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Italy – Supreme Court Ruling on the Repayment Term of Overdraft Facilities

Following the termination of an overdraft facility, a bank obtains a payment injunction in court and claws back the family trust created by the debtors, who resist by claiming that the payment injunction had been applied for prior to the elapse of the 15-days grace period awarded by article 1845 of the Italian Civil Code to the debtors for repayment of the outstanding overdraft facilities.  

Pursuant to the Supreme Court ruling no. 5746, February 22nd, 2022,  in view of the broad definition of receivables set forth by article 2901 of the Italian Civil Code (including contingent or future receivables), a claw-back action can be proposed by the bank that has terminated an overdraft facility, without respecting the 15-days repayment period as per article 1845, paragraph 2, of the Italian Civil Code. As a matter of fact, according to the Supreme Court, it will be up to the debtor who contests the existence of the credit, in consideration of the arbitrariness of the termination without cause, to demonstrate that complying with the aforementioned term would have allowed him to pay, so as to avoid the withdrawal of the overdraft facilities.

The decision at hand is interesting with respect to what is implicit in the holding: the 15-days repayment  period is binding on the withdrawing bank.

If that is the case, the following question arises: what about the standard LMA (“Loan Market Association”) provisions of Italian law-governed facility agreements providing, upon the occurrence of certain events, for the outright termination of overdraft facilities and immediate repayment? 

The only answer to this question arises from a rather dated decision of the Supreme Court, dating from 1971 and according to which the 15-days grace period for repayment of outstanding loan amounts is not to be interpreted as a requirement of the action (“presupposto”) but as a condition (“condizione”) thereof, with the result that the action may be brought even before the time-limit has expired, it being sufficient that the condition has been fulfilled prior to the decision on the merits. 

DISCLAIMER: the content of this news is for informational purposes only and neither represents, nor can be construed as a legal opinion