This content is from: Local Insights

Annulling financial transactions

Under Article 21-nonies of Law 241 of August 7 1990 the annulment of unlawful administrative decisions may be ordered by the public entity (a region or other local authority, for instance) that approved them, provided the annulment is taken on the basis of public interests, within a reasonable period of time and taking into account the interests of any person subject to the relevant administrative decision.

Administrative decisions are unlawful in the case of (i) non-compliance with the law, (ii) misuse of power or (iii) incompetence. In addition Article 1, paragraph 136 of Law 311 of December 30 2004 provides that public entities may also declare unlawful administrative decisions void to reduce the costs and charges paid by the relevant public entity.

In the case of the annulment of unlawful administrative decisions pertaining to transactions entered into with private counterparties, the counterparties must be indemnified against any damage deriving from the annulment. This annulment may not be ordered after the lapse of three years from the decision.

The annulment of unlawful administrative decisions should be the last resort, should other actions aimed at avoiding the annulment of the unlawful administrative decision not be available.

Recently a few local authorities have been trying to annul their internal authorisations for financial or derivative transactions entered into with banks, on the assumption that they were unlawful for not complying with Italian legislation. The power of local authorities to annul authorisations that are purported to be unlawful is limited to administrative authorisations and decisions, and cannot automatically render the relevant contracts void.

Any decision on the validity and effectiveness of contracts is attributed to Italian or English courts, depending on the jurisdiction chosen by the parties in the relevant agreements. So the route chosen by Italian local authorities may not always be easy and without costs implications for them.

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