Deutsche Bank AG London & Anor v Provincia Di Brescia
[2024] EWHC 2967 (Ch)
Banca Nazionale Del Lavoro SpA & Ors v Provincia Di Catanzaro
20 December 2023
[2023] EWHC 3309 (Comm)
High Court
Three banks sued a province in Italy for not paying on a deal to protect against interest rate changes. The province didn't show up to court. The judge looked at the deal and ruled the province had to pay because it had no good reason not to. The judge said the deal was fair and legally sound.
Key Facts
- •Banca Nazionale del Lavoro S.p.A., Commerzbank AG, and Dexia Crédit Local S.A. (the Banks) sought summary judgment against Provincia di Catanzaro (Catanzaro) for breach of contract related to interest rate hedging transactions.
- •Catanzaro failed to participate in the proceedings.
- •The transactions were entered into in 2007 and involved interest rate swaps and cash flow swaps to manage Catanzaro's debt and fund investments.
- •In 2021, Catanzaro ceased payments and attempted to annul the transactions, claiming they violated Italian law.
- •The Banks argued that the transactions complied with Italian law and were governed by English law due to exclusive jurisdiction clauses in the contracts.
- •The Banks sought declaratory relief affirming the validity and enforceability of the transactions.
Legal Principles
Court's discretion to proceed with a hearing in the absence of a party.
CPR 39.3 and R v Jones [2001] EWCA Crim 168
Principles for determining whether to proceed with a hearing in a defendant's absence in civil cases (based on R v Jones principles).
R v Jones [2001] EWCA Crim. 168 (applied in civil cases)
Test for summary judgment: claimant must have a realistic prospect of success, and there must be no other compelling reason to await trial.
CPR 24.3, White Book 2023 paragraph 24.3.2, Swain v Hillman [2001] 1 All ER 91, ED & F Man Liquid Products v Patel [2003] EWCA Civ 472
Approach to summary judgment for declaratory relief: defendant must have no real prospect of successfully defending the underlying facts.
Abaidildinov v Amin [2020] EWHC 2192 (Ch)
Permission required for summary judgment application before defendant has opportunity to participate.
CPR 24.4(1), The European Union v The Syrian Arab Republic [2018] EWHC 1712 (Comm), Citicorp Trustee Company Limited v Al Sanea [2017] EWHC 2845 (Comm)
Consob definition of a hedging derivative and case law interpreting this.
Consob Regulation 11522 of 1 July 1998, Venice CA, Court of Appeal of Milan Decision 921 of 2021, Court of Reggio Emilia Decision 227 of 2023
Italian law on capacity of local authorities to enter into derivatives, including the prohibition on speculative transactions and the requirement that indebtedness be for investment purposes.
Venice, Venice CA, Busto, Pesaro, Cattolica, Article 41(2) of Law 448/2001, Article 3 of Decree 389, Article 1(736) of Law 296/2006, Article 119(6) of the Italian Constitution
English law principles of ostensible authority and ratification.
Busto, Venice, Law Debenture Trust Corporation v Ukraine [2023] UKSC 11
Choice of law rules under the Rome Convention.
Rome Convention on the Law Applicable to Contractual Obligations 1980, Pesaro, Dexia Crediop SpA v Comune di Prato [2015] EWHC 1746, Venice
Outcomes
Summary judgment granted to the Banks.
Catanzaro's absence constituted a waiver of its right to participate, and the Banks demonstrated that Catanzaro had no realistic prospect of successfully defending the claims. The court found the transactions were valid and binding under English law.
Permission granted to amend Claim Forms and Particulars of Claim.
No prejudice to Catanzaro, significant prejudice to Banks if refused.
Permission granted to apply for summary judgment.
To prevent Catanzaro from gaining a tactical advantage from its non-participation and to address concerns about enforceability of a default judgment.