Commodity Trading & Finance

Our market leading, international commodity trading and finance practice consists of experienced specialist lawyers from a multi-disciplined base who advise on a broad range of issues. We advise investment banks, brokers, dealers, trading houses, hedge funds, producers, suppliers and users, as well as exchanges and trade associations. This includes advice relating to trading commodity and energy derivatives, both on exchange and OTC, and the structuring and regulation of international trading businesses; the regulation of market conduct and market abuse; the structuring of financial instruments relating to commodities; physical marketing, trading and supply and energy regulations; trade and commodity finance (including Islamic finance); and dispute resolution, regulatory investigations and enforcement.

Our Practice

Our market leading, international commodity trading and finance practice consists of experienced specialist lawyers from a multi-disciplined base who advise on a broad range of issues. We advise investment banks, brokers, dealers, trading houses, hedge funds, producers, suppliers and users, as well as exchanges and trade associations. This includes advice relating to trading commodity and energy derivatives, both on exchange and OTC, and the structuring and regulation of international trading businesses; the regulation of market conduct and market abuse; the structuring of financial instruments relating to commodities; physical marketing, trading and supply and energy regulations; trade and commodity finance (including Islamic finance); and dispute resolution, regulatory investigations and enforcement.

Through our network of offices in Europe, the Middle East and Asia and the strong relationships that we have formed with law firms within Africa, we are able to advise in jurisdictions throughout the world, drawing on the skills of our commodities, regulatory, tax, insurance, environmental, dispute resolution and restructuring and insolvency specialists. Our team includes practitioners with in house experience at regulators and within the industry.

The focus of our practice is on the following key areas:

  • Financial Markets Regulation

Our financial markets regulatory practice advises on all aspects of the regulation of commodity and energy derivatives markets and trading. This extends to the creation and licensing of broking/dealing/trading business, conduct of business, systems and controls environment and the structuring and operation of international businesses, as well as regulatory perimeter issues.

We have also undertaken broader policies and procedures reviews for a number of entities, including such areas as anti-money laundering and anti-corruption legislation.

  • Market Conduct - Commodities

We regularly advise clients on matters relating to the application of the market conduct and the market abuse regime as well as relevant exchange and regulatory rules, and other considerations impacting on market behaviour.

  • Trading

Our derivatives practice undertakes complex work relating to the structuring and documentation of transactions, including the negotiation of bespoke structured contracts as well as master agreements and related confirmations used for trading.

We enjoy excellent market coverage in the derivatives sector resulting from our unique position amongst the market’s premier law firms as both adviser to the investment banking community as well as acting for a wide range of buy-side and end-user participants.

  • Regulatory investigations, enforcement and disciplinary proceedings

Our core areas of practice include investigations, both on the conduct of internal investigations and on regulatory investigations where we advise and assist clients on response strategies; litigation and all other forms of dispute resolution.
Our team includes lawyers who have previously been members of, or who have been on secondment at, the FCA’s Enforcement Division (or predecessors).

  • Litigation and Dispute Resolution

Our international financial markets litigation practice handles a range of issues including arbitration, mediation and negotiation and contentious regulatory advice. The areas of practice also cover risk management advice, including on an established range of products designed to assist clients identify and mitigate legal risk.

We advise on the whole range of trade & commodity finance products including commodity financing, such as prepayment financing, warehouse/inventory financing and monetisation, commodity transit financing, borrowing base financing and commodity repo transactions; receivables financing, such as pre-export financing, invoice discounting and supply chain finance programmes; export credit agency-backed financings; and trade finance instruments.

  • Islamic Finance

Our financial markets practice has extensive experience in advising on Islamic finance. Our lawyers have advised both Islamic and conventional financial institutions, as well as corporate and governmental bodies, on a wide range of structures.

We have advised extensively on the development of Shariah-compliant liquidity management structures involving trades in commodities, as well as the structuring and transacting of a wide variety of Islamic structured products as synthetic funds and hedging structures.

