BANKING AND FINANCE | The Italian Supreme Court on the French amortisation method

On 29 May 2024, the Italian Supreme Court delivered its judgment in case No. 15130/2024 related to fixed-rate loans with instalment repayments regulated by a French amortisation method. This judgment resolved a long-standing conflict regarding the consequences of failing to indicate the compounded capitalisation regime of interest, even if the nominal annual rate (TAN) is stated in writing. Firstly, the Italian Supreme Court ruled that the failure to indicate the scheme of the French amortisation method and the compounded capitalisation regime does not entail the indeterminacy or indeterminability of the relevant subject matter. Consequently, it does not cause any invalidity of the agreement under the combined provisions of Articles 1346 and 1418 of the Italian Civil Code. Secondly, the Italian Supreme Court clarified that the violation of the rules on transparency, as referred to under Article 117.4 of the Italian Consolidated Law on Banking, does not affect the transparency of the contract terms and conditions. These rules require that any loan agreement should clearly and unambiguously indicate the amount disbursed, the interest rate and any other fees and conditions charged, under penalty of nullity. However, this ruling is facing numerous criticisms, with some concerned that litigation could arise regarding the liability of lenders failing to include the amortisation scheme or the method of capitalisation of interest in loan agreements.

Newsletter n. 97 – June 2024