Double Success on Appeal: No Pecuniary Sanction and No Aggravated Liability under Article 96

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Double Success for Oracle on Appeal: The airline will not be required to pay any pecuniary sanction to the Cassa delle Ammende. The order of condemnation has been annulled.No Aggravated Liability under Article 96 of the Italian Code of Civil Procedure Where the Defense Is Grounded in Established Case Law.

Oracle has secured two significant appellate victories on behalf of a major airline client.

The Court of Palermo overturned the first-instance findings of aggravated liability under Article 96, paragraphs 3 and 4, of the Italian Code of Civil Procedure (c.p.c.), confirming that such sanctions cannot be imposed merely because a party advances a legal argument that is ultimately not upheld.

In the challenged first-instance judgments, the airline had been ordered not only to pay the statutory compensation, but also additional sums pursuant to Article 96 c.p.c., the provision governing so-called vexatious litigation. Under Italian law, this form of aggravated procedural liability applies where a party initiates or pursues legal proceedings in bad faith or with gross negligence, fully aware that its factual or legal position lacks reasonable grounds.

Such conduct is considered an abuse of process. Courts may therefore impose aggravated liability not only in favor of the opposing party, but — in the most serious cases — also by ordering payment of a financial penalty to the Cassa delle Ammende, a public fund managed by the Ministry of Justice and dedicated to rehabilitation initiatives and improvements to the penal system.

This latter sanction, provided for under Article 96(4) c.p.c., is exceptional and distinctly deterrent in nature: it is not intended to compensate a private party, but to safeguard the integrity and efficiency of the judicial system by discouraging procedural misconduct.

In the appeals at issue, however, the Court of Palermo correctly held that the prerequisites for aggravated liability were entirely absent, as the airline’s defense was grounded in consolidated case law and could not therefore be characterized as abusive or frivolous.

Case Overview

The two appeals concerned claims for compensation arising from flight delays. Although the airline had acknowledged liability and, prior to the commencement of court proceedings, had offered the passenger the monetary compensation provided for under EU Regulation 261/2004, the passenger nonetheless initiated legal action.

At first instance, the court ordered the airline to pay both the statutory compensation and additional amounts under Article 96 c.p.c.

Oracle promptly appealed both decisions.

The Court of Palermo overturned the first-instance rulings, emphasizing that:

Principle Affirmed by the Court

The Court reaffirmed that aggravated liability under Article 96 c.p.c. is exceptional in nature and requires clear evidence of bad faith or gross negligence.

A party cannot be sanctioned under Article 96 simply for advancing a legal thesis where that thesis is supported by “copious case law,” including decisions from the same court, even if, in the specific case, it is ultimately rejected.

Key Passage

“Aggravated liability under Article 96 of the Italian Code of Civil Procedure is an exceptional form of procedural liability that requires proof of bad faith or gross negligence. It cannot be imposed merely because a party advanced a legal thesis that was ultimately rejected on the merits. Where the defense is grounded in a significant body of case law — including decisions of the same Court — and the airline promptly offered the statutory compensation, the prerequisites for applying Article 96(3)–(4) c.p.c. are not met.”

The Court further clarified:

“Sanctions under Article 96 c.p.c. are not a penalty for losing a dispute while advancing a legal argument in good faith. In the absence of bad faith or gross negligence, courts may not apply paragraphs 3 and 4 of Article 96 c.p.c. merely because a defense — even if supported by extensive first- and second-instance case law — does not prevail in the specific case.”

Why This Matters

1. No “punitive” use of Article 96 c.p.c.

Article 96 cannot be used as a mechanism to punish the losing party. Courts must rigorously verify the existence of bad faith or gross negligence. Advancing a legally sustainable argument — particularly one supported by consistent case law — does not meet that threshold.

2. Concrete conduct matters

The airline’s immediate willingness to pay the monetary compensation required under EU law further excluded any inference of abusive intent, providing an additional reason why Article 96 sanctions were unwarranted.

In both decisions, the Court annulled the findings of aggravated liability under Article 96(3)–(4) c.p.c. and ordered the opposing party to bear the costs of the appeal proceedings.