  • Energy Regulation and Competition

We have extensive experience of the application of the whole range of competition law, including, merger control, behavioural issues, regulatory investigations and litigation, as well as issues of economic regulation with particular reference to the energy sector.

We have advised clients involved in investigations by the EU Commission and by national regulators, including Competition Act investigations by Ofgem. We have also advised clients, including those involved in trading activities, on compliance programmes and business continuity issues in the face of ‘dawn raids’ and regulatory investigations.

  • Carbon and Emissions Trading

We have advised on all aspects of emission reduction and renewable energy projects that create carbon and other emission related tradable commodities. We have helped clients participate in emissions trading systems including th e UK ETS, the EU ETS and the unregulated markets trading VERs and VCU’s. This has included the tax and accounting treatment of such carbon assets and liabilities.

Our wider cleantech and environmental finance practice supports clients with their corporate responses to climate change, regulatory compliance advice, carbon finance, project development support and occasionally climate change related litigation.

  • Commodity Structured Securities

We advise on a range of structured products involving commodity derivatives including notes, warrants and certificates linked to various commodities and commodity indices and strategies providing synthetic commodity exposure. These securities have been listed on the major European exchanges and in certain cases offered to retail investors. In the area of asset backed securities, we have advised on repackagings of physical metals and physically backed exchange traded commodity securities.

  • Physical Supply and Storage Contracts

We also advise on sale, transportation and storage agreements for commodities including natural gas, crude oil and refined liquids from and to refineries, processing plants and storage facilities and to service stations, as well as long term supply contracts relating to various commodities.

Experience

Key transactional experience of lawyers in the Simmons & Simmons Trade and Commodity Trading & Finance practices includes:

Commodities – Financial Markets Regulation

  • The London Bullion Market Association (LBMA) - advising with respect to the replacement of the previous Silver Fix with the new LBMA London Silver Price operated by CME and Thomson Reuters, the new LBMA Platinum and Palladium Price, administered by the London Metal Exchange, and the new LBMA Gold Price, administered by ICE Benchmark Administration
  • Trading house - assisting with the legal and regulatory work on the establishment and expansion of its commodities trading business across Central Europe, including looking at trading power and gas operations in a number of central and eastern European jurisdictions
  • Chicago Climate Exchange, ® Inc. - advising on arrangements with the International Petroleum Exchange (now ICE Futures) in London for the listing of cash and futures contracts in European Climate Exchange (ECX ®) Carbon Financial Instruments (CFI ®s) on the IPE
  • major international bank - advising on its MiFID2 implementation programme in relation to its commodities business
  • Prudential Financial, Inc. - advising U.S. based Prudential Financial, Inc. in relation to the sale of its Global Commodities business (including Bache Commodities) to New York based investment bank, Jefferies Group Inc., including European regulatory aspects.

Market Conduct – Commodities

  • commodity/energy houses - we have advised a number of clients in the commodities and energy sectors on issues relating to market abuse, including in respect of investigations undertaken by a number of exchanges and related and disciplinary action
  • an energy market participant - acting in relation to an internal investigation concerning compliance with the Regulation on Wholesale Energy Market Integrity and Transparency (REMIT) and UK market abuse regime
  • Futures and Options Association (now the Futures Industry Association - Europe) - advising on the production of Order Handling Guidelines relating to dealings on the London Metal Exchange, which address trading practices accommodating regulatory order handling requirements, and market conduct considerations.

Trading

  • major investment banks and broker/dealers - creating standard form trading documents for on-exchange commodity futures, including the London Metal Exchange
  • hedge fund clients - advising a number of hedge fund clients on their energy trading documentation including advising on and negotiating terms of business, preparing commodity trading annexes for use when trading under ISDA master agreements and advising on bespoke trading agreements.

