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Enron Mail |
I am copying Sara on this b/c I would be interested in her input if she has a
different take than I do. I understand your message to mean that P&G is offering a representation from them that they will strictly adhere to their corporate derivatives policy (with a copy of the policy attached to the contract), and, in exchange for this, they would like the "No Reliance" representation deleted entirely. I don't really see how such a representation helps us with the "No Reliance" problem. The CFTC has ruled that in a dealer/customer context, if the customer relies on the dealer's expertise in entering into a trade, then the trade may be unenforceable against the customer. The legal principle is one of fiduciary duty and doesn't really have anything to do with corporate authorization. In other words, the fact that the trade is authorized does not change the fact that the customer is relying on the dealer's superior knowledge. In its 1996 lawsuit with Bankers Trust, Procter & Gamble unwound an interest rate swap position when they ended up about $200 million out of the money. P&G argued that they were relying on BT due to BT's superior expertise in interest rate markets, and therefore P&G shouldn't have to pay. The issue of whether or not P&G was authorized to enter into the swaps was not an issue at all in that case, nor would it be an issue, in my opinion, if P&G sought to unwind a pulp and paper swap with us based on our alleged superior expertise in pulp and paper markets. The danger of having positions unwound has made the "No Reliance" clause one of the most important clauses in the ISDA for us. I will look at and consider any particular language they may wish to propose, but conceptually, we can not trade with counterparties who wish to rely on our market expertise in deciding whether to enter into a trade. -- Bob Robert E. Bruce Senior Counsel Enron North America Corp. T (713) 345-7780 F (713) 646-3393 robert.bruce@enron.com Ed Quinn@ECT 02/02/2001 04:37 PM To: Robert Bruce/NA/Enron@Enron cc: Subject: P&G Bob, P&G business contact mentioned that they have inserted the following into their ISDA schedules: 1) a clause that states that P&G will strictly adhere to their corporate derivatives policy (that covers deal terms, hedged risks, etc.) and append the ISDA with the corporate policy.... Is this something we can consider??? Policy spells out types of deals they can and can't enter...therefore, they can't sue us (hopefully) if they have followed their policy guidelines... Thanks. Ed Quinn
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