Re: Legal Meeting - 8 June 1999

Elena Kapralova
09/06/99 14:26
To: Louise Kitchen/LON/ECT@ECT, Janine Juggins/LON/ECT@ECT, Justin
Boyd/LON/ECT@ECT, Mark - ECT Legal Taylor/HOU/ECT@ECT, Marcello
Romano/LON/ECT@ECT, David Port/LON/ECT@ECT, Jay Webb/HOU/ECT@ECT
cc:
Subject: Legal Meeting - 8 June 1999

Dear all,

these are the issues from the last legal meeting that need further attention:

1). European Jurisdictions Peculiarities
Slovenia, Cpoatia, Romania must be added to Phase 1 reviews. Products that
considered are gas and power both physical and financial. 15 Jurisdictions
reviews are already received. So far they do not reveal any fundamental
problems with the overall structure. There are few recommendations on the
wording of PAA, ETA and GTC to come. CC (Tim Hueges) is summarising all the
replies and will forward a list of problematic issues for each jurisdictions
by Monday (14th) lunch time.

Possible complications are:

All documents for French and Spanish customers may need translation into
French and Spanish, as part of these jurisdictions requirements.

Sweden and Italy have particularly strict regulations on checking validity
of signatures =< it may need to be reflected in the business processes.

It was suggested to have PAA on the screen as well, so that potential
customers may print them out, fill in and mail to Enron. YES - only in the
garden and we will need clear instrucutions on how to register there also

2). Read Only Access for some customers
instead of ETA read only customers have to click on Read Only Agreement,
therefor it has to be drafted ASAP. DRAFTING REQUIRED. THIS IS ALSO A SYSTEM
REQUIREMENT FOR READ ONLY.

3). Product Descriptions
A decision was made that they will be reviewed by internal legal team (Justin
Boyd, Mark Taylor) but not CC or S&C. OK

4). Timetable
GTCs in English should be finalised by the end of June. First two weeks of
July CC will spend validating marketing data. Project timetable was promised
to CC to be e-mailed yesterday. OK, but timings will vary on the basis of
what timetable says.

5). Translation
Translation of GTCs, ETA and PPA will be done internally . The first priority
languages most likely will be French, German and Spanish.
Actions:

Translations of those GTCs that we already have must be started ASAP (Justin
Boyd to co-ordinate).

Identify languages to translate into (Elena Kapralova to co-ordinate with
Justin and traders)

6). Taxes
Questionnaires similar to the one that was sent to European jurisdictions
must be sent to Canada (Janine Juggins to co-ordinate).

7). Web Page Wording
The words "I accept" and "Delete" in the box that appears after a customer
clicked on price, are to be changed into "Submit" and "Clear". Lawyers are
comfortable with this.

8). Different Entities on Counterparty Side
If there are a few different entities trading for the same company, for ex.
Morgan Stanley International (MSI) and Morgan Stanley (MS), they should be
treated in the system as two separate clients and be granted two separate
System Administrator passwords. This is necessary for tax considerations. It
is confirmed once again that there will be one ETA acceptance click per
System Administrator.

9). Authorisation Risk
Because Online Trading will be Enron's software, all problems arising from
authorisation errors, for ex. when customer that was supposedly authorised
to trade only UK Gas was able to trade power, will be entirely Enron's
liability =< it highlights again an importance of very thorough testing of
authorisation functionality of the system in July and August.NO this would
only be the case if we reverted to asking them what they wanted to trade and
we are not going to do that from a systems process point of view - DAVID _
ISSUE

10). Written and Electronic Confirmations
It appears to be a difference between UK and US practices in treating
superiority of written vs. electronic confirmations. According to the UK law,
an electronic confirmation will overwrite a paper one, generated and mailed
by the Back Office, similar to the current practice for transactions done
over the telephone, when phone conversation overwrites all paper
conformations. In the US the situation is opposite. For the deals done over
the phone, written confirmations still take priority over the phone
conversation tape. In Texas anything that is not in writing, is not
enforceable.

The situation with priority of confirmations of Online trades in US must be
investigated further (Mark Taylor to co-ordinate). The result should be
reflected in US version of ETA. YES

This leads to a further question, whether sending written confirmations in UK
is still necessary?YES

11). UN E-Commerce Directive
There is a daft of UN Directive on e-commerce, which currently has very
strict rules regarding time when transaction is considered complete. It
requires mutual exchange of written confirmations etc. Enron might be in
position to lobby few items in this Directive (Justin and Regulatory Dept.)
What th eEU piece asks for is mutual confirmations by clicking - two further
stages than we have in our system. WE need to build a system which can
incorporate these changes at some point in the furture but not now.

12). Suspending Trades by Counterparty
A few traders are very keen on being able to suspend trades by counterparty,
for instance in a situation when they see a counterparty making a number of
deals in the same commodity. It arises two issues:
IT - the system should be able to put a name of the counterparty on the
transaction summary page (bottom of the price page) YES

Legal - CC has to investigate and give a view whether it is permitted by law.
NO PROBLEM - BUILD SYSTEM NOW TO DO THIS.

Price Check Idea
Just a thought, whether it is technically possible to amend a price check
(the one done when the customer submitted a price, and database does credit,
GTC and price check) in a way that customer is notified about the price
change not for all changes but only when the price has moved against Enron,
i.e. if price moved in Enron's favour transaction should go forward at the
price customer had agreed to earlier. Legally it is OK. Jay, can the system
do it? YES

Internal Issues still to be addressed:

1). Global Liquids Books management, i.e. how responsibilities for price
update will be managed between London and Houston desks.DAVID
2). FX conversion including IT, business processes, tax, risk managment
issues (David Port, Janine Juggins, Jay Webb)DAVID

All comments are welcome,
Regards,
Elena