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In Deutsche Bank AG London v Provincia di Brescia [2024] EWHC 2967 (Ch), the claimant banks sought declaratory relief from the English High Court in respect of two interest rate swap transactions and two settlement agreements they had entered into with Brescia, which Brescia was seeking to challenge in Italy. The Court granted the declaratory relief, rejecting Brescia’s arguments as to capacity and authority to enter into the transactions and settlement agreements and in doing so affirmed the validity of both the transaction documents and the settlement agreements.
This case marks the latest episode in a series of disputes between banks and Italian public authorities in relation to interest rate swaps, in which Italian authorities have sought to rely on issues of capacity or authority to avoid agreements underpinning derivative transactions entered into prior to the Global Financial Crisis. This case applied a recent Court of Appeal decision (Banca Intesa Sanpaolo and Dexia v Comune di Venezia [2023] EWCA Civ 1482) (see our previous article on this case here).
Seeking to refinance its debt, Brescia entered into master agreements with the banks in 2006 and, pursuant to those agreements, entered into the transactions. The master agreements included English governing law and exclusive jurisdiction clauses. In 2015, Brescia indicated that it intended to seek suspension or cancellation of the transactions. Proceedings followed in England and Italy and in 2017 the parties entered into settlement agreements. The settlement agreements settled any claim by Brescia in relation to the validity and effectiveness of the transactions.
In 2020, the banks became aware of reports that Brescia was seeking to set aside the settlement agreements and challenge the transactions on the basis of validity and capacity before the Italian Courts. The banks brought proceedings in England, seeking declaratory relief in relation to the validity of the transaction documents and the settlement agreements.
The court granted declaratory relief in favour of the claimant banks as to the validity and effectiveness of the transaction documents and the settlement agreements. It also made declarations that the banks were entitled to damages for loss, including legal fees in England and Italy, in respect of breaches of the settlement agreements and the transaction agreements. It found:
If you would like to discuss this case further or have any questions, please get in touch with our Banking Litigation team.
You can read more about our practice here. The views and opinions expressed here are the personal opinions of the author(s) and do not necessarily represent the views and opinions of Linklaters.
4 February 2025
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