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Allen & Overy secures victory for Dexia in the English Court of Appeal in Italian local authority swaps claim

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Partridge James
James Partridge

Partner

London

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Biggin Helen
Helen Biggin

Counsel

London

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Nettleton Sophie
Sophie Nettleton

Senior Associate

London

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15 June 2017

​The Court of Appeal today handed down judgment in the case of Dexia Crediop S.p.A. -v-  Comune di Prato ([2017] EWCA Civ 428) holding that interest rate swaps between the parties were valid and binding and that Prato had full capacity to enter into them.  Overturning the decision of the High Court, the Court of Appeal also held that Article 3(3) of the Rome Convention did not apply so as to engage mandatory Italian laws.

This is a landmark ruling in the long-running dispute between Dexia and Prato with significance for many other similar disputes involving Italian local authorities and financial institutions where “lack of capacity” arguments have frequently been raised. The Court of Appeal’s approach to the scope of Article 3(3) of the Rome Convention will be of interest to parties concerned about the potential for mandatory rules of local law to undermine the parties’ agreed choice of law.
 
Dexia was represented by Allen & Overy partner James Partridge, with assistance from senior associate Helen Biggin and associate Sophie Nettleton, all based in London. Massimiliano Danusso and Francesca Marchetti of Bonelli Erede Pappalardo advised on Italian law.
 
James commented: “The decision is of significance to any financial institution facing allegations of lack of capacity or defences based on local mandatory laws.  This decision further confirms the Court’s approach to the scope of Article 3(3), emphasising that swaps entered into on ISDA form documentation as part of a wider chain of back-to-back transactions are to be regarded as taking place in a market which is inherently international.
 
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