- See for example, “Oil Groups sued over price fall,” Financial Times, February 21, 1986; “Tangled Daisy Chains could turn oil traders’ binge into a wake,” Financial Times, February 17, 1986; “Bid to rescue Brent Market,” Financial Times, February 18, 1986; “Brent I. A Market Unreformed,” Petroleum Argus, Vol. XVI, No. 18, April 7,1986, p. 1.
- See, for example, D. Millar, The Future Development of the Fifteen-Day Brent, a Multiclient study, presented to the Petroleum Institute, April 22,1986; “Brent II. A Survey of solutions,” Petroleum Argus, April 7,1986.
- See “North Sea Thrives Again, With a Changing Face,” Petroleum Intelligence Weekly, September 15,1986.
- Although some of the players have changed. See “Who is most Active in the Brent Market?”, Petroleum Intelligence Weekly, September 15,1986, p. 7.
- For basic background information see Oxford Institute for Energy Studies, The Market for North Sea Crude Oil, 1986; “Brent I: Origins of the Market,” Petroleum Argus, Vol. 15, No. 45, November 15, 1985, p. 3; “Brent II: Transparency and Forward Positions,” Petroleum Argus, Vol. 15, No. 46, November 22. 1985, p. 3; “Brent III: Daisy Chains,” Petroleum Argus, Vol. 15, No. 47, November 29, 1986. p. 3; “Brent IV: Two sorts of Futures,” Petroleum Argus Vol. 15, No. 48; December 6, 1985, p. 3; “Brent V: End of BNOC,” Petroleum Argus, Vol. 15, No. 49, December 13, 1985.
- See Oxford Study, supra, Chapter 15 at 238 et seq.
- See Oxford Study, supra, Chapter 12 at 170–172.
- Thus participants can take long or short positions in the market, buying and selling cargoes in the forward months. The Market with its high level of paper trading permits hedging and speculation on a scale usual for futures (rather than forward) markets.
- Background articles on the spot market include: F. Niering, “A Special Petroleum Economist Report: The Spot Market,” Petroleum Economist, January 1984; E. E. Abunara. “Structure and functions of the spot market,” OPEC Bulletin, October 1985; and J. Roeber in a series of articles in the Petroleum Economist, (1) “Dynamics of the Rotterdam Market,” February 1979; (2) “The Wilder Shores of the Oil Trade,” March 1979; (3) “Paradox and Platitude,” April 1979; and (4) “What determines crude oil prices?”, May 1982.
- Launched at the end of March 1983, the NYMEX WTI contract's success led to an attempt on the London exchange, the I.P.E., to launch a 1000 barrel (in tank ARA) crude oil futures contact in November 1983. It lasted less than six months—its failure apparently due to its restrictive delivery terms which did not match trading realities. It was succeeded by a 1000 barrel Brent crude futures cash settlement contract.
- See Oxford Study, supra, Chapter 8 at 131–133.
- For a detailed analysis of the U.K. fiscal regime see T. C. Daintith and G. D. M. Willoughby, United Kingdom Oil and Gas Law (1984), Chapter 11.
- One of the key pieces of oil taxation legislation, the Oil Taxation Act 1975, c. 22, has undergone very little fundamental alteration by subsequent Finance Acts or other petroleum legislation.
- As defined in para. 1(1), Sched. 3, Oil Taxation Act 1975.
- As defined in para. 2, Sched. 3, Oil Taxation Act 1975.
- See Oil Taxation Act 1975, s.2(5) and para. 3, Sched. 3.
- The formal analysis of tax spinning gains is given in Annex 2, Oxford Study, supra, at 271.
- See “UK Tax Change on North Sea Sales Sparking Resistance.” Petroleum Intelligence Weekly, January 5, 1987, p. 1.
- Thus tax spinning has two primary functions for the “spinner.” It completely eliminates tax uncertainty under the present tax regime and further it holds the potential for tax liability reduction. We shall return to this duality of purpose when considering recent government tax proposals.
- As described by the Oxford Study, supra. Chapter 11. The Petroleum Argus of January 31, 1981 reported the significant increase in short trading by traders due to the willingness of integrated producers to sell into the spot market for tax purposes—an opportunity arising from higher than spot BNOC prices. On April 20, 1981 the Petroleum Intelligence Weekly reported the emergence of “tax spinning” for the first time.
- An illuminating description of daisy chaining occurs in the Oxford Study, supra, at 178–181.
