CLAW-BACK ACTION

Claw-back action, what does Italian law establish?

Italian claw-back action is regulated by article 2901 of the Italian Civil Code: “a creditor can, even in cases in which the credit is subject to a condition or a term, ask that the acts by which the debtor has disposed of her/his assets be declared ineffective against him.” Two conditions are essential to be able to start a claw-back action procedure: 1) the debtor was aware of the prejudice her/his act would cause the creditor or the act had the fraudulent purpose of creating prejudice to the creditor’s right; 2) the third person involved in the non gratuitous act should be aware of the prejudice.

All claw-back actions are subject, as set out by article 2903 of the Italian Civil Code, to a five year time bar, where the start date coincides with the asset transfer date. Usually, three parties are involved in a claw-back action: the creditor, the debtor and a third entity which is the beneficiary of the debtor’s asset transfer. The creditor is the only entity entitled to start a claw-back action, she/he will be the claimant in the proceedings and she/he will summon both the debtor and the third party before the Judge.

One should bear in mind that a successful claw-back action does not imply that the assets will be returned to the debtor; on the contrary, case law and the Italian Supreme Court of Justice clearly state that, upon a successful verdict, the creditor can then start enforcement proceedings against the third party, new owner of debtor’s assets, to recover and satisfy her/his credit. In fact, the act between the debtor and the third party is valid, but ineffective against the creditor.

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