The method for accruing interest under the Emissions Trading Master Agreement for the EU Scheme Version 3.0 2008 can evoke some problems and be a little embarrassing for a companies operating on a Polish market. We point at some possible solutions.
It is because the Polish Civil Code (Act of 23 April 1964 - Dziennik Ustaw 1964, No. 16, item 93, with subsequent amendments) provides for different method for accruing interest than IETA Master Agreement (and also standard EFET and ISDA).
Take for instance clause 6.1.1. of the IETA Master Agreement:
[...] the Delivering Party shall pay to the Receiving Party interest on an amount equal to the Contract Price multiplied by the number of Compliance Period Traded Allowances not Transferred to such Receiving Party's Holding Account by the Delivery Date for the period from (and including) the Delivery Date to (but excluding) the actual date of Transfer to the
Receiving Party at the rate specified in clause 8.5(a) (Interest)
Clause 6.1.1. of the IETA Master Agreement is cited only as an instance, because in other places in IETA (see for instance: the definition of Cost of Carry Calculation Period, the definition of Receiving Party Replacement Cost and point 8.5 (a) – relating to rules on the contract interest rate), EFET and ISDA master agreements there are analogous clauses.
Rules on accruing interest under IETA Master Agreement differ in that area from the Polish regulation, where articles 111 – 112 of the Polish Civil Code state:
“Article 111. § 1. A period of time expressed in days shall end at the end of the last day.
§ 2. If a certain event indicates the beginning of a period expressed in days, the day on which that event occurred shall not be included in the calculation of that period.
Article 112. A period expressed in weeks, months, or years shall end on the expiration of the day whose name or date corresponds to the initial day of the period, and should there be no such day in the last month, on the last day of that month.”
It does not mean, that the above mentioned clauses of the IETA Master Agreement are in Poland null and void – articles 111 and 112 of the Polish Civil Code shall apply only if statutory law, a decision of the court or a decision of another State authority or an act in law indicates a period of time without defining the method for calculating it (article 110).
That difference has not only theoretical significance, because software used in departments of accounting of many Polish companies may require some adjustments – on the condition that that software enables different rules on accruing interest for different trade partners and different agreements.
Alternatively, it is possible to make an amendment to an IETA Master Agreement in relation to this issue, for instance in that manner:
„In the clause 1.3. (Interpretation) the Parties agree to add the following sections:
1.3(i) Whenever this Agreement provides for charging default interest on overdue payments, default interest shall be charged from the date immediately following the Payment Due Date until the date of actual payment (inclusive).”
Making this amendment can help to avoid possible misunderstanding and disputes, when companies are establishing settlements with the Polish firm.
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