- “Contango” or forwardation is defined as a situation where the distant month price of futures is higher than the cash or near-month price. The opposite is “backwardation,” which occurs when the cash or near-month price is higher than the distant-month price.
- From the fall of 1982 the paper market expanded and by 1983 it was not only growing in size but was experiencing its first operational problems, (see the Petroleum Argus, September 10, September 15, and November 26, 1982; Petroleum Argus, January 7 and January 19, 1983; the Petroleum Intelligence Weekly December 13, 1982, and January 17, 1983.). According to the Oxford Study data, based on information from the Petroleum Argus, the market grew steadily in 1984 and very dramatically in 1985. (See Oxford Study, supra, at 191 et seq.)
- See the Oxford Study, supra, at 191–213, and for the 1986 update see R. Bacon, The Brent Market. An Analysis of Recent Developments, WPM8, Oxford Institute for Energy Studies, 1986.
- The area of operational tolerances is not one without its problem areas. See for example G. H. Daniel: “Carriage of Oil by Sea, Crude Oil Agreements.” (1982) 5 O.G.L.T.R., 163–165.
- The “15 Day Rule” and its evolution, due to operational necessities, was described in the first of the Petroleum Argus's studies of Brent, supra, footnote 5. The duty of the buyer to nominate the vessel is a condition of the contract and failure to do so timeously is considered to be a breach of contract and the seller may refuse delivery, (as decided by the House of Lords in Bunge Corp. v. Tradax Export S.A. (1981) 2 Lloyd's Rep. 1.) For further discussion see C. Schmitthoff, The Export Trade (6th ed.) at 20–22, and D. Sassoon, C.I.F. and F.O.B. Contracts (3rd ed.) at 334–338.
- The price is “fixed and flat” in forward contracting.
- See Sassoon, supra, Chapter 11. at 440 et seq. for a detailed general examination of the legal aspects of Documentary Letters of Credit. See also F. L. de May, “Bills of Lading Problems in the Oil Trade: Documentary Credit Aspects,” (1984) 3 J.E.R.L. 197; R. M. Wiseman, “Transaction Chains in North Sea Oil Cargoes,” (1984) 2 J.E.R.L. 134.
- The issues raised by this form of trading have been described in: S. B. Pfeiffer: “Internationl Crude Oil Trading—Certain Legal Aspects,” Energy Law Seminar, IBA, Houston, 1984 p. 861 at pages 854–886; J. D. Becker: “International Telex Contracts,” (1983) 17 J.W.T.L. 106.
- Destination Provisions can be important. See Bulk (Zug) A. G. v. Sun International Limited and Sun Oil Trading, (1983) 1 Lloyd's Rep. 655; (1984) 1 W.L.R. 147.
- Thus the English law of Sales applies. The most important statutes with which to ensure compliance are the Sales of Goods Act 1979. c. 54 and the Unfair Contract Terms Act 1977, c. 50 (as amended by the Supply of Goods and Services Act 1982, c. 29).
- Generally speaking it was the BP General Terms and Conditions that were in common use prior to the February crisis.
- Accord and satisfaction was defined in British Russian Gazette and Trade Outlook Ltd. v. Associated Newspapers Ltd. (1933) 2 K.B. 616 at 643.
- Oxford Study, supra, at 178–183 and the Appendix to Chapter 12 which contains a typical bookout telex.
- In fact there are usually several possible ways to construct a chain, ibid.
- According to the Petroleum Argus (Brent II, supra, footnote 2) the Brent Market could be described as the “most transparent in the world. To the diligent enquirer it discloses not only the ruling prices but also the details of transactions….” There is no legal requirement of confidentiality in a normal Brent contract. Thus should a trader not wish his position to be disclosed an express confidentiality clause would have to be inserted in the contract. For a description of book-out procedure see Petroleum Intelligence Weekly, November 12, 1984; “Brent III,” Petroleum Argus, supra, footnote 2; Oxford Study, supra, at 174–188.
- The existence of earlier small daisy chain collapses was indicated in the Financial Times, “Tangled daisy chains could turn oil traders binge into a wake,” February 17, 1986. See also the Oxford Study, supra. Chapter 13 at 212–213 and the Bacon working paper, supra. Chapter 5 at 50–52, which describe the structural weaknesses of the Market.
