The impact of conflict in Ukraine on commercial disputes: a recent Italian example

Paolo Grandi
RPLT RP Legalitax, Milan
paolo.grandi@rplt.it

Daniele Merighetti
RPLT RP Legalitax, Milan
daniele.merighetti@rplt.it

According to a recent decision of the Court of Bolzano (order of 21 November 2023 RG, 2470/2022, confirmed, on appeal, by the preliminary order of 22 February 2024, RG 3828/2023), due to the ongoing armed conflict between the Russian Federation and Ukraine, a party’s ability to recover funds paid to a legal entity based or with registered office in Ukraine ‘is complex – both in fact and in law – because of martial law that is in force in Ukraine.’

In the case, two companies based in Italy applied for an urgent injunction against two leading Italian banks, not to pay a Ukrainian municipal corporation, based in Western Ukraine, pending the resolution of ongoing judicial proceedings in Italy. The payments at issue had been demanded by way of enforcement of ‘first demand’ and ‘autonomous’ guarantees totaling €1 million issued by the two banks against the advance payment made by the Ukrainian counterparty.

The Court found that the ‘objective difficulty’, which would be faced by a legal entity based in Italy ‘in the recovery of the huge sum subject to guarantee upon the outcome of the judgment on the merits, against a company based [...] in a country in a state of war’, was sufficient in itself to satisfy the requirement of the so-called periculum in mora, that is, the danger of a ‘serious and irreparable prejudice’, referred to in Article 700 of the Italian Code of Civil Procedure. Together with the reasonable likelihood of the existence of the right to be protected (the so-called fumus boni iuris), the existence of a periculum in mora, which cannot be fully remedied by the existing ordinary procedural tools, allows for the application of a preventive urgent measure, as compared with a court procedure on the merits.

According to the Italian judges, a further procedural element which may confirm this ‘objective difficulty’ is the complex process of the notification of a judicial act which, under normal circumstances, ‘should have been a simple international notification’, in this case ‘to be executed through the Central Authority’ under the Hague Service Convention. However, in this case, formal notification through the Central Authority was never completed because the Ukrainian company voluntarily intervened in the proceedings after learning of the banks’ refusal to pay.

Based on such legal principles, the Court of Bolzano granted the application for an urgent injunction. According to the Court, the following additional circumstances were of little relevance to its decision:

• the Ukrainian company whose payment the banks guaranteed is a state-owned enterprise and is in a stable economic and financial situation, with the capacity to meet its obligations and with no significant probability of default;
• Ukraine has ratified the 2019 Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters, which provides for the automatic recognition of foreign judgments issued by the judicial authority of one of the acceding states;
• only the eastern part of Ukraine, mainly the Donbass region, is under a war status; and
• the Russian-Ukrainian conflict did not result in the blocking of the local and international banking system.