On October 7, 2016, Reed Smith assisted the International Energy Credit Association (“IECA”) in preparing an enforceability opinion for the release its Master Netting Agreement (the “MNA”) under both English and U.S. law.1 The MNA is billed as a state-of-the-art solution designed to manage the termination, close-out, and netting of both physical and financial transactions, including in the bankruptcy context. These legal opinions allow parties to the IECA MNA to be confident that their exposure on covered transactions can be viewed on a net, rather than a gross, basis, thereby reducing credit risk and potentially conserving working capital.
Benefits to users of the new MNA include its ease of use, support by legal enforceability opinions under both English and U.S. law, flexibility of use under bespoke and traditional master trading agreements, and its intended use with a variety of energy-related commodities, metals, freight, and emissions and other environmental products.
Market participants that are party to multiple trading agreements with a single counterparty should review the MNA and consider its applicability where the importance of netting exposures is a priority under covered transactions.
- The Master Netting Agreement is available for download from the IECA’s website.