Court of Appeal Addresses Validity of Interest Rate Swaps in Banca Intesa Sanpaolo SpA & Anor v Comune Di Venezia: Key Legal Principles and Outcomes Explained

Citation: [2023] EWCA Civ 1482
Judgment on


The Court of Appeal’s decision in the case of Banca Intesa Sanpaolo SpA & Anor v Comune Di Venezia addresses crucial questions regarding the validity of interest rate swap transactions under English law, factors determining the applicable law for unjust enrichment claims, and the applicability of the change of position defence in the context of ultra vires contracts. This article meticulously dissects the Court’s findings and the legal principles applied, providing legal professionals with an overview and analysis pivotal to the understanding of complex financial litigation, contractual capacity under foreign law, and restitution claims.

Key Facts

The dispute revolves around two interest rate swap transactions entered into by Banca Intesa Sanpaolo SpA and Dexia Crediop SpA (the “Banks”) with the Italian municipality Comune di Venezia (“Venice”). These transactions were aimed at restructuring Venice’s existing debt obligations. The Banks argued that the transactions, governed by English law, were valid, while Venice contested their validity on the grounds of incapacity under Italian law.

The main contention was whether these swaps were ‘speculative’ and hence void under Italian law, which would have implications under English law regarding Venice’s capacity to enter into them. A subsequent question addressed the applicability of the Limitation Act 1980 concerning time-barred claims for restitution of payments made under these transactions. Furthermore, the case examined the available defences, namely the change of position, in the context of unjust enrichment claims.

The legal principles underpinning the Court’s decision primarily include:

  1. Characterization of Foreign Law: The determination of Venice’s capacity to enter into the swaps required a characterisation under English conflict of laws rules of the principles laid down by the Italian Supreme Court in its judgment in Cattolica.

  2. CONSOB Determination: The CONSOB Determination provided significant guidance on whether a derivative is hedging or speculative under Italian law, involving tests related to risk reduction and high correlation between the derivative transaction’s characteristics and the underlying debt instrument.

  3. Limitation Act 1980: The application of section 32(1)(c) involves identifying when a claimant, exercising reasonable diligence, could have discovered their mistake, not necessarily when the mistake was judicially recognized, as adjusted by the Supreme Court in FII.

  4. Applicable Law for Restitution: The closest and most real connection test serves as the criteria for determining the applicable law for unjust enrichment claims.

  5. Change of Position Defence: A defence to a claim in unjust enrichment attributable to anticipatory change in position is recognized under English law, even where the transaction in question was void due to being ultra vires.


  1. Validity of Transactions: The court concluded that the Italian Supreme Court would have deemed the transactions as hedging, not speculative, given the high correlation with the Amended Rialto Bond and the existence of an underlying hedge that voids the argument of speculation.

  2. Novation Fees as ‘Upfront’: Contrary to Venice’s claim, the court found that novation fees paid to Bear Stearns were not ‘upfront’ payments from the Banks to Venice, and hence did not construe new borrowing or a speculative risk under Italian law.

  3. Limitation Period: Since Venice could have recognized a worthwhile claim against the validity of the swaps as early as 2010, the court found claims for restitution for payments made before 15 August 2013 to be time-barred under English law.

  4. Change of Position Defence: The court reinforced that an anticipatory change of position defence is available against a local authority’s restitution claim for payments made under a void contract, and there exists no stultification of public policy.


The decision of Banca Intesa Sanpaolo SpA & Anor v Comune Di Venezia is a landmark ruling illustrating the interaction between English and foreign law in determining contractual capacity and the validity of complex financial transactions. By clarifying the criteria for characterizing foreign law principles, the timing for the discovery of mistakes under the Limitation Act, and the application of change of position defence, the Court of Appeal has reaffirmed key doctrines of English private law and their application in disputes involving foreign entities. This case thus offers valuable insights into the mechanics of restitution claims and the safeguards against unjust enrichment in the international finance landscape for UK legal practitioners.

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