Autonomous guarantee contract and compound interests clauses.
As is well known, the autonomous guarantee contract is characterized by the absence of a substantial link with the underlying contract (also so called guaranteed contract); on the contrary, such link is typical of the ordinary guarantee contract. In other words, under the autonomous guarantee contract the guarantor undertakes to pay without raising any objections related to the validity, enforceability or, as appropriate, the fulfilment of the performance of the underlying contract (the contract usually provides for clauses such as “payment upon first call” or “without objections”).
Over time, however, jurisprudence has mitigated the rigour of such contractual provisions. First of all, it has accepted that the guarantor may bring an action by invoking the so-called exceptio doli generalis, i.e. by contesting that the creditor has enforced the guarantee in an abusive or even fraudulent manner: that happens when the creditor requested the payment even though he was aware that said payment was not due (see, among the most recent, Court of Cass. 16.11.2007 no. 23786 and Court of Cass. 14.12.2007 no. 26262). Subsequently, the Supreme Court has held admissible – by the guarantor – also objections of nullity of the underlying contract for breach of mandatory rules pursuant to Art. 1418 (1) of the Civil Code or for illegality of the cause or object pursuant to Art. 1418 (2) of the Civil Code (see, among others, Court of Cass. 10.01.2018, no. 371, Court of Cassation, Joint Chambers, 18.02.2010, no. 3947, Court of Cass. 3.03.2009, no. 5044 and Court of Cass. 24.04.2008 no. 10652).
Now, according to a more recently consolidated orientation, the Court of Cassation has recognised the guarantor’s right to contest the nullity of individual clauses of the guaranteed contract and, in particular, those providing for anatocistic conditions (i.e. providing for compound interests) (see Court of Cass. 6.09.2021 no. 24011).
The ruling at stake is of particular interest because – as it is easy to understand – it allows a wider range of technical disputes in the context of a contract which, on the contrary, aims precisely at avoiding any type of dispute.
In fact, first the Court of first instance of Sassari and then the Court of Appeal of Cagliari rejected the guarantor’s objections, stating that the prohibition of compound interests is not absolute, but is allowed under the specific conditions set out by Article 1283 of the Italian Civil Code and Article 120 of the Consolidated Banking Law (in compliance with the provisions of Article 2, paragraph 2, of the CICR (the Inter-ministerial Committee for Savings and Credit) resolution of 9 February 2000, i.e. the same periodicity in the capitalisation of debit and credit interests). The provisions on compound interests – according to these judges – are therefore not mandatory rules and, consequently, the compound interests’ clauses are not invalid under Article 1418 (1) of the Civil Code.
The Court of Cassation, however, censured this principle, stating – on the contrary – that « where the particular legitimising conditions provided for by Article 1283 of the Civil Code do not apply, provided that the capitalisation is based on a customary practice, rather than on a normative one (the only one that admits a derogation from Article 1283 of the Civil Code pursuant to Court of Cassation, S.U. no. 21095/2004) must be considered prohibited due to the violation of a mandatory rule, that is dictated to protect a public interest » and the guarantor can also claim to such nullity. Such a decision is justified by the fact that « if the contrary solution were accepted, it would allow the creditor to obtain, through the guarantor, a result which the law prohibits« .
The above principle becomes even more relevant if one considers the relationship between the guarantor and the guaranteed party. Once the creditor has been paid, the guarantor – in the case of an autonomous guarantee contract as in that of an ordinary guarantee contract – has a right of recourse against the guaranteed party. But the latter is not obliged to perform if the guarantor failed to previously discharge its burden of contesting and raising all possible defences against the creditor.
It is therefore foreseeable that litigation on the subject of the autonomous guarantee contracts may increase significantly and that, with this in mind, the secured creditors will seek contractual formulations which will sterilise also such objections.
The Court of Cassation’s excessive formalism criticized by ECHR.
The European Court of Human Rights, in a recent judgment (ECHR, 28.10.2021, appeal no. 55064/11), has condemned Italy for violating the right of every individual « to have his or her trial fairly examined … by a court of law » (§ 6.1 of the European Convention on Human Rights).
