Deutsche Bank AG v. Total Global Steel Ltd.

Deutsche Bank (DB) sued Total Global Steel (TGS) for breach of contract for the sale of Certified Emissions Reductions (CERs), instruments created under the Kyoto Protocol to measure and limit greenhouse gas emissions under the European Union Emissions Trading System (EUETS). The CERs DB purchased from TGS had previously been “surrendered,” or used to demonstrate compliance with emissions limitation commitments. DB claimed that the CERs they acquired were valueless. TGS accepted that they had supplied surrendered CERs, but denied that they were in breach of contract as they disputed that they were obliged to deliver CERS that could be used under the EUETS for determining compliance with commitments. TGS claimed: (1) that the CERs were not valueless; and (2) that DB did not mitigate their loss by moving the CERs out of their account which was subject to the EUETS before EU regulations prevented them from doing so (therefore preventing them from selling or disposing of the CERs thereafter). The Court ordered TGS to pay damages to DB, since the European Commission had announced in January 2010 a check that prevented surrendered CERs from being used for compliance purposes; this check rendered the CERs purchased by DB worthless and the Court held that the contract included a term that the instruments should be used for determining compliance with emissions commitments pursuant to and in accordance with the EUETS. They also held that the wording should be interpreted with an interpretation that “makes business sense and would accord with the reasonable expectations of those buying and selling such instruments on the spot market”.