Dexia Crediop SpA v Provincia di Pesaro e Urbino

Contracts governed by an express choice of English law remain subject to that choice unless a later choice of law is demonstrated with reasonable certainty. References to foreign regulatory provisions or formation rules do not, without more, replace the chosen law. Under article 3(3) of the Rome Convention, the use of standard international swap documentation is itself an international element capable of preventing the application of otherwise mandatory local rules.

On summary judgment, the court may determine short questions of law and construction where the evidence is sufficient, but should not finally resolve a genuinely conflicting issue of foreign law. Declaratory relief may be granted where there is a real dispute and the declarations serve a useful and just purpose.

Dexia and the Italian municipal authority entered into two interest-rate swaps under an ISDA Master Agreement and Schedule governed by English law. Pesaro later brought proceedings in Italy alleging, among other matters, that the transactions were invalid under Italian law, lacked the necessary municipal approval and breached Italian rules governing local-authority derivatives.

Dexia brought English proceedings seeking declarations concerning the transactions’ governing law, validity, compliance with Italian law, authority, purpose and contractual representations. Pesaro acknowledged service but did not challenge jurisdiction under CPR Part 11, did not serve a defence and did not appear at the summary judgment hearing.

The central issues were whether the transactions were governed by English law, whether Pesaro had a realistic prospect of establishing non-compliance with Italian law or lack of capacity, and whether the requested declarations should be granted.

1. Summary judgment and absence. Pesaro had knowingly chosen not to participate despite proper service. The court therefore proceeded in its absence. The summary judgment principles in Easyair Ltd v Opal Telecom Ltd and Abaidildinov v Amin applied. The court could decide short questions of law or construction where the evidence was sufficient, but should not conduct a mini-trial.
2. Governing law. The Master Agreement and Schedule expressly selected English law and constituted a single agreement covering the transactions. References to Italian regulatory provisions and Article 1329 of the Italian Civil Code concerned the circumstances or mechanics of contracting and did not demonstrate with reasonable certainty a later choice of Italian law under article 3(2) of the Rome Convention.
3. Mandatory rules. The use of the standard multi-currency, cross-border ISDA documentation supplied an international element. Article 3(3) of the Rome Convention was therefore not engaged so as to displace the express choice of English law. The court declined to rely on Dexia’s alleged back-to-back swaps because they were not before it, but held that the ISDA documentation alone was sufficient.
4. Italian-law challenges. On the evidence, the transactions did not constitute indebtedness of the type identified in the Cattolica decision, requiring approval under Article 119(6) of the Italian Constitution or Article 42 TUEL. Even if approval had been required, the relevant Provincial Council resolutions supplied it. Article 41 of Law No. 448/2001 did not apply to these transactions as a refinancing or restructuring of existing loans.
5. Decree 389 specifically permitted collar interest-rate swaps. The court summarily rejected the challenges based on the alleged increasing payment profile and the restructuring of the First Transaction. It declined, however, to determine summarily whether Article 3(2)(d) required equivalence between the cap and floor values, because Professor Gentili’s opinion conflicted with Italian decisions and the issue was better left for trial.
6. Capacity and validity. The alleged Italian-law defects concerned material validity rather than Pesaro’s capacity. Under article 8(1) of the Rome Convention, material validity was governed by English law. No arguable English-law ground of invalidity was identified.
7. Declarations. Declaratory relief was useful and just because there was a real dispute concerning the transactions and the declarations could assist in resolving the Italian proceedings. Summary judgment was granted for Declarations 1, 3, 4, 5, 8, 9, 11 and 12; Declaration 6 was limited to specified authority and resolution documents; Declaration 7 was granted except regarding Article 3(2)(d) of Decree 389 and the related part of the 2004 Circular. Declarations 13–16 were limited to the fact that the relevant representations had been made.

First-instance decision. No appellate history was stated in the judgment.