Déjà vu: Italian Supreme Court on Jurisdiction over U.S. Rating Agencies

Many thanks to Felix A. Koechel, researcher fellow of the Max Planck Institute Luxembourg for International, European and Regulatory Procedural Law. This contribution summarizes a presentation he made at one the Institute’s weekly seminars (the so called “Referentenrunde”), which are held every Wednesday from 2 p.m. to 4 p.m.

Prior to the German Federal Supreme Court’s decision in December 2012 (see here), the Italian Corte Suprema di Cassazione (Supreme Court) already in April 2012 was called upon to decide on Jurisdiction over damage claims brought by investors against rating agencies based in New York (Cassazione, 22 May 2012, No. 8076).

In January 2007 one of the three claimants, a stock company based in Bologna (Italy), purchased from another company based in London shares of a company based on the Cayman Islands. After the conclusion of the contract in London, the shares were pooled on the claimant’s bank account in Bologna, and subsequently transferred to two further corporations equally based in the region of Emilia-Romagna and acting as claimants. The decision to acquire the shares was allegedly motivated by positive ratings awarded by the defendants (two rating agencies based in New York) as to the financial standing of the issuer. There was, however, no contractual relationship or even direct contact between the claimants and the defendants. By July 2007 the shares had already lost 80 % of their initial nominal value while it was not before August and December 2007 that the initial ratings were downgraded. Therefore, the claimants sued the defendants in Bologna for damages allegedly suffered as a consequence of both the initial inaccurate rating and the tardive downgrading. The Court of first instance referred the question of jurisdiction to the Italian Supreme Court by means of the regolamento preventivo di giurisdizione (Article 41 of the Italian Code of Civil Procedure).

Although the facts of the Italian and the German case are similar, their outcomes differ considerably: The Italian Supreme Court declined jurisdiction on the grounds of Article 5(3) of Regulation (EC) No 44/2001. Not only is the application of the aforesaid Regulation noteworthy but the case more importantly gives an example of the problems arising from Article 5(3) Brussels I in case of merely financial damages.

Attentive readers of conflictoflaws.net know that according to Article 3(2) of Law No. 218 of 1995, in Italy the special rules of jurisdiction of the Brussels Convention apply even if the defendant is not domiciled in a contracting state (see here). Although it is controversial whether this reference should be read as referring to the Brussels I Regulation, both courts and scholars have clarified that to this date, and lacking the Italian legislator’s intervention, the reference has to be interpreted as designating the Brussels Convention (cf. Cassazione, 21 October 2009, No. 22239; cf. Pocar in Riv. dir. internaz. priv. proc. 2011, 628 ff.). It is therefore likely that the application of the Brussels I Regulation in the present case is due to the very specific wording of the question referred by the Bolognese court and may not be misinterpreted as a change in case law. Taking into consideration the continuity between the Brussels Convention and the Brussels I Regulation in the specific case of Article 5(3) this question should have been without prejudice to the Court’s decision.

In fact, Article 5(3) was the only ground of jurisdiction at hand that could have led to an Italian forum since the Italian legislator has refrained from introducing additional (exorbitant) fora. It is shown particularly in comparison with the German case that the progressive and courageous “Europeanization” of the national rules on international jurisdiction at that time came at the price of possible disadvantages for Italian claimants.

Regrettably, the Court does not address extensively the problems arising out of Article 5(3) in the case of financial damages. In line with the ECJ in Marinari (C-364/93), the Court narrows down the Article 5(3) notion of “place where the harmful event occurred” to the place of the initial damage. According to the Italian Court, this initial damage consists of the acquisition of the shares at an excessive price. Apart from that, the Italian Court neither refers to the principle of ubiquity nor to the relevant and more recent ECJ case law regarding financial damages in Kronhofer (C-168/02). While the localization of the initial damage in London can be well accepted, the Italian Supreme Court missed the chance to contribute to the discussion on the interpretation of Article 5(3) in case of financial damages. It is to be hoped that the financial crisis with its rising flood of claims against rating agencies will shed some light on the problem.

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About Marta Requejo

Marta Requejo is a senior researcher fellow of the Max Planck Institute Max Planck Institute Luxembourg for International, European and Regulatory Procedural Law. She obtained her law degree from the University of Santiago after spending a year at the University of Le Mans (France) as an Erasmus student; she holds a Doctorate (European Doctorate) from Santiago de Compostela University. Tenured lecturer since 2001, she qualified for access to senior professorship in September 2011. Her primary teaching and research interests are conflict of laws, international litigation, and international commercial law. She has been visitor for researching purposes at the Max Planck Institute on Foreign and Private International Law (Hamburg, Germany), the Institut Suisse de Droit Comparé (Lausanne, Switzerland), the Paris-Pantheon University and the BIICL; also visiting professor at the Paris-Panthéon University. So far she has published four monographs: "Ley local y forma de los actos en el Derecho internacional privado español", 418 pp; "Proceso en el extranjero y medidas antiproceso (antisuit injunctions)", 282 pp; "La cesión de créditos en el comercio internacional", 281 pp; "Violaciones graves de derechos humanos y responsabilidad civil", 369 pp. She is also author of several articles printed in collective works, and numerous papers in law journals, mainly Spanish ones, like the Revista Española de Derecho Internacional or Diario La Ley, but also in foreign magazins like The European Legal Forum or Era Forum. She belongs to the Group of research De Conflictu Legum.

One thought on “Déjà vu: Italian Supreme Court on Jurisdiction over U.S. Rating Agencies

  1. Giacomo Pailli

    Dear Felix,
    thanks for your piece. I have two small side-comments on the first part of your post.

    As far as the regolamento preventivo di giurisdizione is concerned, it was not the Tribunale di Bologna that referred the matter to the Corte di Cassazione (courts do not have this power in Italy, at least with reference to international jurisdiction). Rather, when the defendants appeared and objected that the Tribunale lacked jurisdiction, the plaintiffs made use of this special proceedings and brought the question before the Corte di Cassazione.

    Regardless, the Corte di Cassazione was not bound by the way in which the parties framed the question (iura novit curia). It was, thus, free to state that the Brussels Convention, and not the Regulation, applied to the matter.
    Now, the judgment is very short and the issue was not even considered by the Court. Hence, I think that the application of the Regulation is due more to sloppiness than to a change of approach.

    If you want to have a look at the decision (in Italian), here is a link:

    The second comment is that there are good scholarly contributions that calls into question whether art. 3 of l. 218/95 still points to the Brussels Convention, see, e.g., the convincing remarks of Pietro Franzina here on conflictoflaws.net


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