Dexia SA v Comune di Torino is the latest decision in the Italian swaps litigation, which has thrust the financing of various Italian local authorities using the ISDA Master Agreement into the spotlight of the English courts. In the late 1990s and early 2000s, Torino, one of Italy’s wealthiest municipalities, issued substantial variable-rate bond debt (the “BOCs”), including debt used to fund infrastructure investment for the 2006 Winter Olympics. Between 2001 and 2006, it entered into interest rate swaps with Dexia (via its Italian subsidiary, Crediop) under a 1992 multi-currency cross-border ISDA Master Agreement governed by English law. The swaps matched around €400 million of the BOCs and converted Torino’s variable-rate exposure initially into a collared variable rate (bounded by a cap and floor) and subsequently into fully fixed payments through to 2030. The English court described the arrangement as economically equivalent to moving from a variable-rate to a fixed-rate mortgage, with no upfront payment and no alteration of the underlying indebtedness.
After a prolonged period of low interest rates following the financial crisis, the swaps developed a significant negative mark-to-market value. In June 2024, Torino commenced proceedings in the Court of Turin seeking damages equal to the net payments under the 2006 swaps or declarations that they were void under Italian law, relying on lack of capacity, invalidity and regulatory breach. Dexia responded in October 2024 by issuing proceedings in the English Commercial Court for declaratory relief as to the English court’s jurisdiction to hear disputes arising out of the agreement between the parties and the validity of the swaps. As has become something of a common theme in the Italian swaps cases, Torino initially contested jurisdiction in England but then withdrew from the English proceedings, choosing instead to pursue its case in Italy.
Jurisdiction: exclusivity confirmed, but not finality
The case has produced several important judgments.
Butcher J’s 2025 judgment is a leading authority on the 1992 ISDA jurisdiction clause post-Brexit. Clause 13(b) of the multi-currency cross-border Master Agreement makes English jurisdiction exclusive as against “Contracting States”, as defined by reference to s.1(3) CJJA and any modifications to the CJJA “for the time being in force”. When the swaps were entered into, Italy was a Contracting State by virtue of the Brussels Convention. The key issue was whether Italy remained a Contracting State following the UK’s withdrawal from the EU.
Butcher J held that “for the time being in force” required the court to determine whether the relevant state was a “Contracting State” at the time of the litigation, rather than when the contract was entered into. Italy remains a Contracting State because both Italy (via the EU) and the UK are bound by the 2005 Hague Convention on Choice of Court Agreements. Accordingly, English jurisdiction is exclusive vis-à-vis Italy, even for swaps predating the UK’s accession to the 2005 Hague Convention, and Torino’s Italian proceedings breached the jurisdiction agreement.
He further held that clause 13(b) covers pre-contractual and tortious claims and that the Italian rules on non-disposable rights were a matter of the material validity of the jurisdiction agreement, which is governed by English law, rather than capacity — an argument that Torino had raised in Italy — which would have been governed by Italian law. As a matter of English law, the clause is effective.
For practitioners, the key takeaway is that the English courts will treat the 1992 clause as exclusive against counterparties in states bound by the 2005 Hague Convention at the time of the litigation. However, foreign courts may, of course, take a different view.
Butcher J’s judgment, which concerned only the 1992 ISDA MA jurisdiction clause, also does not provide any guidance on the operation of the 2002 ISDA MA jurisdiction clause. The latter does not include “for the time being in force” wording and would appear to operate non-exclusively in most situations.
Merits: capacity and Civil Code arguments addressed
The other key judgment to come out of the case is Andrew Baker J’s June 2026 merits judgment, in which he comprehensively found in favour of Dexia SA and granted the majority of the relief sought. As Torino chose not to participate in the English proceedings, Baker J considered and rejected each of the arguments that Torino had raised in the parallel Italian litigation. Torino’s arguments in Italy were consistent with the principal arguments that Italian local authorities have advanced since the Italian Supreme Court’s decision in Cattolica in 2020.
