Banca Nazionale Del Lavoro SpA & Ors v Provincia Di Catanzaro

Summary judgment may be granted on declaratory issues where the defendant has no realistic prospect of showing that the underlying facts or matters are wrong and there is no compelling reason for trial. A party’s deliberate non-participation does not create a tactical advantage. The court may proceed in its absence where notice, waiver and the futility of adjournment are established, subject to fairness.

For English-law ISDA transactions entered into by an Italian local authority, Italian public-law objections will not defeat the contracts where the exclusive English jurisdiction clause applies. A vanilla hedge is not speculative where it reduces an existing risk and closely correlates with the exposure. Reprofiling existing debt does not itself create new indebtedness, and permitted upfront proceeds used for investment may satisfy the applicable investment-funding restriction.

Three banks sought permission to amend their claims, permission to apply for summary judgment, and summary judgment concerning interest-rate hedging transactions entered into with Provincia di Catanzaro. The claims sought declarations as to the transactions’ validity and enforceability, together with money judgments.

Catanzaro had been validly served but filed no acknowledgement of service or defence, did not challenge jurisdiction, and did not attend the applications. It had instead taken administrative self-redress steps in Italy and commenced related Italian proceedings. The central issues were whether the English court could proceed in Catanzaro’s absence and whether Italian arguments concerning jurisdiction, capacity, authority and validity gave Catanzaro any realistic prospect of defending the claims.

1. Disposition. Permission was granted to amend the statements of case and to apply for summary judgment. Summary judgment was granted substantially in the terms sought, with some broad or insufficiently explained declarations refused. Certain non-liability declarations were left for possible determination at trial.
2. Absence and permission. Applying the principles in R v Jones [2001] EWCA Crim. 168 to civil proceedings, the court could proceed because Catanzaro had been validly served, knew of the proceedings and applications, had deliberately declined to participate, and would not be assisted by an adjournment. The court nevertheless had to proceed fairly. Permission under Civil Procedure Rules 1998 CPR 24.4(1) was appropriate because Catanzaro had an opportunity to participate, including to challenge jurisdiction. The greater enforceability of a reasoned summary judgment than a default judgment abroad was a proper consideration.
3. Summary judgment test. Under CPR 24.3, the question was whether the proposed defences had a realistic rather than fanciful prospect of success and whether any compelling reason required a trial. For declaratory relief, the court considered the underlying facts or matters and granted declarations where Catanzaro had no real prospect of showing that they were wrong: Abaidildinov v Amin [2020] EWHC 2192 (Ch).
4. Jurisdiction. The exclusive English jurisdiction clauses covered disputes concerning the validity and enforceability of the transactions. Italian administrative self-redress could not alter that contractual allocation. Catanzaro had not challenged English jurisdiction and its proposed TAR arguments could not determine the private-law consequences of the contracts.
5. Capacity and speculation. A derivative was not speculative where it was entered into to reduce an existing risk and closely correlated with the underlying exposure. The transactions matched the underlying debt in notional amount, maturity and cash flows. Their cash-flow and interest-rate components were a straightforward hedge, not speculative derivatives.
6. Indebtedness, authority and validity. Reprofiling existing repayments did not create new borrowing or additional resources. Only the upfront payments could potentially constitute indebtedness, and those payments were permitted and allocated to specified investment expenditure. Any authority defect was immaterial under the English governing law because the Manager had ostensible authority and Catanzaro had ratified the transactions through prolonged performance and approval of audited accounts. Italian mandatory-law objections did not displace English law under Article 3(3) of the Rome Convention.
7. Final orders. The transactions were valid, binding and enforceable in accordance with their terms. Catanzaro was bound by the contractual representations, which were true and accurate. The litigation remained live only in relation to the declarations identified by the court as unsuitable for summary determination.