Banca Intesa Sanpaolo SPA v Comune Di Venezia

JurisdictionEngland & Wales
JudgeMr Justice Foxton
Judgment Date14 October 2022
Neutral Citation[2022] EWHC 2586 (Comm)
CourtQueen's Bench Division (Commercial Court)
Docket NumberCase No: FL-2019-000012
Between:
(1) Banca Intesa Sanpaolo SPA
(2) Dexia Crediop SA
Claimants
and
Comune Di Venezia
Defendant

[2022] EWHC 2586 (Comm)

Before:

Mr Justice Foxton

Case No: FL-2019-000012

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS (ENGLAND AND WALES)

KING'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Jasbir Dhillon KC, Fred Hobson and Tom Wood (instructed by Pinsent Masons LLP) for the Claimants

Raymond Cox KC, Simon Paul and Marcus Field (instructed by Osborne Clarke LLP) for the Defendant

Hearing dates: 23, 27–30 June, 4–7, 11–14 and 19–21 July 2022

Further written submissions: 9, 15 and 21 September 2022

Draft judgment to parties: 3 October 2022

Approved Judgment

I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

THE HONOURABLE Mr Justice Foxton

Mr Justice Foxton

This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be Friday 14 October 2022 at 10:00am.

Mr Justice Foxton

A INTRODUCTION

1

In this case:

i) The Claimants ( the Banks which expression, as the context requires, also extends to the Claimants' predecessors in title) seek declarations that certain interest rate swap ( IRS) transactions ( the Transactions) which they say they entered into with the Defendant ( Venice) on the terms of the 1992 ISDA Master Agreement are valid and binding, and alternative relief in contract and tort if it is found they are not.

ii) Venice seeks declarations that the Transactions are not valid and binding (and consequential relief in unjust enrichment), and alternatively relief in contract and tort if it is found that they are.

2

Behind that simple symmetry lurks a complex set of questions raising disputes of pure fact, and of Italian and English law, some of them with potentially profound implications for the sanctity of English law contracts. By way of a very short introduction to those issues:

i) Venice contends that, for various reasons, it lacked the substantive power to enter into the Transactions as a matter of Italian law, and that, applying English conflict of law principles, that means that it did not have capacity to enter into the Transactions and that they are not valid.

ii) The Banks deny that the entry into the Transactions contravened any provisions of Italian law, on the basis of arguments as to the effect of Italian law and its application to the facts of this case, and further deny that any such contravention would deprive Venice of capacity to contract as a matter of English conflict of laws principles in any event.

iii) Venice also contends that the Transactions breached various rules of Italian law which have the status of “mandatory rules of law” for the purposes of Article 3(3) of the European Union Convention 80/934/EEC ( the Rome Convention) and that as a result the Transactions are void and/or unenforceable.

iv) On this basis, Venice claims restitution of the net amounts paid under the Transactions to date. The Banks contend that they have a defence of change of position to these claims, and that Venice's claims are time-barred.

v) If the Transactions are valid and binding, Venice alleges that the Banks owed Venice a non-contractual advisory duty to assess the suitability of the Transactions, which was breached, and that Venice has suffered loss as a result.

vi) If the Transactions are not valid and binding, the Banks allege that Venice was in breach of various contractual duties or is liable to it in respect of various misrepresentations and/or misstatements, for which they claim damages.

B THE EVIDENCE

3

There was evidence from six witnesses of fact.

4

For the Banks, I heard evidence from:

i) Mr Samir Belarbi, who at the relevant time was Head of the Debt Management Desk in the Seecond Claimant's ( Dexia's) Public Finance Division in Italy;

ii) Mr Carlo Gabbi, who at the relevant time was Head of Local Authorities in the Debt Capital Markets Division in the Investment Banking Team at Banca IMI, which formed part of the Intesa Sanpaolo Group; and

iii) Mr Marino Binetti, who at the relevant time worked for Banca Intesa Infrastrutture e Sviluppo S.p.A. ( BIIS) as a relationship manager for the region of Northeastern Italy (which included Venice).

5

For Venice, I heard evidence from:

i) Mr Piero Dei Rossi, who was the Director of Venice's Finance Department between 2000 and 2017; and

ii) Ms Gabriella Mutti, who from 1999 to 2017 was the officer in charge of the Venice Loan and Mortgage Office and reported to Mr Dei Rossi.

