Intercontinental Exchange Benchmark Administration: the new administrator of LIBOR

ICE Benchmark Administration took over the administration of LIBOR from the British Bankers Association (BBA) on 1 February 2014. This transfer of administration of LIBOR may raise questions of interpretation of LIBOR definition, due to the fact that the LIBOR definition in the currently published forms of LMA documents does not specifically refer to ICE as the new LIBOR administrator.

In the context of a judicial resolution of a matter addressing the change described above, one could expect that courts are likely to implement two methods in order to achieve the desired contractual continuity and clarity of contractual relationship among the parties: (i) contractual interpretation whereby the words are given their contractual meaning; or (ii) implying a meaning to the terms in the contract through judicial interpretation.

In practice, the parties’ intention is for interest accrued to be calculated primarily by reference to a benchmark based on interbank lending rates in the London market with the characteristics of BBA LIBOR. Taking into account that ICE LIBOR does retain all the fundamental attributes of BBA LIBOR, then reference to BBA has to be regarded only as a label. The reason for this is that LIBOR administered by ICE in essence remains the same rate based on the same methodology in collection, calculation and publication of data, as the only change relates to the actual name and way of administration of the applicable LIBOR. Under this perspective, it would be arguably expected that courts would interpret references to BBA LIBOR as being references to ICE LIBOR…

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