Supreme Court challenges indefinite suspension of payments in municipal insolvency proceedings

The Italian Supreme Court of Cassation has raised a question of constitutional legitimacy regarding the regulations governing the financial distress of municipalities. Through interlocutory ordinance No. 6538/2026, the Court challenged Article 78 of Decree-Law No. 112/2008, which prohibits creditors from initiating or continuing individual enforcement actions and halts the accrual of interest for the entire duration of a local authority’s recovery procedure, without establishing a final deadline.

The ruling, which deviates from a 2013 Constitutional Court precedent and incorporates European Court of Human Rights guidelines, argues that the lack of a final term results in a limitation of enforcement rights that harms the substance of the credit itself. According to the Supreme Court, a debt recovery procedure against a public body with an indeterminate duration or sine die can constitute a substantial "expropriation of the credit," as satisfaction within an unreasonable timeframe is equivalent to non-satisfaction.

Regarding the principle of par condicio creditorum, the Court noted that while mechanisms to freeze interest and revaluation aim to protect public interests and prevent the deterioration of the debtor’s assets, such measures are neither reasonable nor proportionate if applied indefinitely. The case now moves to the Constitutional Court, potentially leading to a legislative overhaul of how municipal financial distress is managed in Italy.

Gianni & Origoni (GOP) assisted Tecnimont S.p.A. (part of the Maire Group) in the proceedings against a local authority in financial distress. The legal team was composed of partners Antonio Auricchio and Decio Nicola Mattei, and counsel Giovanni Mastrangelo.