Bloomberg News

Tuscany Seeks Ruling to Annul Swap Contracts With BofA, UBS

June 07, 2011

(Adds London suits starting in the third paragraph.)

June 7 (Bloomberg) -- The region of Tuscany is seeking an Italian court’s permission to annul derivative contracts with Bank of America Corp., UBS AG and Deutsche Bank AG, saying they violated Italy’s municipal financing rules.

Tuscany, with a population of 3.7 million, estimates the swap contracts hid at least 5 million euros ($7.3 million) of costs, according to a statement posted on the region’s website late yesterday. The municipality said it plans to continue making payments under the contracts.

The move to annul the swaps follows lawsuits by the three banks and New York-based JPMorgan Chase & Co., which have filed claims against the region at the High Court in London, documents showed. In court papers filed in December, Bank of America’s Merrill Lynch asked that, even if the transaction were ruled void, the issue of payment recovery be decided under English law.

Dozens of disputes are emerging between local governments in Germany and Italy and the banks that created swap deals for them. While municipalities are increasingly filing suits at home, claiming they weren’t properly advised of risks or that swaps were unlawfully settled, banks are turning to U.K. courts where they expect to get swifter rulings.

UBS and Deutsche Bank spokesmen declined to comment, while officials at Bank of America and JPMorgan had no immediate comment.

Tuscany, in documents filed June 1 at the London court, said the transaction with Merrill was unlawful because some requirements weren’t met. Because the transaction is void, lawyers for Tuscany argued that Merrill should return all the money paid by the municipality -- about 21.1 million euros.

--Editors: Christopher Scinta, Dylan Griffiths

To contact the reporters on this story: Elisa Martinuzzi in Milan at Lindsay Fortado in London at

To contact the editors responsible for this story: Anthony Aarons at Edward Evans at

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