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The restrictions imposed bythe CSRC can be viewed asintended to establish China’s ownmarket institutions in advance ofliberalisation. The Shanghai FuturesExchange (SHFE) is an example.Since it was established in 1999,the SHFE has grown quickly andis thought to trade twice as manycontracts as the LME, albeit at lowervalues and with different products.It seems certain that Chinawill continue to be the world’spredominant consumer and producerof metals for the foreseeable future.Stockpiles of copper in Chinesewarehouses are currently at fourtimes the level of that held in all LMEwarehouses worldwide, and Chineseproducers and traders have recentlyagreed to export refined copper toLME warehouses.If the LME were able to gain afoothold in China, it could begincompeting directly with the SHFE andgive greatly increased internationalaccess to Chinese metals markets.For more information, please contactJanet Ching, Associate, on +44 (0)207264 8477 or janet.ching@hfw.com,or your usual contact at HFW.“The CSRC haskept tight controlover China’scommoditiesderivatives marketssince the 1990s.”DECC calls for RED evidenceDirective 2009/28/EC on thepromotion of the use of energy fromrenewable sources, which is usuallyreferred to as the Renewable EnergyDirective or simply “RED”, sets atarget for the EU to obtain 20% ofits energy from renewable sourcesby 2020. RED also sets targets forEU Member States. The UnitedKingdom’s target is to obtain 15% ofits energy from renewable sources by2020.On 26 April 2012, the UK’sDepartment of Energy and ClimateChange (“DECC”) published a Callfor Evidence on Renewable EnergyTrading, and, in particular, on thepossibility of the UK using certainmechanisms set out in RED.Under RED, a Member State thatgenerates renewable energy has arenewable “credit” attached to thatenergy, which it can use towardsfulfilling its overall renewable energytarget. Flexibility mechanisms inRED, including statistical transfers,joint projects and joint supportschemes, allow Member States toapply towards their targets energyfrom renewable sources that isproduced by them but consumedin other Member States. RED doesnot provide guidance on how theflexibility mechanisms should workin practice. Implementation is left toMember States.Statistical transfersThe statistical transfer mechanismin Article 6 of RED allows a MemberState with an expected surplus ofrenewable energy to “transfer” aquantity of its renewable energy toanother Member State. No actualphysical flow of energy needs to takeplace. The RED does not prescribethe terms of such an agreement,other than that the Member Statemaking the transfer must still meetits own target and that the EuropeanCommission must be informed of thetransfer.Joint projectsThe joint projects mechanism isset out in Articles 7 to 10 of RED. Itstates that two or more MembersStates may finance joint renewableenergy projects and share the valueof the energy generated. As withthe statistical transfers, there is norequirement that an actual physicalflow of energy take place.Member States can also finance jointprojects with non-EU countries, butin such circumstances, in order toqualify under RED, the renewableenergy produced from the projectmust be imported into the EU.Joint support schemesJoint support schemes provided forin Article 11 of RED are intendedto encourage Member States toco-operate in the use of renewableenergy. Two or more Member Statesmay co-operate on some or allof their schemes for developingrenewable energy, without necessarilyproviding joint finance, and can sharethe renewable energy value betweenthem.In its Call for Evidence, the DECC hasstated that joint support schemes arenot currently considered appropriatefor use in the UK because of theimportance to the UK of retainingcontrol over domestic renewableenergy schemes, which are partly02 Commodities Bulletin


funded by UK residents through taxor levies on energy bills.So far, there do not appear to beany statistical transfers or jointprojects in the UK. The DECC’sCall for Evidence is an attemptto understand how flexibilitymechanisms could work, and thepotential for the UK to import andexport renewable energy. It followsthe DECC’s July 2011 consultationdocument, the Renewable EnergyRoadmap, which stated that theUK government intended to acquirepowers necessary to trade renewableenergy with other EU Member Statesand other countries. The DECC’sstated intentions indicate that REDflexibility mechanisms may createopportunities for companies in therenewable energy sector, particularlyin the UK.The Call for Evidence closes on 11June 2012.For more information, please contactSobia Bashir, Associate, on +44 (0)207264 8347 or sobia.bashir@hfw.com,or your usual contact at HFW.“RED doesnot provideguidance on howthe flexibilitymechanisms shouldwork in practice.”HFW recruits leadingcommodities lawyerHFW is delighted to announce itsrecruitment of Robert Finney as a newpartner in its London office.Robert’s practice focuses onderivatives, trading and financialregulation, particularly in relationto commodities markets. He has arange of regulated and unregulatedclients, including banks, investmentinstitutions and other financialbusinesses. He assists those involvedin trading physical commodities andcommodity derivatives, includingproducers, processors, tradinghouses, brokers and investment funds.He also has extensive experienceadvising exchanges and other marketinfrastructure providers.Robert has over 20 years’experience of exchange-traded andOTC derivatives and underlyingcommodities, especially in energy andmetals. In addition to advising clients,Robert has spoken at numerousconferences, and written many articleson the impact of financial regulationon commodities businesses. ManyHFW clients will be concernedabout the impact of forthcoming EUreforms on OTC derivatives reporting,collateralisation and clearing, and theextension of the MiFID and marketabuse regimes. Robert is particularlyengaged in these matters. Over manyyears Robert has been listed forcommodities, futures/derivatives andfinancial services in the leading lawfirm directories, Chambers UK, Legal500 UK and Legal Experts. He wasvoted “Best Legal Advisor - Regulatory& Commercial” at The ComplianceRegister Platinum Awards 2010 and2011. He is a founder member of theFutures and Options Association, anda member of its Metals Working Group.Welcoming Robert to the firm,Chris Swart comments, “HFW’scommodities clients increasinglyrequire assistance with regulatorymatters. Robert’s arrival is a significantaddition to our existing regulatorypractice and will assist with thebroad expansion of our commoditiescapability”.For more information, please contactChris Swart, Partner on +44 (0)207264 8211 or chris.swart@hfw.com, oryour usual contact at HFW.Conferences & EventsCoaltrans AsiaBICC Bali(3-6 June 2012)Richard Wilmot, Guy Hardaker andAndrew CarpenterLSLC Maritime Business Forum -LNGThomas Miller, London(13 June 2012)Eleanor MidwinterManagement of Risk in the LNGBusiness TodayDeVere Venues, Canary Wharf,London(14 June 2012)Eleanor MidwinterOil and Gas Trading OperationsDexter House, London(18-20 June 2012)Matthew East and Martina KellyIECA: 26th European EducationConferenceWestin Palace Hotel, Madrid, Spain(24-26 June, 2012)Robert WilsonCommodities Bulletin 03


Lawyers for international commerceHOLMAN FENWICK WILLAN LLPFriary Court, 65 Crutched FriarsLondon EC3N 2AEUnited KingdomT: +44 (0)20 7264 8000F: +44 (0)20 7264 8888© 2012 Holman Fenwick Willan LLP. All rights reservedWhilst every care has been taken to ensure the accuracy of this information at the time of publication, the information is intended as guidance only. It should not beconsidered as legal advice.Holman Fenwick Willan LLP is the Data Controller for any data that it holds about you. To correct your personal details or change your mailing preferences pleasecontact Craig Martin on +44 (0)20 7264 8109 or email craig.martin@hfw.comhfw.com

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