The key arguments that Baker J addressed were:
- Governing law: The court held that Torino’s capacity is governed by Italian law, but the material validity of the swaps is governed by English law under Article 3(1) of the Rome Convention. Article 3(3), which can import mandatory domestic rules where all elements are connected with one country, was inapplicable. The use of the multi-currency cross-border ISDA and foreign banks in back-to-back hedging created sufficient international elements, so the swaps could not be treated as purely Italian.
- Capacity: Torino argued that the swaps were speculative and ultra vires. Applying the CONSOB test, the court held that swaps that correlate with underlying borrowing and are aimed at risk reduction are hedging, not speculation, even with a negative mark-to-market at inception. This reinforces the Court of Appeal’s approach in Venezia.
- “Impermissible indebtedness”: Torino further contended that the swaps constituted forbidden “indebtedness” under Article 119(6) of the Italian Constitution. The court rejected this: there was no upfront payment, no extinguishment or modification of the BOCs and no structural borrowing. Rolling a negative MTM into new swaps did not amount to implicit indebtedness.
- Authority and ratification: Torino also argued that the transactions had not been properly authorised under Italian law. However, the court pointed to the council resolutions authorising the transactions, the officials’ ostensible authority under English law to bind Torino in those transactions and the two decades of performance and budgetary approvals incorporating swap cash flows as evidence that the transactions had been properly authorised and ratified.
- No advisory duty: In the Italian proceedings, Torino had also argued that a tender presentation to Torino and Torino’s acceptance letter gave rise to an advisory contract. The English court held that the non-reliance and entire agreement clauses in the ISDA Schedule negated any advisory relationship. The court noted that Torino had independent advisers. Even if a duty had existed, causation and loss were not made out: the court found that Torino had already decided to fix its rates, and expert evidence showed that it could not have obtained a better deal.
- Compliance with Italian regulations: Arguments that the transactions were void under the Italian Civil Code based on non-disclosure of mark-to-market values, implicit costs and probabilistic scenarios were rejected, with the court relying on two recent Italian Supreme Court decisions that confirmed the requirements for a derivative to be valid under the Italian Civil Code, limiting the scope of Cattolica. For hedging swaps of the type in issue, such disclosure is not a condition of validity; additional disclosure is required only where complexity prevents an understanding of risk from the contract itself. The English judgment thus aligns with modern Italian case law.
- Torino was a professional investor: Finally, the court held that Torino was a professional investor under CONSOB rules, based on a written declaration to another bank. The significance of this is that it disapplies certain investor-protection rules that would otherwise have required enhanced disclosure by Dexia SA.
- Contractual indemnity: The court also held that Torino’s breach of the 1992 ISDA MA exclusive jurisdiction clause triggered a contractual indemnity, entitling Dexia to recover its litigation expenses.
Practical implications for practitioners
On jurisdiction, the English courts have shown a willingness to uphold the 1992 multi-currency cross-border jurisdiction clause as exclusive in English proceedings against counterparties in states bound by the 2005 Hague Convention. Parallel foreign proceedings, of course, remain a possibility. A foreign court is not bound by an English court’s interpretation of the clause and will apply its own rules on jurisdiction.
While the English courts have held the 1992 jurisdiction clause to be exclusive, the English court’s position is less certain for transactions documented under the 2002 ISDA Master Agreement. The 2002 clause makes English jurisdiction exclusive only where the foreign court is bound to apply Article 17 of the 1968 Brussels Convention or the 1988 Lugano Convention — both long since superseded. Unlike the 1992 clause, the 2002 form contains no “for the time being in force” mechanism that would update the reference to current conventions. For new trades, ISDA’s 2018 Choice of Court and Governing Law Guide or bespoke wording may offer greater certainty.
On the merits, Torino underlines the value of clear contemporaneous records. The court examined hedging purpose, correlation with underlying exposures, the presence of independent advice and international elements in the transaction structure. Non-advisory clauses, entire agreement clauses and evidence of professional investor status also featured prominently in the court’s analysis.
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