- Leonard Silk, “No Immediate Relief Seen For Falling Crude Prices,” International Herald Tribune, February 1–2, 1986. Due to OPEC action the price of spot crude fell on average by four dollars between December 1985 and January 1986 and by a further six dollars between January and February. See also “Assessing the Price Plunge and What lies ahead,” Petroleum Intelligence Weekly, March 3, 1986.
- See footnote 1, supra. Also, “North Sea oil forward spot market threatened,” Financial Times, February 13, 1986.
- Analysed in Section Three below.
- Bacon gives three ways of measuring “size” or market activity, supra, at 9–21; Oxford Study, supra, at 192–195.
- “North Sea Market Thrives Again, With a Changing Face,” Petroleum Intelligence Weekly Sept. 15, 1986 at 3; “Who is Most Active in the Brent Market?” Petroleum Intelligence Weekly, September 15, 1986 at 3; “Who is Most Active in the Brent Market?”, Petroleum Intelligence Weekly September 15, 1986 at 7. This trend appears to be confirmed by recent reports: “Oil on the Street,” Petroleum Argus, December 1, 1986 at 5; “Wall Street Revisited,” Petroleum Argus, December 8, 1986, at 4; “Oil companies lose Brent market control to Wall St.,” Financial Times, December 2, 1986.
- See, supra, footnote 24, Chapter 3.
- A. Seidel and P. Ginsberg, Commodities Trading, 1983, at 23–25; and C. Veljanovski, “An Institutional Analysis of Futures Contracting” in Futures Markets: Their Establishment and Performance, (Ed.) B. A. Goss, 1986.
- P. Ottino, “Oil Futures: The International Petroleum Exchange of London,” (1985) 1 J.E.R.L. 1.
- Seidel and Ginsberg, supra, at 15.
- Usually Brent was traded on BP General Terms and Conditions. An example of a typical Brent contract was given in the Petroleum Argus, “Brent II,” supra, footnote 2.
- International Petroleum Exchange of London: “Brent Crude Oil, Trading of Brent Crude. Notes for Discussion.” A paper distributed on February 26, 1986.
- In fact the figures given in Bacon's working paper, supra, show dramatically the level of paper trading occurring in. 1985, especially Tables 2 and 3. See also the Oxford Study, supra, Table 13.6.
- For as brief description of the market composition see Oxford Study, supra, at 202–205. The Brent Market was described in the Petroleum Argus (“Brent II,” supra, footnote 2) as: “… a club which anyone may join who has the resources to buy an $18 million cargo and a personal acquaintanceship with one or two of the members. The club has no premises and no written book rule. It has no secretariat and no one responsible for promoting it or even for telling… the prices it is trading at.”
- However as shall be discussed in section three below, there are several suggestions for the establishment of some form of clearing system.
- A brief account is given in “Brent III,” Petroleum Argus, supra, footnote 2. For a detailed analysis see the Oxford Study, supra, at 178–181.
- For a useful article on the “squeeze” see E. T. McDermott: “Defining Manipulation in Commodity Futures Trading: The Futures ‘Squeeze’”, 74 Nw. U.L.Rev. No. 2 202 (1979).
- Millar, supra, footnote 2.
- In fact in February three trading houses in the Brent Market, PVM Oil Associates, Neste OY and Petrosun proposed a “Brent Crude Oil Trading Code of Practice” (telexed on February 20 and amended version telexed on March 26, 1986). From the suggested code of practice one can identify six areas of concern: the declaration procedures, date manipulation, the desirability of book-outs, problems with respect to “operational performance,” non-performance, and questions of financial security/guarantee. These mirror the areas of difficulties identified by Millar.
- This type of squeeze would be termed a “futures long-squeeze” and an analysis of such a type of squeeze and its regulation is given in an article by Gordon T. Gemmill: “Regulating Futures Markets: The UK and the USA.” in Futures Markets: Modelling, Managing and Monitoring Futures Trading, (Ed.) Manfred Streit, 1983, p. 295 at 309–315. It should be recalled that the Brent forward market is characterised by “a pricing mechanism which pushes the price of dated cargoes up or down according to the relationship between net positions in paper and available cargoes.” (Oxford Study, supra, at 178).
- This practice was not criticised for the perfectly legitimate trading strategy of “taking a position on a set of dates with a view that such dates may in time gain a premium over a 15-day cargo. What was deemed objectionable was pure delaying of passing on laydays while searching the market for a premium”, (amended PVM Proposal, supra, clarification of suggestion 1(B)).