Regulatory investigations, enforcement and disciplinary proceedings

  • two separate global financial institutions - In-house experience advising on large and complex cross-border commodities-related investigations in Asia, the Americas and Europe, including multiple regulatory inquiries and advising on systems and controls enhancements
  • international investment bank - acting on a large and complex internal investigation into its clearing broker relationship with one of the world’s largest trading companies, following its bankruptcy. Advising on systems and controls issues and reporting, on behalf of our client, to the FCA.
  • futures clearing broker - acting for a futures clearing broker undertaking an investigation into systems and controls and risk management issues, following a client default, the unwinding of a complex client trading position and a substantial loss to our client.

Litigation and dispute resolution

  • commodities trading house - acting on an ad hoc arbitration in London against a Swiss incorporated oil trader, in a dispute involving complex issues relating to the scope and application of the exemptions from the authorisation requirements in MiFID.
  • major investment bank - successfully defending a Commercial Court action brought by another bank for monies allegedly due under a letter of credit. This was the first case of its kind and is an important authority on letters of credit.
  • the private banking division of a major investment bank - acting in its defence of High Court proceedings for alleged breach of mandate in respect of currency and commodities trades.
  • major multinational trading company - advising on multiple disputes in relation to the shipping and sale of different commodities.
  • major Chinese SOE trading division - acting on a SIAC arbitration of a dispute over the supply of Indonesian coal.

Trade and Commodity Finance

  • Castleton Commodities International LLC - co-advising in connection with its US$3.75bn committed borrowing base working capital facilities, to fund general corporate purposes and finance the Company’s acquisition of Morgan Stanley’s Global Oil Merchanting business
  • a bank - advising in relation to the structuring of industrial metal commodity inventory financings and transit financings in and between various developed and developing markets jurisdictions
  • a leading commodities bank - advising on its metal commodity repurchase terms with specified trading companies in over 25 London Metal Exchange (LME) and non-LME jurisdictions
  • a Dutch trading bank - advising on a prepayment facility and advance payment guarantee from a PRC bank as security in relation to the sale and purchase of cross border fertiliser supplies.

Islamic finance

  • major international banks - advising in respect of the establishment of Shariah compliant commodity based trading and financing arrangements and hedging instruments including the following structures: vanilla deposit structures; range accrual deposits; overdraft facilities; repo facilities; profit rate swaps; and cross currency swaps
  • various investment banks - advising investment banks on structured securities programmes for the offering of Shariah compliant commodity linked notes and certificates.

Physical Energy Regulation and Competition

  • Nabucco - advising Nabucco, the high-profile gas pipeline project to import gas from the eastern borders of Turkey to Vienna, on a variety of matters including the Third Energy Package, competition law compliance, RTPA exemptions and other regulatory and competition matters
  • various clients - advising a number of other clients, including a gas interconnector project, on the implications of the Third Energy Package
  • various clients - undertaking anti-competition policies and procedures reviews for a number of entities.

Carbon and Emissions Trading

  • Trade Association and multinational company - advising in relation to issues relating to Phase 2 NAP of EU ETS including judicial review proceedings
  • major hedge fund - advising on documenting Emissions Trading deals for a major hedge fund, then one of the most significant carbon traders in Europe
  • major investment bank - on its proposed purchase of CERs including providing it with an overview of the Kyoto framework and the risks associated with the lack of certainty regarding the post-2012 international policy framework.

Commodity and Structured Securities

  • Law Debenture - acting as counsel to the trustee, Law Debenture, on the first exchange traded commodity security issued in the UK in 2004 (an issue of Gold Bullion securities) and issues by ETF Securities Limited of exchange traded commodity securities for, inter alia, crude oil, precious metals (gold, silver, palladium, platinum, swiss gold), carbon emissions, soft commodities and currencies
  • acting as counsel to the arranger in relation to the DB ETC Industrial Metals programme, a physical ETC programme under which the securities were secured on LME warrants in respect of a range of industrial metals
  • acting for the product provider in relation to the establishment of the Boost ETP programme, a synthetic ETP programme under which the securities are linked to the performance of various indices, including commodity indices.

Physical Supply and Storage Contracts

  • various commodity traders and suppliers - advising on supply contracts relating to various commodities.