No Consequential Loss - Emissions Annex Provision

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EU Emissions Allowance Transaction Annex to the 2005 ISDA Commodity Definitions

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(d)(ix) in a Nutshell

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(d)(ix) in all its glory

(d)(ix) No Consequential Loss

Except to the extent included in any amount payable under Section 6(e) of the Agreement, any payment in respect of Receiving Party’s Replacement Cost or Delivering Party’s Replacement Cost, or any payment in respect of Encumbrance Loss Amount, neither party is liable to the other, whether in contract, tort (including negligence and breach of duty) or otherwise, for any business interruption or loss of use, profits, contracts, production or revenue or for any consequential or indirect loss or damage of any kind however arising.


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Emissions trading documentation
ISDA: EU AnatomyEU Wikitext EU Nutshell (premium) • UK AnatomyUK Wikitext (to be merged into EU Anatomy)
IETA: IETA Master AgreementIETA WikitextIETA Nutshell (premium)
EFET: EFET Allowances AppendixEFET Allowances WikitextEFET Nutshell (premium)



What ought to be an after thought winds up being a complete mangle. Really, you shouldn’t be suddenly mentioning something as fundamental as consequential losses in an specific product annex to a definitions booklet — and if you do have to mention it, ideally you wouldn’t make such an unholy mess of it — but this is the world we live in.



So firstly this sets out to exclude consequential losses then opens the door to all the places it is most conceivable someone might contrive to claim them: as a close out, during a Failure to Deliver pre-close-out mechanism, and as a result of a misrepresentation about title to the Allowances you have delivered.

All of these are good places not to exclude consequential loss, so we tend to agree they should be excluded, but it feels to us like the consequential loss provision should therefore just be omitted.

Let us rehearse: ordinarily, consequential losses and loses of profit are too speculative and too indeterminate to pass the remoteness test, and so would not be available as a remedy for breach of contract anyway.

But where they are determinate — for example, when one misses out on deposit interest one could expect to earn on a failed or delayed payment — these will, and more to the point should, be recoverable.

Meaning this clause does not really do anything.

Oh, and “loss” and “damages” are different things, for Pete’s sake. They are not synonyms.

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  • The JC’s famous Nutshell summary of this clause
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See also