Venice also put into evidence a statement from Mr Enzo Faro, who at the relevant time was a senior consultant at Brady Italia SRL ( Brady Italia). This evidence was not challenged by the Bank.

6

I am satisfied that the factual witnesses were generally doing the best they could to assist the court, although I felt that Mr Binetti's evidence, when confronted with emails showing that the Transactions had been priced in part to recover the First Claimant's ( Intesa's) contribution to the “Friends of Venice” fund, involved an attempt to distance himself from any involvement in or admitted recollection of an embarrassing subject (see [15] below). All of the factual witnesses faced the great difficulty of being questioned about events which had taken place, in the main, in and before 2007, some 15 years on. The need to reconstruct matters which they could no longer recollect, and to do so in the context of litigation in which the parties held strongly adversarial positions in a dispute with significant implications for both of them, inevitably influenced the reliability of the witness evidence. As is frequently the case, the evidential value of contemporaneous documentation and the inherent probabilities was significantly greater than the witnesses' oral evidence. That is as true of helpful answers drawn from a compliant witness under skilful cross-examination as it is of answers which support the case of the party who called the witness.

7

I heard expert evidence in three disciplines.

8

First expert evidence on Italian administrative/public law from:

i) Professor Torchia, a Professor of Administrative Law at the University of Study of Rome “Roma Tre”, called by the Banks; and

ii) Professor Domenichelli, who was formerly a President of Administrative Law at the University of Padua, called by Venice.

9

Second, expert evidence on Italian civil law from:

i) Professor Gentili, Emeritus Professor of Civil Law at Università Roma, called by the Banks; and

ii) Professor Sciarrone Alibrandi, a Professor of Banking Law and Financial Markets Law at the Università Cattolica del Sacro Cuore, called by Venice.

10

The Banks submitted that both of Venice's Italian law experts were “unsatisfactory”, suggesting that:

i) Professor Alibrandi had a tendency to give “lengthy and discursive answers which failed to engage with the questions”, provided answers which went beyond the questions asked and failed “scrupulously to maintain her independence”, adopting “the role of an advocate for Venice”;

ii) Professor Domenichelli was reluctant to give direct answers to straightforward questions and tended to add “non-responsive” elaboration, and the court could not be confident that he “fully understood his duty to maintain his independence rather than adopt a partisan approach”.

11

In my view, those criticisms are not made out:

i) As a preliminary matter, they do not make appropriate allowance for the difficulties of experts being cross-examined on highly technical subjects through the intermediation of translation, with the attendant possibility of the intended meaning being lost at both stages of the translation exercise.

ii) I accept that (as with many expert academics addressing their own discipline) there were occasions when Professor Alibrandi gave longer answers than the process of cross-examination in a tightly time-tabled trial can allow for. This was exacerbated by a tendency for the questions put to her to “parse” topics into smaller elements, which Professor Alibrandi did not regard as informative in isolation. However, she responded to the court's request that she seek to give shorter answers whenever possible. I am satisfied that in answering questions in the way in which she initially did, Professor Alibrandi was not seeking to avoid answering the questions or to be unhelpful – indeed quite the opposite.

iii) Further, there was something of a clash of “the two cultures” when Mr Dhillon KC sought to test the evidence of both Venice's Italian law experts by reference to its implications for the practicalities of entering into swap transactions or the security of such transactions, considerations which those experts did not regard as relevant to the issues they had been asked to address or within their expertise.

iv) I do not accept that any of the experts (on either side) deliberately sought to withhold what they believed to be relevant materials from the court.

v) The reality is, as I explain below, that the Italian Supreme Court has expressed views which would involve a fundamental restatement of a number of the issues of Italian law debated in this case. Many respectable Italian scholars approve of that development (as is clear from some of the commentaries placed before the court), and in any event are prepared to treat that reformulation as the best statement of Italian law as it now stands. Professors Alibrandi and Domenichelli are among their number. Others (including Professors Torchia and Gentili) do not share that view, believing that the Supreme Court has sought to derive legal doctrines from legislative sources which those instruments cannot support, and has interpreted other court decisions in ways they do...

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