In wholesale power markets, standardised documentation is not a luxury; it is a risk-control device. For cross-border traders, suppliers, and large consumers, the EFET Electricity Trading Agreement is frequently the preferred framework because it offers a familiar allocation of credit risk, delivery risk, and close-out mechanics. However, “using EFET” is not the same as “being legally safe.” In Turkish practice, the value of an EFET structure depends on disciplined tailoring: aligning product schedules and operational clauses with Turkish market realities, while ensuring that remedies, collateral, and dispute provisions remain enforceable under Turkish law principles.
1) Why EFET is used in electricity trading
Electricity trading creates exposure in three directions at once: price volatility, imbalance/nomination risk, and counterparty credit. An EFET Electricity Trading Agreement is designed to address these systematically through (i) a master agreement structure, (ii) confirmations for individual trades, and (iii) strong default and close-out provisions. This reduces negotiation time and, more importantly, makes disputes more “calculable,” because parties can revert to standard definitions and a predefined valuation logic.
2) Contract structure: master, annexes, confirmations
To maximise legal clarity in Turkey, treat EFET as a modular package:
- Master Agreement: core legal terms (representations, events of default, close-out, netting, interest, dispute resolution).
- Election Sheet / Annexes: choices on governing law, credit support, delivery procedures, tolerance, and operational options.
- Confirmations: deal-specific terms (product, quantity, delivery period, price, currency, payment dates, delivery point).
A frequent drafting error is letting confirmations “rewrite” the master unintentionally. The safest approach is a strict order of precedence clause stating what prevails in conflicts (typically: confirmations → election sheet → master agreement → general definitions).
3) Product definition and delivery mechanics
EFET language is market-oriented, but Turkish operations can differ by balancing model, metering flows, and settlement practices. Therefore, your confirmations and delivery annexes should be explicit about:
- Delivery point (meter point / balancing boundary / connection point)
- Scheduling and nominations (deadlines, methods, and who is responsible)
- Data finality (when metering/settlement data becomes binding)
- Losses and pass-through charges (network charges, taxes, regulated fees—who bears what)
If you leave these items generic, the “real contract” will be created later through emails and operational practice—exactly the scenario that produces litigation.
4) Credit support and collateral: making it enforceable
The commercial purpose of EFET is to protect against counterparty default. In Turkey, collateral drafting should be practical and enforceable:
- Bank guarantees: define unconditional wording, call procedure, expiry alignment, and reduction mechanics after settlement periods.
- Cash collateral: specify segregation, interest, top-up triggers, and return timelines.
- Parent guarantees: avoid ambiguity about scope (all obligations vs. payment only), duration, and defences.
To maximise certainty, include clear credit events (late payments, financial deterioration indicators, insolvency filings) and a step-by-step remedy ladder: request additional collateral → reduce exposure → suspend trading → terminate and close out.
5) Events of default, termination, and close-out valuation
EFET’s close-out mechanism is often the most litigated part of the relationship—especially in fast price moves. To strengthen interpretability, ensure:
- Trigger events are precisely defined (payment default, insolvency, repudiation, illegality, failure to provide collateral).
- Notice mechanics are tight (email, registered mail, electronic systems; deemed receipt rules).
- Valuation method is transparent (market quotations, replacement cost, or commercially reasonable procedures).
- Interest clause is clear (default interest rate, compounding, day-count conventions).
In Turkish disputes, unclear valuation language can be attacked as subjective. The practical solution is to embed objective data sources, calculation steps, and documentation requirements for close-out.
6) Force majeure, change in law, and regulatory constraints
In electricity, “non-delivery” is often caused by system constraints, curtailment, grid incidents, or regulatory measures. Your EFET elections should distinguish:
- Force majeure: performance impediment + strict notice and mitigation duties.
- Change in law / regulatory change: economic impact allocation (pass-through, renegotiation, or termination right).
A strong EFET Electricity Trading Agreement avoids treating regulatory volatility as a generic force majeure; instead, it allocates economic consequences in a predictable way.
7) Interpretation principles: how EFET should be read in Turkish practice
Even when a standard form is used, disputes are resolved by interpretation. To reduce interpretation risk:
- Use a definitions-first discipline: avoid deal terms that conflict with defined expressions.
- Keep “commercially reasonable” standards measurable (timelines, data sources, calculation steps).
- Maintain a consistent documentary trail: confirmations, amendments, and operational notices should be archived and referenced.
- Add a no oral modification clause and a controlled amendment process.
Where Turkish courts or tribunals examine EFET wording, they often focus on the parties’ conduct and written communications. Therefore, consistency between what is signed and what is operationally done is essential.
8) Governing law and dispute resolution design
For Turkey-facing trades, parties typically choose either Turkish law with Turkish courts/arbitration, or a foreign law/arbitration package if the trade is cross-border. Whatever you choose, align it with:
- enforceability of interim measures (especially around collateral calls),
- confidentiality needs for trading strategies,
- speed and expertise (arbitration with energy-experienced arbitrators is often preferred).
Conclusion
Drafting and interpreting EFET documentation for Turkey is less about copying a template and more about engineering certainty. A robust EFET Electricity Trading Agreement will clearly define delivery and settlement mechanics, embed objective pricing and close-out valuation rules, and build a credit support architecture that works in practice. When these elements are aligned, EFET becomes what it is meant to be: a predictable trading framework rather than a dispute multiplier.
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