Capacity in derivatives with public bodies after Dexia credit local S.A. v Patrimonio del Trentino S.p.A. [2024] EWHC 2717 (Comm) ('Dexia v Trentino')

Abstract

This case note examines Dexia v Trentino, a key case on capacity in derivative transactions involving public or quasi-public entities. The comment suggests that the case is consistent with the distinction between hedging and speculation being determined objectively by reference to the entity’s financial exposure and economic purpose. It is also consistent with the leading authority, particularly that in Banca Intesa Sanpaolo Spa & Anor v Comune Di Venezia [2023] EWCA Civ 1482. The comment illustrates a judicial movement towards objective assessments of capacity in light of the distinction between hedging and speculation. The note, however, critiques reliance on legal form and argues that hybrid entities like Trentino, though private in structure, are publicly accountable. Unlike private entities, the public impact of decisions involving their capacity has ramifications that extend beyond those applicable to private companies. The comment argues that courts should look past legal form to the public accountability common to entities emanating from public law and those utilizing private structures.