Italy – Partial Invalidity of Guarantees based on the Italian Banking Association Model Agreement (So-Called “Modello ABI”)

By decision no. 41994 of December 30th, 2021, the Italian Court of Cassation, Joint Chambers, gave an historical ruling on omnibus (open-end) guarantees granted on the basis of the model used by Italian banks between 2002 and 2005, the so-called “Modello ABI” (the “Model”).

The decision grounds on a previous ruling of the Bank of Italy (no. 55/2005), whereby the agreement between Italian banks concerning the use of the Model was deemed as anti-competitive (the “Agreement”). In fact, it was ascertained that certain provisions of said Agreement were in breach of competition laws, both at domestic and EU level (i.e. article 2 of Law no. 287/1990 and article 101 TFEU).

In particular, the Agreement provided for the following clauses (the “Relevant Clauses”) to be included in the Model:

1. clause 2, which extended the scope of the guarantee to any amounts paid to the bank by the debtor, which the bank has been obliged to reimburse for any reason whatsoever;

2. clause 6, which provided for a waiver by the guarantor to the forfeiture term set forth under article 1957 of the Italian Civil Code to be complied with by the bank in order to enforce the guarantee after expiration of the guaranteed obligation;

3. clause 8, which entitled the bank to enforce the guarantee for the reimbursement of the amounts granted to the debtor, also in case the guaranteed obligation has been declared void.

After the ruling of the Bank of Italy, the unlawfulness of the Agreement was undisputed, but it was not clear to what extent such unlawfulness affects the guarantees granted in compliance with the Model.

The Court of Cassation eventually clarified this issue according to the following reasoning:

1. there is a functional link between the Agreement upstream, and the guarantees granted downstream, in fact said guarantees contained the Relevant Clauses because of the banks complying with the Agreement;

2. however, the unlawfulness of the Agreement does not automatically lead to an overall invalidity of the guarantee, but only of such specific provisions falling within the scope of the Agreement.

Consequently, by the decision at hand, the Court of Cassation declared only a partial invalidity of the guarantees granted in accordance with Model with exclusive reference to the Relevant Clauses, considered detrimental to the consumers.