Italian law distinguishes prescrizione (id est limitation of time period) from decadenza (id est time bar).
Prescrizione is relevant to insurance and reinsurance claims. It governs the limitation period within which a recovery action can be exercised to avoid the claim becoming subject to a time bar defence.
Decadenza is ruled out byanother body of rules, which may operate rather differently to Prescrizione.
The parties cannot deviate from the prescrizione regime, because is of public policy and its operation is mandatory.
Prescrizione defences must be raised by the opponent and cannot be found ex officio by the Judge or the Arbitrator otherwise the judgment or award may be repealed.
Under Italian law a time barred claim is unenforceable whilst prescrizione (once expired and, unless waived after the expiry) extinguishes the right of the party who failed to protect it.
The "setting off" of reciprocal obligations, meaning claims arising out of the same contract or a closely related contract, falls within Arts. 1241, 1242 and 1243 Italian Civil Code and can be pleaded as a defence only by someone who has rights against the claimant arising out of the same contract or a closely related contract.
The Italian Supreme Court held [1] that the defendant may only assert a claim by way of set-off where his claim is against the claimant and arises out of the same relationship which gives rise to the claim made by the claimant.
In the matter of reinsurance, art. 1931 of the It. Civil Code provides that if the cedant/reinsured company or the reinsurer go bankrupt reciprocal debts and credits as ascertained at the end of the insolvency proceedings are mutually set-off even if they pertain to various reinsurance contracts. The provision is far from clear and the commentators [2] maintain that Art. 1931 entails a sort of final adjustment (different from the setting-off as defined under Art. 1241 It. Civil Code) allowing certain losses, premiums and reserves to be processed and then finally adjusted not from their co-existence as provided for under Art. 1241 but only at the end of the insolvency proceedings.
Unless the reinsurance contract provides to the contrary, pre-payment by the reassured of the indemnity due by him to his insured is not deemed to be a pre-condition triggering the reinsurers' obligation to pay. (see Art. 1930 and 1931 Civil Code)
The setting-off (compensazione in Italian) is compatible with Art. 56 of the Italian bankruptcy law. Insolvency is now regulated in the European Community under the directive no. 1346/2000 of May 29th 2000.
[1] Cass. 5.VI.1976 n. 2037.
[2] Le Assicurazioni – 2007 – page 441.
