Italy, Court of Cassation, 12 December 2014 n. 26242

Identification of the case

• Article 11 of the Italian Constitution
• Article 111 of the Italian Constitution
• Article 1421 of the Italian Civil Code

• Article 54 of the CFREU

Summary of the case

The dispute concerns a claim of nullity regarding a contract of annuity (“rendita vitalizia”). Specifically, against the same contract, two different complaints were filed – the first one brought on by contractual party and the second one by her legal representative – in two different proceedings: the first one asking for the termination of the contract and the second one claiming its nullity. Whereas the first complaint (i.e. termination) was rejected by the local Court with a decision become final, the second complaint (i.e. nullity) was upheld both by the Tribunal and by the Court of Appeal. Therefore, before the Court of Cassation, the losing party claimed that, since the first decision of the Tribunal (in 1992) rejected the complaint for the termination of the contract, a res iudicata regarding the validity of such contract had arisen; thus, the validity of such contract could not be challenged furthermore. According to the losing party, the res iudicata does not concern only the specific claim addressed by the decision, but also all the legal assessments logically connected to the claim, so that without ascertaining such assessments then the claim could not have been decided on. 

Due to some interpretative issues related to the scope and limits of such res iudicata over the validity of a contract as well as regarding the legal value of the ex officio ascertainment of nullity in a judicial proceeding concerning a different claim (e.g. termination), the Court decided to refer the decision to the Joint Chambers.

• Civil judicial enforcement

Declaration of nullity of the contract.

The Court states in first place that, according to Article 1421 of the Italian Civil Code, the judge has the duty to declare, ex officio, the nullity of a contract. Notwithstanding, the general application of this principle is sometimes contested with particular regard to the “new” categories of nullity developed mainly following the European legislation, i.e. the “protection nullity”, whose provisions reserve to a single contractual party (e.g. the consumer) the faculty to claim the nullity of the contract. Thus, from a restrictive point of view, this discipline should be incompatible with the power of ex officio declaration as laid out in Art. 1421. On the other hand, the Court highlights, it could argued that, since the “protection nullity” is aimed, on a microeconomic level, at ensuring a proper balance between the contractual parties and, on a macroeconomic level, at ensuring the functioning of the market (pursuant not only to the provisions regarding the functioning of the common market but also to Article 41 of the Italian Constitution), as it also happens when a contract is void because infringing antitrust provisions. The purpose of protecting supra-individual and/or collective interests may justify the ex officio declaration when dealing with relative and protection nullity as well. A broad and general application of the ex officio declaration of nullity is also advocated and reassessed by the CJEU, in particular with the decision C-243/08 (Pannon). On the basis of the CJEU reasoning, the Court of Cassation upholds a concept of nullity which is “functional…depending on the concrete balance of interests” as well as aimed at protecting fundamental interests and values.

In second place, the Court also examines and scrutinizes the issue of the scope and limits of the ascertainment of the validity of the contract, especially when the proceedings is initiated on the basis of a different claim (e.g. termination). The Court deals with the issue of the object of the proceeding in order to determine whether the judge has the power to scrutinize the validity of the contract when a different claim is brought on. The Court points out that, at least in principle, the judge should tend to ascertain, once and for all, the suitability of the contractual agreement to produce its effects: such statement is justified by several principles to be taken into account when assessing the object of the proceedings. In particular, the principle of effectiveness of the protection, as well as the principle of justice of the decisions – related with Article 111 of the Italian Constitution and Article 6 of the ECHR – should discourage from formalistic and restrictive interpretations and instead lead the judge to adopt the interpretation most suitable in order to offer a comprehensive assessment and an effective remedy to the issues revolving around the validity of the contract or its effects.   

Role of the Charter and role of the general principles on enforcement

The Court makes explicit reference to Article 54 of the Charter when assessing the hypothetical occurrence of a proceeding where the parties do not file a claim for ascertaining the nullity of the contract, leaving it for the judge to declare ex officio. If, in such a situation, the judge, after at first detecting the nullity, realizes that there are no grounds to declare it and does not declare it, then a res iudicata arises with regard to the “non-nullity” of the contract, so that the parties, not having filed a claim for nullity before, cannot challenge such judicial assessment anymore, otherwise they would fall under the “abuse of rights” pursuant to Article 54 of the CFREU.

In second place, the Court deals with the concept of “effective remedy” when assessing the object of the proceeding as well as the object of the judicial assessment: in particular, the Court advocates for an interpretation of the provisions regarding the object of the judicial ascertainment which complies with the necessity to ensure an effective remedy. Therefore, it points out that, at least in principle, the judge should, when dealing with a claim related to the nature and effects of a contractual agreement, assess, regardless of the specific claim, the suitability of the agreement to function and perform its desired effects. Thus, even if Article 47 is not mentioned, the Court seems to refer to the effectiveness of the remedy as a guiding principle in order to guide the interpretation methods employed by judges.