- It seems that it was fairly common that certain companies would only agree to book-out where they had made a profit and could realize cash up front, leaving the loss-making deals to be settled wet market, (Oxford Study, supra, at 176).
- A practice very similar to no. 2, at a different stage in the chain. See Oxford Study, supra, at 177.
- A practice which was of questionable legality.
- Another practice of dubious legality, rather than merely commercially undesirable. It arose because of the difficulties in passing on the date range quickly enough and it was such falsification which led to the Gatoil telex, discussed below.
- The alternatives being: (1) covering with a dated cargo probably bought by paying a substantial premium, or (2) persuading the buyers to accept a substitute crude at a favourable price, or to renounce their rights for a consideration (i.e. induced cancellation).
- Millar, supra, at 3.
- Bacon, supra, at 50, which develops the point made in the Oxford Study, supra, at 213, that: “Low forwardness and a high paper multiplier can cause problems for the market.”
- Oxford Study, supra, at 247.
- As reported in the Financial Times, supra, footnote 37.
- One of Austria's large industrial companies, Voest-Alpine was a big Brent Market player and in December of 1985 lost an estimated $150m in its oil trading activities.
- See the articles cited in footnote 1 for general details. For alleged reproductions of the Gatoil Telex and Shell's telex to resolve a disputed chain involving Gatoil see, “An Inside Look At The Brent Market Crisis,” Petroleum Intelligence Weekly, February 24, 1986.
- It was reported that Gatoil's difficulties resulted in a suit against Nichimen. (Note the position of Nichimen in the Shell chain, ibid.)
- See footnote 68, supra. Note that the problem arose allegedly from an alteration in the date range, caused by inability to pass on the nomination in time.
- There were at the end of February rumours of other defaults in the chains for that month. Another case to come to light was for 15-day Brent with a date range February 19–21, 1986, as reported in Avant Petroleum Inc. v. Gatoil Overseas Inc., (1986) Lloyd's Law Reports (C.A.), Vol. 2, 236.
- “Brent crisis could lead to UK oil tax changes,” Lloyd's List, February 24, 1986; “Oil Majors face suit over North Sea deals,” Lloyd's List, February 22, 1986; “Oil groups sued over price fall,” Financial Times, February 21, 1986. For details see the amended complaint submitted by Transnor (Bermuda) Limited to the United States District Court, Southern District of N.Y., dated July 28, 1986, (particularly the declaration of Edward Roy Moor), 86 Civ. 1493 (WCC). See also the Plaintiffs Memorandum of Law in Answer to the Motion to Dismiss, dated November 7, 1986.
- Of which approximately $268m are treble damages.
- Based on three claims: (1) Antitrust: It is alleged that the defendants conspired to tax spin, thus allowing BP and its affiliates access to a supply of cheap North Sea crude and enabling it to underbid Transnor to supply crude to the US Defence Fuel Centre; (2) Antitrust: It is alleged that the defendants in combination and conspiracy (Violating 15 USC s.1) tax spun to such an extent as to depress the price of WTI and Brent and that this manipulation of the market resulted in losses on Brent cargoes and WTI market for Transnor; and (3) Commodity Exchange Act Violation. It is alleged that the defendants by their conspiracy to depress the prices of WTI and Brent crude oil violated 7 USC sections 9, 13(b) and 6(c).
- Transnor appears to face three hurdles: firstly, to achieve standing; secondly to establish jurisdiction and finally to prove conspiracy. Should it be successful in the first two then access to the records of the defendants will be granted and thus become public and available to the OTO.
- See the statement made by the Financial Secretary to the Treasury to Parliament, Hansard, Written Answers, November 18, 1986, Col. 178–179; the Inland Revenue, Press Release November 18, 1986. At the time of writing it would appear likely that as a result of the consultations with industry and other interested parties the final form of the amended taxation rules may take a softer modified form than that presented by the OTO in November. These taxation issues will be discussed in Section Three below in greater detail.
- However one may question why resort was not made to EEC competition law. Article 86 would appear ex facie to be a possibility and is a directly effective provision of the Treaty, while Article 85 would also appear to offer some scope, recalling that Lord Denning M.R. stated in Application des Gaz v. Falks Veritas (1974) Ch. 381 at 396 that both Articles 85 and 86 create new torts—a view supported by Goulding J. in Chelmkarm Motors v. Esso Petroleum (1979) 1 C.M.L.R. 73.
