Clifford Chance
Derivatives with Italian local authorities: Council of State rules against the Province of Pisa
7 January 2013
In its decision no. 5032/2011 of 7 September 2011, the Council of State had ruled that a local authority could, subject to certain conditions, unilaterally revoke its decision to enter into certain derivative transactions, thus retroactively setting aside the transactions. The assessment whether the conditions for the unilateral annulment had been met in the case which was the subject matter of the judgment (about derivative transactions entered into between the Italian Province of Pisa and certain credit institutions) had been deferred to a subsequent decision of the Council, to be made with the benefit of technical analysis by court-appointed experts. Whether or not the transactions in question embedded any 'implicit costs' – on which the court-appointed experts would need to opine – appeared to be the critical issue.
This decision has now been handed down (Council of State's decision no. 5962/2012 of 27 November 2012), the Council of State ruling that the Province of Pisa was not entitled to unilaterally revoke its resolution in the specific circumstances, notwithstanding that the transaction did in fact bear implicit costs in the experts' view.