• Right to an effective remedy before a tribunal
• Right to a fair trial
• Right to a public hearing within a reasonable time
• Explicit reference to Art. 6 ECHR

The Court refers to Article 111 of the Italian Constitution and puts it in relationship with Article 6 of the ECHR when assessing the justice of the decision as a guiding principle the judge must take into account when interpreting the scope and limits of the object of the judicial proceeding.

The Court also refers to Article 41 of the Constitution, pointing out that, pursuant to it, the proper functioning of the market represents a supra-individual interest which may justify the ex officio declaration of nullity even in situations where such nullity is specifically aimed at protecting one single party of the contract (i.e. the consumer).

As previously stated Article 47 of the CFREU is not mentioned, although the principle of effectiveness of the judicial remedy is used by the Court to justify a broad interpretation of the concept of “object of the proceeding”. On the other hand, Article 54 of the CFREU is used by the Court to explicit the prohibition of abuse of rights, in the sense that the parties, when not having filed a claim for the nullity of the contract, cannot challenge the decision of the judge which at first detect the nullity but then decides not to declare it.

Article 6 of the ECHR is used by the Court to uphold the idea of the “justice of the decision” as an interpretative guide for the judge to follow when assessing the object of their ascertainment.

• Effectiveness

In the decision here examined the principle of effectiveness plays a double role: in fact, it is in first place related to the application of the ex officio declaration of nullity to consumer contracts and other contracts covered by the so-called “relative or protection nullity” provisions; in second place, the concept of effective judicial remedy is used by the Court to offer some interpretative tools to judges.

As far as the first point is concerned, the Joint Chambers of the Court of Cassation, when assessing the scope and limits of the ex officio declaration of nullity pursuant to Article 1421 of the Italian Civil Code, initiate a dialogue with the CJEU, taking into consideration the reasoning of the Pannon case. In doing so, the Joint Chambers advocate for an application of Article 1421 not only to contract regulated by the provisions of the Civil Code, but also to the contracts regulated by the special provisions of “protection nullity” or “relative nullity”, which empower just one of the parties to claim for the nullity of the contract, on account of protection of social interests, market equilibrium and weaker parties’ position. A general and broad application of Article 1421, thus, in the eyes of the Court, constitutes a mean to ensure the effectiveness of the protection of such interests, as it is also laid out in the decision n. 26243 of the Joint Chambers, dealing with the same issue.

In second place, the concept of effectiveness is taken into account by the Joint Chambers when assessing the principle which should guide judges when assessing the scope of their ascertainment, with particular regard to the situations where a contractual agreement is somewhat involved. The Joint Chambers uphold a broad interpretation of the concept of “object of the proceeding”, since the effectiveness of the remedy should lead judges to assess, regardless of the specific claim, the suitability of the agreement to function and perform its desired effects.  

Elements of judicial dialogue

• Dialogue among same level national courts within the same Member State

• Direct dialogue between CJEU/ECtHR and National court (out of preliminary reference procedure)

• CJEU C-243/08, Pannon

Conform interpretation with EU law as interpreted by the CJEU.

The Court seeks to offer an interpretation over the application of Article 1421 of the Italian Civil Code which complies with the findings of the CJEU about the impact of the principle of effectiveness over the ex officio declaration of nullity.

The Joint Chambers refer both to other decisions of the Court of Cassation and the Pannon decision, pursuing the goal to offer a comprehensive and final interpretation of the National Law. In particular, as far as the dialogue with other decisions of the Court of Cassation is concerned, it must be mentioned that the Court refers to decision n. 14828/2012, which pointed out how the ex officio declaration of nullity of the contract was meant to be aimed at protecting certain supra-individual interests.

The decision of the Joint Chambers, coupled with decision n. 26243 taken on the same day, is expected, so far, to put an end to the debates between Courts and between lawyers regarding the scope and limit of the ex officio declaration of nullity.

Additional notes on the decision

Decision n. 26243 was taken by the Joint Chambers of the Court of Cassation on the same day of decision n. 26242. This second decision, dealing with the same issues of the scope and limits of ex officio declaration of nullity, reached the same conclusions as decision n. 26242 and referred to the findings of the CJEU in the Pannon case in order to uphold a broad application of the ex officio declaration. In particular, the Court in this second decision explicitly stated that the application of Article 1421 to all categories of contracts – and, therefore, also to the ones covered by “relative nullity” provisions – is essential in order to ensure the “non-renounceable” guarantee of the effective protection of fundamental values and interests.

The “twin judgments” given by the Joint Chambers of the Court of Cassation can so far be regarded as landmark decisions, since they outlined a comprehensive interpretation of all the issues related to the ex officio declaration of the nullity of a contract.