On 18 June 2026, Andrew Baker J handed down judgment ([2026] EWHC 1401 (Comm)) upholding Dexia’s claim for declarations in respect of €320 million in interest rate swaps entered into with the Municipality of Torino under a 1992 ISDA Master Agreement. The Judge comprehensively rejected Torino’s various arguments in support of its €150 million loss claim against Dexia in Italy, finding that the transactions were valid and binding, and that Dexia had not acted wrongfully in proposing and entering into those derivatives.
The judgment is the most recent decision in a now decade-long line of cases arising from interest rate swaps entered into with Italian local authorities prior to the Global Financial Crisis. Following Brexit and the Court of Appeal’s decision in Venezia, Italian local authorities have frequently commenced claims challenging the derivatives in Italy, notwithstanding English governing law and exclusive jurisdiction clauses. Torino commenced such proceedings in Italy in 2024, challenging several transactions entered into with Dexia between 2001 and 2007 which substituted its variable rate exposure on five underlying bonds for collared and, later, fixed interest rates.
Last July, Butcher J gave summary judgment declaring that the English courts retained exclusive jurisdiction notwithstanding Brexit, and ruling that the Italian proceedings brought by Torino were wrongfully brought (see previous update here). He therefore directed that Dexia’s claim proceed to trial.
At trial, Andrew Baker J found that the transactions were valid and binding hedging transactions, building on existing English authority in Venezia, Catanzaro and Brescia: Torino had capacity to enter into the swaps, those who acted on its behalf had actual and ostensible authority to do so, and Torino’s Municipal Council had repeatedly ratified them in any event. The Judge rejected Torino’s argument that Dexia had entered into, and breached, an advisory contract in relation to the transactions. He further ruled that, although irrelevant to the validity of an English law contract, Dexia had complied with various mandatory rules of Italian financial services law.
The Judge also considered the impact of recent developments in Italy, including two 2026 Court of Cassation decisions which clarified its landmark Cattolica decision of 2020 (upon which many of Torino’s arguments were based). These decisions made clear – consistently with the view taken by Cockerill J in Busto Arsizio – that the Cattolica decision concerned the requirements for entering into speculative transactions and financial bets, and had no application to swaps which precisely hedged underlying indebtedness by substituting the interest rate thereon (as in Torino’s case).
Finally, the Judge ruled that Torino’s claim in Italy for damages calculated by the gross value of the transactions was misconceived, as counterfactually it would always have entered into an equivalent, or less advantageous, hedging transaction to substitute its variable rate exposure for fixed rates, and it had therefore suffered no recoverable loss.
Andrew Baker J also awarded Dexia its costs on the indemnity basis.
Andrew Lodder and Matthew Hoyle acted for Dexia, instructed by Bonelli Erede Lambardi Pappalardo LLP.