A recent Italian ruling looks set to deter banks from
contracting with Italian local authorities.
The ruling, handed down on September 7, allows Italian
authorities to autonomously annul a contract if any
irregularities are found to have affected the administrative
process resulting in the decision.
According to Fabio Guastadisegni, head of the litigation
department at Clifford Chance in Italy, "this important ruling
means the municipality can stop the payment and the rights of
the bank as counterparty are disregarded."
The onus is then on the bank to start proceedings to enforce
the validity of the derivative transaction.
An unusual precedent
The precedent is contrary to the application of the Isda
The litigation centres on...