragging themselves further away from the comfortable mark-to-market world, ever more gingerly, and when they got to the pit that is — would become — Failure to Deliver (Alternative Method) - EEP Applicable, there are gasps of despair, a desperate last-minute lunge, they throw in a handful of improvised expository definitions hoping this might scare away whatever unspeakable evil lurks in the shadows, but alas, they wink out, snuffed out by the suffocating darkness. To be featured in a forthcoming Opco Boone adventure:
- “G... g... guys?” stuttered Edd. “I th ... th ... think we better get outta here.”
- Roly snorted. “What’s wrong Eddy-boy? Scared like a — ” The tubster yawped and clucked and duck-walked around Cadet Sweeney, a fierce, brittle enjoyment squalling in his pink little eyes.
- “I’m not yeller!” Edd squeaked.
- “Are too! —” Roly’s little apple cheeks flushed with brimming petulance.
- “Cut it out Roly,” barked AJ. Don’t pay him no mind, Sweeney. You carry on.”
- “Lads! Quiet!” hissed Squadron Leader Opco Boone. “I have to finish this determination dispute trigger. I need bit of quiet. It’s — fiddly ... multi-lat ... ” Boone jabbed his screwdriver into the mechanism, and spluttered as a shower of rust sprinkled his face.
- “Don’t forget the double counting, Opco,” said George.
- Boone wiped his face and adjusted his goggles. “I got it, G. Just a little further —”
- The Eagle Squad leader reached into ancient contraption again, but as he did so, deep in the bowels of the ETS there was a deep, subsonic moan, as if a God, or a monster, was finally stirring from the slumber of aeons.
- What the fuck was that?
- Nearby, a vigorous flutter, an explosion of limbs, like a scrambling bird escaping from its predator’s clutch.
- “Roly! Roly! Come back! Where are you going?”
- But the young squadsman had gone. A righteous sneer curled A.J.’s lip.
- Boone stood up. “C’mon gang, this is a dead end. No-one will read this, or understand it, much less ever use it. We better find Roly. Let’s get out of here.”
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