Remedies for Failure to Transfer or Accept after Cessation of Suspension Event - EFET Allowance Provision

2007 EFET General Agreement Version 2.1(a) (Power) A Jolly Contrarian owner’s manual™ Go premium Crosscheck: ISDA wikitext EFET wikitext IETA wikitext (a) - (b) - (c) - (d) - (d)(i) - (d)(i)(1) - (d)(i)(2) - (d)(i)(3) - (d)(i)(4) - (d)(i)(5) - (d)(ii) - (d)(ii)(1) - (d)(ii)(2) - (d)(ii)(3) - (d)(iii) - (d)(iv) - (d)(v) - (d)(vi) - (d)(vii) - (d)(viii) - (d)(ix) - (d)(x) - (d)(xi) - (d)(xii) - (e) 1 - 2 - 3 - 4 - 4.1 -4.2 - 4.3 - 4.4 - 5 - 6 - 7 - 8 - 9 - 10 - 11 - 12 - 13 - 14 - 15 - 16 - 17 - 18 - 19 - 20 - 21 - 22 - Defined Terms - Elections 1 - 2 - 3 - 4 - 5 - 6 - 7 - 8 - 9 - 10 - 11 - 12 - 13 - 14 - 15 - 16 - 17 - 18 - Schedule 1 - Schedule 2 - Schedule 3A - Schedule 3B - Index: Click ᐅ to expand: ISDA Emissions TOC EFET Emissions TOC IETA TOC Failure to Transfer or Accept 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. Original text: edit § 8.5 Remedies for Failure to Transfer or Accept after Cessation of Suspension Event (a) Where the Buyer fails to accept Transfer from the Seller of the Contract Quantity in whole or in part on a Delayed Delivery Date and such failure is not excused by an event of Force Majeure, another Suspension Event or the Seller’s non-performance, the Seller’s Cover Costs shall consist of the sum of the following elements: (i) the Seller’s Cover Costs as provided in § 8.2(b) of this Allowances Appendix; (ii) an amount (the “Default Cost of Carry Amount”) calculated at the Default Cost of Carry Rate for the Default Cost of Carry Calculation Period multiplied by the product of the Contract Price and the number of Allowances not Transferred or accepted for the relevant Allowance Transaction, divided by three hundred and sixty (360). Such Default Cost of Carry Amount shall be identified in the relevant invoice; and (iii) interest on the Default Cost of Carry Amount accrued from (and including) the Delivery Business Day following the Default Cost of Carry Calculation Period, to (but excluding) the receipt by the Seller of damages for the Buyer’s failure to accept Transfer, calculated at the Interest Rate specified in § 13.5 (Default Interest) of the Agreement. (b) Where Seller fails to Transfer to the Buyer the Contract Quantity in whole or in part on a Delayed Delivery Date and such failure is not excused by an event of Force Majeure, another Suspension Event or the Buyer’s non-performance, Buyer’s Cover Costs shall consist of the aggregate of the following elements: (i) Buyer’s Cover Costs, as provided in either: (a) § 8.1(b)(i) of this Allowances Appendix; or, (b) where an EEP or EEP Equivalent has been made applicable to an Allowance Transaction and has arisen, § 8.1(b)(ii) of this Allowance Appendix; in either case, reduced by (ii) the Default Cost of Carry Amount; provided, always, that in the event that the number resulting from application of the applicable formula set forth immediately above in either § 8.5(a) or § 8.5(b) results in a negative number, such number shall be deemed to be zero and no damages will be owed. Comparison See our natty emissions comparison table between the IETA, EFET and ISDA versions of emissions trading docs Resources and Navigation Index: Click ᐅ to expand: EFET Allowance Annex - Premium Emissions

Overview

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Just what happens if, without excuse, a Delivering Party fails to deliver, or a Receiving Party fails to accept delivery of, Allowances is a key part of any self-respecting emission allowances trading document. Though each Carbon Squad approaches it in its own charmingly idiosyncratic way, the good ninjas of ISDA, EFET and IETA broadly get to the same place. Broadly.

The provisions are these:
ISDA: Sections (d)(ii) (Failure to Deliver)
EFET: Clause 8.5 (Remedies for Failure to Transfer or Accept after Cessation of Suspension Event)
IETA: Clause 12 (Transfer or Acceptance Failure)

Summary

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When your Transaction gets to its end game, there are — absent unforeseen external events beyond the parties’ reasonable control, like Force Majeure, Suspension Events and Illegality — if the Delivering Party, or for that matter, the Receiving Party, just hasn’t come up with the required “goods” by the required time, how do things play out?

Each of the Master Agreements does things its own way, and as you might expect, the respective literature plays like a Myers Briggs assessment of the organisation’s personality.

How the Trading Agreements deal with Failure to Transfer or Accept

Component	ISDA	EFET	IETA
Cure Period to remedy	Yes: Final Delivery Date (2 days hence)	yes, through 2 day grace period	Yes: to Final Delivery Date (2 days hence)
EEP/No EEP alternatives	Yes	Yes	Yes
Replacement Costs	Delivering Party’s Replacement Cost/Receiving Party’s Replacement Cost	Buyer’s Cover Costs/Seller’s Cover Costs	Delivering Party’s Replacement Cost/Receiving Party’s Replacement Costs
No EPP Replacement Cost calculation	Example	Min [0, Price Increase on Failed Allowances + Transaction Costs + Accrued Interest]	Example
EPP Replacement Cost calculation	Example	Example	Example
Interest accrual basis	Example	Confusing. There are different accrual rates for the grace period and the default period, and interest seems to accrue during the grace period on the whole value of the undelivered Allowances, not just any price differential against the Traded Price.	Example
Example	Example	Example	Example
Example	Example	Example	Example
Example	Example	Example	Example
Example	Example	Example	Example

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• JC’s “nutshell” summary of the clause
• Background reading and long-form essays

See also

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