In particular, the ECHR deemed that in one case the Court of Cassation had applied the principle of the so-called self-sufficiency of the appeal too rigidly and its consequent decision of inadmissibility of the appeal violated the fundamental right to a fair trial.
The principle of self-sufficiency of the appeal has been interpreted by the Supreme Court, starting from the analysis of the content of the appeal established by art. 366 of the code of civil procedure and concluding that the appeal – in order to include all the elements necessary for the decision – must literally contain not only the parts of the judgment that are under dispute, but also the text of the documents or deeds that form the basis of the appeal, specifically indicating the references to the text (number of the document, paragraph, page, etc.). This principle addresses the need for clarity and uniqueness of the objections and to enable judges to reply in as quickly and complete a way as possible.
The ECHR acknowledges the merits of the interests that underly the principle of self-sufficiency, and values both the nature and characteristics of the judgments of legitimacy, as well as the necessary preparation and accuracy of the lawyers admitted to practice before the higher courts. However, compliance with these requirements must be examined carefully and flexibly with reference to each individual case and cannot be transformed into a « trap » that excludes examination of the appeal when, on careful reading, all its elements are actually present.
In other words, the ECHR, does not contest the principle in itself (in fact – out of the three joined appeals that were the subject of its decision – only one was upheld, while no violation was found in the other two), but its excessively formalistic application.
In this specific case (the « Sutti » case), the case originated from the termination of two leases of properties for commercial use, ordered by the Court of Catania and confirmed by the Court of Appeal, with rejection of the tenant’s counterclaim for payment of goodwill indemnity. The subsequent appeal to the Court of Cassation was declared inadmissible (Court of Cassation no. 4977 28.02.2011) because it « does not comply with the above principles, since the five grounds on which it is based do not include a heading indicating the flaws complained of and references to the cases governed by art. 366 of the code of civil procedure, and there is no reference or indication of the documentation on which the supporting arguments are based« .
On the contrary, the ECHR held that « the reading of the appellant’s appeal to the Court of Cassation made it possible to understand the subject matter and development of the case before the courts of merit, as well as the grounds of appeal, both in terms of the legal basis (the type of criticism with reference to the cases provided for in Article 360 of the CPC) and the content, through references to parts of the judgment of the court of appeal and the relevant documents cited in the appeal to the Court of Cassation itself » and concluded, therefore, that the decision of the Supreme Court violated the appellant’s right to a fair examination by the courts.
Allow me a consideration regarding this decision (and on the day after the approval of the delegated law for the reform of the civil procedure): the problem regarding an excessive workload of judges, in particular at the Court of Cassation, as well as that of the excessive duration of trials – problems which are at the basis of the application of the principle of self-sufficiency – are evident to all: In order to solve them, there needs to be a real collaboration between lawyers and the judiciary, where the former actively cooperates, doing everything possible to limit recourse to trial and, when necessary, to facilitate the judges’ task; while the latter is diligent in responding to requests for safeguarding, without indulging in time management or sanctioning the work of defenders with restrictive (if not sometimes punitive) measures.
The evaluation of foreign participations and securities received by inheritance for income tax purposes.
When foreign shares and securities are received by inheritance, the cost incurred by the deceased person at the time of original purchase shall configure the relevant cost in the hands of the resident beneficiary for income tax purposes. Hence, as a consequence of the exclusion from inheritance tax granted to these assets, the “revaluation” of the inherited participations and securities is not possible or allowed. This is the opinion of the Italian Revenue Agency in its answer to ruling no. 675 of 7 October 2021.
The Italian Revenue Agency, in its abovementioned answer, clarified that, for foreign securities (shares and bonds) received by inheritance from a non-resident deceased person, the cost recognized for the determination of subsequent capital gains for income tax purposes cannot be assumed in the normal (arm’s length) value of the securities at the date of the opening of the inheritance, but must instead be quantified in the original cost borne by the deceased person.
The doubt was raised by one of the resident heirs of a person who was not resident for tax purposes in Italy at the date of his death, and who had inherited some shares and bonds, all deposited abroad, issued by Italian companies and by companies not having their registered office in Italy.
