Commodity & Energy Trading

Our Practice

We have a market leading commodities and energy trading practice.  We advise investment banks, brokers, dealers, trading houses, hedge funds, producers, suppliers and users, as well as exchanges and trade associations on a wide range of issues.

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/energy; physical marketing, trading and supply and energy regulation; commodity and inventory financing (including Islamic finance); and dispute resolution, regulatory investigations and enforcement. 

Our team includes practitioners with in house experience at regulators and within the industry.

Experience

Commodities - Financial Markets Regulation

  • advising a major investment bank on structuring, licensing and other regulatory issues in the context of its proposed pan European expansion of its commodities trading business. This involved advising senior management on regulatory issues (both for financial and physical trading), and on regulatory capital and passporting / licensing implications of various potential structures
  • advising a major supply and trading company in respect of the regulatory structure of its oil derivatives and hedging operations
  • advising a commodities broker/dealer on structuring and documentary issues relating to various commodity structured products
  • advising a number of international banking institutions on becoming members of the London Metal Exchange including advising in respect of structural and regulatory issues, and trading documentation.

Market Conduct – Commodities

  • advising 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.

Trading

  • advising a number of major investment banks and broker/dealers in relation to creating standard form trading documents for on exchange commodity futures
  • 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 and enforcement, and litigation and dispute resolution

  • representing a major broker/dealer in US$100m default and closeout proceedings against a Brazilian sugar trader
  • advising a number of commodity houses on a variety of disputes and close out arrangements with respect to defaulting clients.

Financing

  • advising a syndicate of lenders led by Barclays Capital in relation to a secured letter of credit facility made available to a global energy trader
  • acting for leading commodity dealers in respect of their metal repo financing arrangements
  • advising a syndicate of lenders led by a major investment bank in relation to secured project finance and trade finance facilities made available to a gas and power trader in the UK
  • advising project companies sponsored by BG Group, Petronas and the Egyptian General Petroleum Corporation in relation to the development and financing of Egyptian LNG, a project first financed on the basis of a long-term LNG SPA with GDF Suez.

Islamic finance

  • advising major international banks 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
  • advising investment banks on structured securities programmes for the offering of Shariah compliant commodity linked notes and certificates.

Physical Energy Regulation and Competition

  • 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
  • undertaking anti-competition policies and procedures reviews for a number of entities.

Carbon and Emissions Trading

  • advising on IETA and ISDA Master Trading Agreements focusing on the aspects of the agreements that are specific to the EU ETS
  • advising a commodity broker/dealer on establishing a carbon trading desk and its membership of BlueNext
  • advising Rhodia on strategic and compliance advice regarding its participation in UK Emissions Trading Scheme
  • advising a trade association and multinational company in relation to issues relating to Phase 2 NAP of EU ETS including judicial review proceedings
  • advising a major investment bank on documenting the trade of a high volume contract for sale and purchase of CERs by way of auction from an Indian Industrial gases CDM project
  • advising on documenting Emissions Trading deals for major hedge fund, then one of the most significant carbon traders in Europe
  • advising the West Nile electricity board on an ERPA contract to sell CERs to the World Bank
  • advising AgCert International on its strategy for trading CERs into the EU ETS
  • advising a 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

  • 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.

Physical Supply and Storage Contracts

  • advising various commodity traders and suppliers on supply contracts relating to various commodities, including aluminum, uranium, plastics and ethylene.

Specialist Expertise

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 cross border business
  • 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. This includes advising clients on issues relating to inside information as well as the impact of large positions.

Trading

  • our derivatives practice undertakes complex work relating to the structuring of transactions and the creation and negotiation of trading documents. 

Regulatory Investigations and Enforcement, and Litigation and Dispute Resolution

  • Simmons & Simmons’ international financial markets litigation group focuses exclusively on contentious work for financial institutions. We therefore work mainly on high value, complex matters for investment banks, clearing banks, investment and fund managers, securities houses, commodities and futures brokers and dealers and other financial institutions operating in the UK and international financial markets
  • our financial markets litigation practice focuses on the following core areas: litigation and all other forms of dispute resolution including arbitration, mediation and negotiation; contentious regulatory advice including the conduct of disciplinary proceedings; investigations, including acting for financial institutions, both on the conduct of internal investigations where we report on suspected irregularities and on regulatory investigations where we advise and assist clients on response strategies; and risk management advice, including an established range of products designed to assist financial institutions identify and mitigate legal risk.

Financing

  • our commodity finance practice undertakes work for both lenders and borrowers whether through secured lending or other financing arrangements.

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
  • transactions involving commodities have played an important part in the development of the Islamic finance industry and an understanding of the relevant trades, risks and market practices is essential for any participant in the Islamic finance market
  • 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
  • our experience allows us to advise clients on current market practices and areas of likely Shariah sensitivity on a geographic and institutional basis.

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

  • closely aligned with our multidisciplinary, cleantech and environmental finance practice, 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 the 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.

Physical Supply and Storage Contracts

  • we also advise on sale, transportation and storage agreements for commodities including natural gas, crude oil and refined liquids (such as propane, butane, condensate, bitumen) from and to refineries, processing plants and storage facilities and to service stations, as well as long term supply contracts relating to various commodities.