- Millar, supra. Many of the operational proposals were also present in the PVM, Proposed Code of Practice, supra.
- In fact neither of the new General Terms and Conditions and the new telex forms have found acceptance in the industry which by and large chooses to continue to use the old General Terms and Conditions.
- Suggestions 1(A)-1(E) of the PVM Code, supra.
- See the Shell Telex in the Petroleum Intelligence Weekly, March 24, 1986.
- See the clarification of suggestion 1(A) of the PVM Code, amended version, March 26, 1986, supra\ Millar, supra, section 3.2.
- For example a need to ascertain the cargo's acceptability within a refiner's own system, or the genuine breakdown of telex machines.
- Shell's Standard Form Brent “15-day Telex” (Edition June 1986) clause 6(a) states that in nominating the date range and cargo number “time is of the essence” and clause 6(b) states that the contracting parties undertake to pass on such notices “as expeditiously as possible.” B.P.'s Form of Telex Contract for sales of 15-day Brent (Edition March 1986) clause 5 B(I) and clause 5B(II) contain almost identical requirements.
- Bunge Corporation New York v. Tradex Export S.A., (1981) W.L.R. 711 (H.L.) in particular Lord Wilberforce (at 716, E-F), asserted that “… broadly speaking time will be considered of the essence in ‘mercantile’ contracts…”
- Oxford Study, supra, at 174–176 and 180; Petroleum Argus, “Brent II,” supra, footnote 2; the PVM proposal, supra, the clarification of suggestion 1(C).
- Millar, supra, section 3.4.
- United Kingdom. Under the Restrictive Practices Act 1976 such an agreement may be subject to registration (s.1(1) and s.6), unless the Secretary considers s.21(2) to apply: European Economic Community. Possibly Articles 85 and 86 of the EEC Treaty may apply. With respect to Art. 85 it is arguable whether the contract itself would satisfy the requirement that it affects trade to an “appreciable extent” (Volk v. Veraeke (1969) E.C.R. 295 and Beguelin, Case 22/71, (1971) E.C.R. 949). Recalling Brasserie de Haecht case (Case 23/67, (1967) E.C.R. 407) a “network” of identical agreements can be caught, even though individually each would have negligible effect. Should all sales of Brent crude include such a clause then establishing a “concerted practice” is also a possibility. Article 86 discussed below in text; United States: Section 1 Sherman Act 1890 c. 617, 15 U.S.C. A § § 1–7. For an introduction to the issues see L. Sullivan: Handbook of the Law of Antitrust, at 277–279 and 315–329.
- The existence of a dominant position is determined by consideration of the “relevant market” and “the strength of the undertaking in that market.” The Brent Market, following the reasoning of United Brands (1978) E.C.R. 207), could be considered a separate market from the general “crude oil” market and satisfies the three criteria of relevance (D. Wyatt and A. Dashwood: The Substantive Law of the EEC (1980), at 291–299). There is a strong possibility that certain Brent producers could be caught due to the combination of the factors which give them crucial control and strength in the market despite the fact that in 1985 only three Brent producers were in the top ten Brent Market participants and none were in the top five. (See Commission's definition of “dominant position” given in the Continental Can Company case (1972) C.M.L.R. D 11 at D 35.) However, there is also the important possibility that the Court would recognise that the Brent producers, although legally economically independent of each other, by parallel conduct are “jointly dominant.” It certainly has been suggested by the Commission that this is possible: See Oil Companies Report: Competition Report 1975, p. 18. Cf. Hoffmann La Roche & Co. AG v. EC Commission, [1979] 3 C.M.L.R. 211
- There is no definition of what constitutes abuse. However the case-law after the Continental Can Company case, supra would suggest that any behaviour of a dominant company may be abusive if it is liable to interfere with the well functioning of the Common Market.
- See e.g. BRT v. SABAM, (1974) 2 C.M.L.R. 238, or Eurofima, (1973) C.M.L.R. D 217. Note also the possibility of being caught under Art. 86(d) EEC—see Dashwood, supra, at 315–316.
- For commentary and annotation, see J. P. Cunningham and J. Tinnion: The Competition Act 1980, 1980.
- By virtue of s.44 and Sched. 4 para. 1(1) of the Restrictive Trade Practices Act 1976 the 1969 Order has effect as if it had been made under s.7(l) of that Act. The vulnerability is that the agreement must be registered, and, unless exempted (e.g. under s.21(2)), it will be examined by the Restrictive Practices Court, under Part 1 of the RTP Act 1976. This a formal procedural vulnerability and in practice there is the strong possibility of the operation of s.21(2): that the Secretary of State, on recommendation of the Director of Fair Trading, may consider the agreement's restrictions are “… not of such significance” as to warrant investigation by the Court. However the requirement has relevance as failure to register can, under s.35(2), give rise to damages for breach of a “duty owed to any person who may be affected by a contravention” of the requirement.
- Millar, supra, section 3.5; See also suggestion 3 and its revision in the PVM proposal, supra.
- See “New Contract For Brent,” Petroleum Argus, April 21, 1986, p. 5; “Brent II,” Petroleum Argus, April 7, 1986, p. 2.
- See Bacon, supra, at 38–39.
- Ibid, the Oxford Study, supra, at 177.
- This particular objection is rejected by Millar, supra, at 14.
- This is a serious objection and one which would be extremely difficult to overcome.
- D. Chaikin and B. J. Moher: “Commodity futures contracts and the Gaming Act,” Lloyd's Maritime and Commercial Law Quarterly, August 1986, Part Three.
- The classic definition of a wagering contract was given by Hawkins, J. in Carlill v. Carbolic Smoke Ball Co. (1892) 2 Q.B. 484 at 490. See also the earlier definition by Cotton L.J. of a contract by way of gaming or wagering, in Thacker v. Hardy (1878) 4 Q.B. 685 at 693–695. A contract for differences is basically a contract for the payment of the difference in the price of shares or commodities as they fluctuate over time.
- Including: Strachan v. Universal Stock Exchange (1896) A.C. 166; Barnett v. Sanker (1925) 41 T.L.R. 660; Woodward & Another v. Wolf (1936) All E.R. 529; Grizewood v. Blane (1851) 11 C.B. 526; Richards v. Stark (1911) K.B. 296; Re Gieve (1899) 1 Q.B. 794; Philp v. Bennett and Co. (1901) T.L.R. 129; Weddle, Beck and Co. v. Hackett (1929) 1 K.B. 321.
- For a general summary see Halsbury's Laws of England, Vol. 4, paras. 1–22.
- Universal Stock Exchange, footnote 102, supra, Ironmonger & Co. v. Dyne (1928) 44 T.L.R. 497.
- See e.g. Lindley J. in Thacker, supra, footnote 101, at 689; Brett L. J. in Weddle, Beck & Co., supra, footnote 102, at 693–694.
- There must in fact be a mutuality of intention not to deliver the goods before it could be caught as a gaming contract or wager. On this point see Weddle, Beck and Co., supra, per Swift J. at 330; Grizewood v. Blane, supra, per Creswell J. at 549.
- See Chaikin, supra, for a detailed analysis of the two approaches. The clearest articulation of the subjective intention approach is to be found in the Universal Stock Exchange, supra.
- See Cooper v. Stubbs (1925) 2 K.B. 753, (C.A.) at 763 as the leading case.
- Thacker, supra, and recently Pagan & Fratelli v. N. G. J. Schouten N.V. (The Philipinas I), (1973) 1 Lloyd's Report 349.
- Followed in: Barnett, supra; Philp, supra; Forget v. Ostigny (1895) A.C. 318; Universal Stock Exchange v. Stevens (1892) 66 L.T. 612.
- Footnote 9, supra, at 763.
- Barnett, footnote 3, supra, at p. 661.
- See footnote 3, supra. The case on appeal from the Court of Appeal which upheld the direction to the jury by Cave J. quoted on pages 167–168.
- Ibid, at page 173.
- Ibid, at page 171.
- It followed Barnett (London Metal Exchange), supra, and Weddle, Beck & Co. (London Stock Exchange), supra, and in turn was followed by Garnac Grain Co. Inc. v. H.M.F. Faure & Fairclough Ltd. (1964) 1 Q.B. 650.
- Barnett, supra, at 533–534.
- (1976) 1 Q.B. 683.
- Ibid, at 710.
- The accord is the agreement by which the obligation is discharged. The satisfaction is the consideration which makes the agreement operative. See British Russian Gazette and Trade Outlook Ltd. v. Associated Newspapers Ltd. (1933) 2 K.B. 616 at 643.