The aforesaid securities were treated as « exempt » from inheritance tax pursuant to Article 2, paragraph 2 of Legislative Decree No. 346/1990, according to which, if at the date of the opening of the inheritance the deceased person was not resident in Italy, inheritance tax is due only on assets deemed to be existing in Italy (so-called « extraterritoriality »).
The applicant, who was wishing to sell for considerations some of the foreign securities, asked the Revenue Agency for a confirmation about the criteria to be adopted for the evaluation of such securities for income tax purposes (i.e. taxable base for capital gains), pointing out that, pursuant to Article 68, paragraph 6 of the Income Tax Code in the case of acquisition by inheritance « what is assumed as the cost is the value defined or, failing that, the value declared for the purposes of inheritance tax, as well as, for securities exempt from that tax, the normal value at the date of the opening of the inheritance ».
According to the Revenue Agency, contrary to what Article 68, paragraph 6, of the Income Tax Code would seem to provide as a general rule, the possibility of adopting the so-called « normal value » is limited to the specific cases of exemption in the technical sense (e.g. shares or quotas of companies for which the inheritance tax is not due pursuant to Article 3, paragraph 4-ter of Legislative Decree No. 346/1990; as already clarified by the same Revenue Agency with the previous Resolutions no. 120/E of 2001 and Circular no. 12/E of 2008) and does not extend to situations where the assets are outside the scope of application of the inheritance tax lacking the territoriality requirement.
In the absence of any declared value for inheritance tax purposes (i.e., the main criterion for evaluating financial assets received mortis causa), the Revenue Agency concluded (confirming its previous general guidance provided with Circular Letter no. 91/E of 2001) that the original cost actually incurred by the deceased person is the value to be applied by the resident beneficiary for income tax purposes.
Green pass retention and the enhanced green pass, new requirements for private employers?
The introduction of the green pass in the private employment field has been an important and challenging innovation for private employers. The provisions aimed at regulating the green pass in the private employment field have been subject to recent amendments (Law 165 of November 19, 2021 and Law Decree 172 of November 26, 2021) which, on the one hand, has introduced the enhanced green pass and, on the other, has introduced the possibility of retaining the green pass of workers.
The enhanced green pass
The enhanced green pass, valid from December 6 to January 15, can only be obtained by people who have been cured or vaccinated. Any limitations and restrictions will therefore be applied only to non-vaccinated individuals who hold an « ordinary » green pass.
Access to certain activities, including sporting events, parties and indoor catering activities will be possible only in the presence of the enhanced green pass.
It seems clear that private employers, who are on the list of the activities subject to the enhanced green pass procedures, have to integrate existing procedures in order to set up appropriate methods of verification of enhanced green passes as well.
Retention of the green pass
Workers will also be able to ask their employers to keep a copy of the green pass and thus be, for the duration of the certification delivered, exempt from the controls provided for by the law.
This novelty also inevitably entails, for private employers, new obligations.
The aforementioned innovations introduced by the legislator do not appear to be free of critical points, in particular, with reference with the provisions regarding the storage of green passes that appear to be in conflict with the indications issued by the Privacy Guarantor to the Parliament (ref. 9717878) and with certain provisions of EU Regulation 2021/953; furthermore, the verification of the reinforced green pass, in the activities subject to the new obligations could lead to the duplication of the employers’ control procedures.
Pending the approval of appropriate internal company procedures and clarifications from the Privacy Guarantor, it seems reasonable for the employer to refuse the management of green passes if the same could expose companies to sanctions for incorrect data processing.
It is therefore required to amend the procedures to the new legislative provisions.
DISCLAIMER: This newsletter merely provides general information and does not constitute legal advice of any kind from Macchi di Cellere Gangemi. The newsletter does not replace individual legal consultation. Macchi di Cellere Gangemi assumes no liability whatsoever for the content and correctness of the newsletter.
TO READ OUR PREVIOUS NEWSLETTER OF 19 NOVEMBER 2021: