In a judicial landscape historically unfavorable to banks on OTC derivatives, the Milan Court of Appeal, with its recent ruling no. 2773/2025 of October 20, 2025, has opened a significant breach on crucial issues such as Mark to Market and Rational Alea.

The ruling stands out for its balance: it does not contradict the principles established by the Joint Divisions (No. 8770/2020), but applies them in a measured manner, confirming the suitability of banking contracts and emphasizing the economic substance of the transaction.

Here are the key points:

• Rational Alea validated: The Court confirmed that the operating methodologies and transparency standards already adopted by intermediaries for some time may comply with the Rational Alea requirement.-
• ‘Dynamic’ MTM formula: The problem of predetermining a formula for the ‘dynamic’ calculation of MTM (as the cost of early termination of the contract) does not arise if the derivative contract does not include a unilateral withdrawal clause for the customer.
•  Substantial fairness of MTM: if the MTM value indicated in the prospectuses is in line with market values, the contract is worthy of protection.
• MTM and differentials: MTM is the sum of expected future differentials, so the general formula for calculating differentials can also be used to arrive at their expected value, using forward quotes for the variable rate.