- See footnote 88, supra, “United Kingdom.”
- See footnote 88, supra, “EEC.”
- Presumably a “reasonable” request to bookout would not entail locking into loss. The overall utility to these expressions of intention is clearly questionable.
- Veljanovski, supra, at 25.
- Ibid. Also see: D. Courtney and E. Bettelheim: An Investor's Guide to the Commodity Futures Markets, 1986, Chapter 1, pages 7–11.
- Veljanovski, supra, at 25–27.
- For similarities and the evolution of futures trading see: Veljanovski, supra, at 24–26; Fesharaki, F. and Razavi, H.: Spot Oil, Netbacks and Petroleum Futures, Special Report No. 1063. Economist Intelligence Unit, 1986. Chapter 7, page 6.
- Veljanovski, supra, at 26–27.
- For several reasons which include that contracting individuals must try to determine the reliability risk of the opposite party and that enforcement costs through the normal legal channels are high.
- Generally speaking less than 2 per cent, of oil futures contracts are settled by delivery. Some argue (see Veljanovski, supra, at 31–33) that futures contracts can lose some of their attraction as hedging mechanisms.
- Veljanovski, supra, at 29–30.
- Financial Services Act 1986, Chapter 60, 1986.
- Gower Report: Review of Investor Protection, Parts 1 and 2, 1984, Cmnd. 9125.
- White Paper: Financial Services in the United Kingdom, 1985, Cmnd. 9432.
- For example the 1982 Consultative Document.
- Exempted Chapter IV persons include the Bank of England (s.35), recognised investment exchanges and clearing houses (s.36 and s.38), overseas investment exchanges and clearing houses (s.40); Lloyd's, and some other miscellaneous categories (s.42–45). Authorised Chapter III persons include members of SROs (s.7); persons authorised by recognised professional bodies (s. 15); insurance companies (s.22); persons authorised by the Secretary of State (s.25) and those authorised in other Member States of the EEC (s.31).
- Gower Report, supra, Part 1, paragraph 4.03.
- Thus catching forward contracts, unless otherwise excluded.
- See, e.g., Hansard, Standing Committee E, January 30, 1986, Cols. 43–44, 60–66; Hansard (H.L.), Vol. 479, No. 134, July 21, 1986, Cols. 37 and 41; Hansard (H.L.), Vol. 479, No. 135 July 22, 1986, Cols. 101–102.
- For some of the difficulties see the debate in the Standing Committee E. Hansard, January 30,1986, Cols. 62–65.
- Ibid. Also Hansard (H.L.), Vol. 479, No. 134, July 21, 1986, Cols. 44–46.
- The Consumer Credit Act 1974 c. 39 introduced the idea of a Schedule giving illustrative examples, in this case of “new technology.” It was clear from the structure and provisions of that Act (s. 188) that the illustrations were to be of substantial persuasive authority in construing “new technology.” The VAT Act 1983 c. 55 comes closer to the Financial Services Act situation. Schedules 5 & 6 of the 1983 Act contain notes in a form identical to the 1986 Act. However, s.48(6) explicitly states that the VAT Act 1983 shall be interpreted in accordance with the notes.
- See the statements of Mr. Cash in Standing Committee E, Hansard, January 30, 1986, Col. 65.
- P. St. J. Langan: Maxwell on The Interpretation of Statutes, (1969 12th Ed.) at 9–13.
- Recall the importance of being voted on and passed by Parliament rather than inserted after the Bill becomes law; J. Avory in R. v. Hare (1934) 1 K.B. 354 at 355.
- Thus ensuring that prompt delivery contracts are to be considered as for commercial purposes.
- Originally at the Bill stage (Bill 51, printed December IB, 1985, note 3(c), para. 8, Sched. 1) the absence of specifically contracted terms and instead standardisation was an indication that the contract was made for investment purposes.
- The level of Wall St. interest in the Brent Market has increased 24-fold in one year, (Petroleum Argus, December 1, 1986 p. 5). See also the Transnor arguments, cf. footnotes 72 and 74, supra, regarding the status of the Brent forward contract and U.S.A. Futures Market regulation.
- For example para. 19, Sched. 1 which at first glance appears to be highly relevant to those who “sell goods or supply services.” While potentially useful to producers, it is less so for traders, merchants, brokers and investment houses.
Journal of Energy & Natural Resources Law
Volume 5, 1987 - Issue 2