Commercial Court grants summary judgment in latest Italian swaps case

27/09/22

The Commercial Court has today entered summary judgment for Dexia Crediop SpA (“Dexia”) and granted extensive declaratory relief in Dexia’s claim against the Province of Pesaro e Urbino (“Pesaro”) in the latest of a line of cases before the English courts between banks and Italian local authorities relating to derivatives.

The derivatives in question were interest rate swaps documented under an ISDA Master Agreement (1992 version) and were entered into in 2003 and 2005, respectively.  In the aftermath of the seismic Cattolica decision of the Italian Supreme Court, which declared an Italian-law governed swap between a bank and local authority invalid, Pesaro commenced proceedings in the Court of Pesaro (the “Italian Proceedings”) which would have the effect of unwinding or reversing the relevant swaps, which are governed by English law.   In response, Dexia issued proceedings in England (the forum chosen by the parties under the ISDA Master Agreement), seeking a number of declarations regarding the validity of the transactions in question, the circumstances of their entry, and their compliance with (among other things) certain Italian laws and regulations which were alleged by Pesaro to be applicable to the transactions.

At Dexia’s request, the hearing of Dexia’s two applications for summary judgment was expedited on the basis that it appeared likely that the Court of Pesaro would finally determine the Italian Proceedings at a hearing listed for 3 October 2022 and, accordingly, it was desirable that the Italian Court should have the available to it the English Court’s judgment prior to that hearing.

Pesaro did not appear at the hearing of Dexia’s applications on 8 September; nevertheless, Peter Macdonald Eggers KC (sitting as a Deputy High Court Judge) was satisfied that it was appropriate to continue in Pesaro’s absence, and was further satisfied that it was appropriate to enter summary judgment for Dexia, and (with one exception) to grant the extensive declaratory relief which Dexia had sought.  In doing so, the Deputy Judge considered the arguments that Pesaro had advanced in the Italian Proceedings (concerning the governing law of the transactions, the validity of the transactions, and conformity of the transactions with Italian law), and those arguments which it might have advanced had it chosen to participate in the English proceedings. However, in the light of a conflict between Italian case law and the views of Dexia’s Italian law expert, the Deputy Judge held that there was a triable issue in respect of Pesaro’s argument that the transactions did not comply with Article 3(2)(d) of Article 3 of Decree no. 389 of 1 December 2003 issued by the Treasury Department of the Italian Ministry of Economy and Finance and the Circular of the Italian Ministry of Economy and Finance of 27 May 2004 insofar as it relates to Article 3(2)(d) of the aforesaid decree.

While the English courts have previously, in similar cases involving Italian local authorities, been prepared to grant declaratory relief after trial or default judgment, this judgment represents the first time such extensive declaratory relief has been granted in a case of this type following a successful application for summary judgment.

The judgment is here.