Key takeaways:

• On 20 March 2014, the UK Court of Appeal handed down its decision in Barclays Bank Plc v Unicredit Bank AG [2014] EWCA Civ 302. The appeal concerned the construction of a clause requiring a party to make a determination in a “commercially reasonable manner” in deciding whether to consent to optional early termination. The case concerned a “synthetic securitisation” and is particularly relevant to financial institutions. In this update, we pick out the key issues in the decision.
• As the starting point, the Court decided that a party required to make a determination in a “commercially reasonable manner” was entitled to take account of its own commercial interests in preference to the interests of the counterparty. It was the “manner” of the determination which must be commercially reasonable; it did not follow that the outcome had to be commercially reasonable.
• A “commercially reasonable” determination was also held to be a control on the deciding party. A party will not be acting in a commercially reasonable manner if it makes demands which are substantially above what it could otherwise reasonably anticipate.