Olga Gutovska: more than 3 billion Euro of debt of Turin is due to be paid (re Dexia v Turin)

This is a note about a recent development of multi-jurisdictional litigation related to the debt of Turin (regarding the declarations in favour of Dexia).

Case: Dexia S.A. v Comune di Torino.

Dexia is a French banking corporation [the Creditor].

Turin is a municipality (and municipal authority) in Italy [the Debtor].

J Baker in his Judgment dated 18 June 2026 has granted the declarations (albeit not all of them) as requested by the Claimant. J Baker's view was that Turin's non-participation in the proceedings was a deliberate choice and the trial proceeded without the Defendant. The judgment follows a similar line of ratio & analyis in other proceedings related to similar circumstances (re Venezia etc).

The Defendant had no difficulty instructing lawyers and pursuing satellite litigation when and where it suited its own interests and ignored the English proceedings by choice; the Claimant succeeded in showing it has made all necessary steps to notify the Defendant of the proceedings, as well as the latest changes of the claim form and form of the declarations thought.

At trial J Baker analysed the concepts of capacity, alleged advisory duties and other issues as well as expert evidence of Professor Rimini on Italian law and Professor Cucurachi on derivatives.

J Baker by his Judgments has granted, among others, the following declarations:

(1) The execution and delivery of, and the performance of its obligations under, the Transaction Documents and any other documentation relating to the Transaction Documents, by the Defendant, does not, and did not at any material time, violate or conflict with any law applicable to the Defendant, any provision of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets.

(2) The execution and delivery of, and the performance of its obligations under, the Transaction Documents and any other documentation relating to the Transaction Documents, by the Defendant, does not, and did not at any material time, violate or conflict with any law applicable to the Defendant, any provision of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets.

(3) All applicable information that was furnished in writing by or on behalf of the Defendant to the Claimant and was identified for the purpose of Section 3(d) of the ISDA Master Agreement in Part 3(b) of the Schedule was, as of the date of the information, true, accurate, and complete in every material respect.

(4) In entering into the Transaction Documents and the Transactions, and on each date that a Transaction was amended, extended, or otherwise modified, the Defendant:

(a) was acting for its own account and made its own independent

decisions to enter into each of them and as to whether the Transaction

Documents and the Transactions were appropriate or proper for the

Defendant based upon its own judgment and upon advice from such

advisors as it had deemed necessary;

(b) did not rely on any communication (written or oral) of the

Claimant as investment advice or as a recommendation to enter into

the Transaction Documents and the Transactions, it being understood

that (i) information and explanations related to the terms and

conditions of the Transaction Documents and the Transactions would

not be considered to be investment advice or a recommendation to

enter into the Transaction Documents and the Transactions, and (ii) no

communication (written or oral) received from the Claimant would be

deemed to be an assurance or guarantee as to the expected results of

the Transactions.

(5) The Transaction Documents constitute the entire agreement and understanding of the parties with respect to their subject matter and supersede all oral communication and prior writings with respect

thereto.

J Baker also provided some background analysis repeating the view expressed in other similar cases that it is not open for a debtor to nullify the transaction only because it turned out that their choice of hedging technique turned out to be less efficient than a theoretical alternative hedging technique (or lack of such), which they did not pursue:

..."Its appreciation, with hindsight, that the cost of servicing its debt under the BOCs would have been lower (to date), if they had been left as they were, is no different than the appreciation a homeowner would have who took out a fixed rate mortgage in (say) early 2008, wanting cashflow certainty and no exposure to rises in interest rates, that as things turned out, a variable rate mortgage would have generated a substantially lower interest cost from 2009 onwards. Equally obviously, it cannot make a difference, without more, that Torino proceeded in two stages, initially issuing the BOCs with variable rate coupon, then from 2001, via the Transactions, moving towards and ultimately onto a fixed rate, rather than issuing the BOCs with the final interest profile it achieved, or something like it, in place from the outset" [emphasis added]

Olga Gutovska, managing partner at Gutovska & Partners, commented:

The debt of Turin, which is circa 3 Billion Euro as of July 2026, is due to be paid to the creditors. The Judgment of J Baker is following the principles long established in this area of law.

Credit: Olga Gutovska, Gutovska & Partners 2026