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What should lawyers take from the recent judgment in Dexia Crediop SpA v Comune Di Prato? Matteo Acciari and Luca Zamagni, of Axiis Legal Network and experts in financial derivatives, provide their view on the case and its impact on derivative transactions.
Dexia Crediop S.p.A. v Comune di Prato  EWHC 1746 (Comm)
The main claim, made by the Italian bank Dexia Crediop S.p.A. against the Italian municipality of Prato, was to ascertain the validity and enforceability of six interest rate swap transactions executed by the parties between 2002 and 2006. These transactions were governed by a master agreement drafted by the International Swaps Dealers Association (ISDA) and were to be paid by the municipality in instalments, the latter suspended since 2010. The judgment accepted the defendant’s arguments that none of the six swaps was valid and enforceable, as they did not comply with mandatory provisions of Italian law. As such, Dexia’s main claim failed.
This case raised a large number of issues of Italian public and financial law and the issue for the English judge was to rule in a case where the ISDA Master Agreement agreed by the parties selected English law as the sole governing law of the transactions and of any relevant claim.
The key issues of the case concerned the validity of the swap transactions and the liability of the financial intermediary for an alleged contravention of Italian law. These issues were introduced by the defendant to resist the main claim of Dexia. It was common ground that, irrespective of the English governing law clause of the master agreement, Prato could rely both on the Italian regulation limiting access of Italian local authorities to the financial markets (Italian Budget Law no 44/2001 and Decree no 389/2003 enacted by the Italian Ministry of Economics), and on the domestic regulation on the provision of financial services and related transactions set
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