Material Adverse Change in UK Law

In summary, authority supports the following conclusions. The interpretation of a "material adverse change" clause depends on the terms of the clause construed according to well established principles. In the present case, the clause is in simple form, the borrower representing that there has been no material adverse change in its financial condition since the date of the loan agreement.

However, the reference to formality may be of limited assistance to GHU in this case. This is because sub-clause 21.6(d) of the BBVA Credit Agreement provides that an event of default occurs if the company begins negotiations with any creditor for the rescheduling of any of its indebtedness. It is not limited to the commencement of negotiations with creditors generally with a view to formally rescheduling the company's whole debt book.

In the present case, part of that matrix concerns the nature of the Urvasco group's business. At the end of 2007, it owed about €2.3 billion to over forty banks, mostly Spanish banks. The business, even in a benign economic climate, required constant negotiations with financial institutions. Such negotiations would not, in my view, constitute an event of default, whether or not resulting in a formal agreement.

Prudent and circumspect economic operators – such as BT – were not justified in holding any expectation that the Old Scheme would be maintained forever. As the Court of Justice explained, the question is whether such operators could have foreseen the possibility of the change that happened. The question is whether, in all the circumstances, the operator would have had sufficient information to permit it to expect that a change was possible.

In response to that, Mr Lasok reminded us that, in addition to the changes introduced by the FA 1990, the consequential 1991 Regulations and guidance, by way of a change to the previous practice, required any claims for relief under the Old Scheme to be made in the return for the tax period when the relevant insolvency document was received – they could no longer be made in any subsequent return.

By the 1 st Psari Funding Agreement of 24 November 2010 Psari agreed with Excalibur to advance, and did advance, US $ 10,000,000 in respect of costs. It also agreed to advance a further $ 5 million for security for costs should that be ordered. In return Psari was, in the event of success, to obtain a 10% working interest in such interest as Excalibur received in the Shaikan field (with the option of monetisation after a certain period) or 10% of any damages in respect of Shaikan.

The 10% figure was to be increased by a further 2.5% if the $ 5 million was drawn down, and pro rata to any lesser sum. Under the Agreement Excalibur undertook to use Clifford Chance until such time as its obligations to Psari were discharged in full.