Bank of America Corp. and UBS AG filed claims in London against the region of Lombardy, preempting the municipal authority's plan to sue the banks in the Italian courts in a dispute about derivatives fees.
An investigation by Milan's prosecutor said the banks hid 95 million euros ($125 million) in fees when they sold the region derivatives that adjust payments on a $1 billion bond from 2002. The prosecutor dropped his criminal probe because it would breach the statute of limitations. Lombardy hired Italian lawyers in June to prepare a civil suit against the firms.
Bank of America's Merrill Lynch unit filed a claim at London's High Court July 13, and UBS submitted its claim July 21, court papers show. The banks are seeking to confirm that contracts with the region are valid and that they met their obligations, according to three people familiar with the claims who declined to be identified because the dispute is private. The London claims make it tougher for Lombardy to pursue the banks locally, lawyers said.
"The jurisdiction chosen by the parties at the time of the swap was England," said Dario Loiacono, a banking lawyer at Loiacono e Associati in Milan who is not involved in the case. "If the plaintiff sues in another jurisdiction, the defendant can challenge it. The banks' claim was probably designed to avoid having to challenge the jurisdiction in Milan."