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Hunting titans: A&O loses out to City firm Seddons in High Court Italian derivatives dispute

City firm Seddons has won a long running battle at the High Court for the Italian public authority Comune di Prato in a four-year dispute against Allen & Overy-client Dexia Crediop, an Italian investment bank, over six derivative contracts.

The case examined the validity and unilateral termination of six derivative contracts regarding the public body’s debt restructuring 15 years ago. In a judgement handed down by Justice Paul Walker today (26 June), the court held the derivatives contravened article 30 of Italy’s consolidated law on financial markets and investment services.

Representing Comune di Prato was Seddons partner and head of the firm’s Italian desk Germana Lo Iacono-Smith, and by Italian-qualified Avvocato Edoardo Fabbi. The firm instructed 3 Verulam Buildings duo Jonathan Davies-Jones QC and Christopher Burdin.

Iacono-Smith said: ‘It is notable that this is the first such judgement of its kind which has been secured on merit, rather than settled out of court or lost because of a procedural defect. As such, it will have widespread implications for a whole host of banks and financial institutions in any current and future disputes around the validity of such derivatives contracts.’

Investment bank Dexia Crediop turned to Allen & Overy to handle it case which had a team including senior associate Helen Cowley that instructed Fountain Court duo Richard Handyside QC and Rupert Allen.

The Magic Circle firm has previously acted for Dexia Crediop in several disputes, including a successful jurisdictional challenge in 2010 also involving derivatives – that time its team was led by James Partridge in London and Massimiliano Danusso in Rome.

In relation to the most recent dispute, the Italian article stipulates for a contract on a placement of financial services to be effective, if placed at a distance, it must be suspended for seven days from the date of execution. During that time, the local authority has the right to withdraw from the contract without facing any penalty from the bank.

Justice Walker found the article was violated because the Comune was subsequently not provided with a cooling-off period, rendering the contract void. The amount of compensation awarded as part of the judgment will now be decided following further assessment by the Court.