Derivatives, simple Irs must have implicit elements and costs declared
In Rome, two rulings established the nullity of plain vanilla swaps
4' min read
4' min read
The apparently simplest and most transparent derivatives (the plain vanilla ones) do not escape the trap of nullity if they lack the essential elements of determinability of the contractual object. Two recent rulings (Rome Court of Law and Court of Appeal) have established the nullity of two interest rate swaps (Irs, involving the simple exchange of a fixed rate against a variable one) for the absence of clear parameters in the determination of the Mark to Market (Mtm) and for the presence of undeclared implicit costs. The two disputes (coordinated by the company Martingale Risk) concern Banca Nazionale del Lavoro (Bnl) and Monte dei Paschi di Siena (Mps) and, so far, have seen the victory of the clients. On the derivatives-related cases, however, the orientation continues to be not uniform in the various judicial venues.
Bnl: Mtm and hidden costs
The Court of Appeal of Rome (Judgement No. 3624 of 10 June 2025) completely overturned the first instance judgement, giving a Roman company in the real estate sector the right to a dispute against Bnl (probably intending to appeal to the Court of Cassation). The company had subscribed an Irs in 2005 apparently aimed at hedging the interest rate risk on a variable rate loan. The transaction, however, had turned out to be a financial boomerang, generating losses in excess of EUR 550,000.
The crucial point of the appeal decision concerns the failure to indicate the method of calculating the Mtm in the contract. The Court emphasised that this omission represented a fatal flaw that prevented the investor from assessing the real economic value of the transaction, compromising the rationality of the negotiation.
The Capitoline Court's reasoning is perfectly in line with the consolidated orientation of the Supreme Court, in particular with the ruling of the United Sections No. 8770/2020, according to which the impossibility of determining or calculating the Mtm renders the contract null and void for indefiniteness of the object.
In addition to the problem of market value (Mtm), the Court identified a second critical profile in the presence of implicit undeclared costs, hidden in the determination of the fixed rate applied to the company. These hidden charges altered an essential element of the contract, contributing to the declaration of nullity. The result? BNL was condemned to return 557,000 euro to the company, an amount that includes both the losses actually suffered and the hidden costs ascertained by the court-appointed expert witness (Ctu).
