Banca Intesa Sanpaolo SPA & Anor v Comune Di Venezia  EWHC 2586 (Comm) is an excellent illustration of the relevance of characterisation and of the international harmonisation of same. It also discusses the application of the ‘purely domestic contracts’ rule of Article 3(3) Rome Convention, carried over into the Rome Regulation.
Background is long-running litigation involving derivative transactions used by Italian municipalities to hedge their interest rate risk, as Sarah Ott summarises the context here (she discusses Dexia Crediop SpA v Provincia di Pesaro e Urbino  EWHC 2410 (Comm), a case with many similar issues).
Venice contends that, for various reasons, it lacked the substantive power to enter into the Transactions as a matter of Italian law, and that, applying English conflict of law principles, that means that it did not have capacity to enter into the Transactions and that they are not valid. It also contends that the Transactions breached various rules of Italian law which have the status of “mandatory rules of law” for the purposes of A3(3) Rome Convention 1980 (which is applicable and not the Rome I Regulation) and that as a result the Transactions are void and/or unenforceable.
The Banks deny that the entry into the Transactions contravened any provisions of Italian law, on the basis of arguments as to the effect of Italian law and its application to the facts of this case, and further deny that any such contravention would deprive Venice of capacity to contract as a matter of English conflict of laws principles in any event.
Capacity to enter into contractual relationship itself is not caught by the Rome Convention as a result of the Convention’s carve-out of Article 1(2) c (most legal systems make such capacity subject to the lex incorporationis, and  is determined by reference to the law in force when the Transactions were entered into). Foxton J refers as authority to Credit Suisse International v Stichting Vestia Groep  EWHC 3103 (Comm) .
Who then is to decide whether a particular issue of Italian law raises a question of capacity, or authority, or some other kind of legal challenge to the validity and efficacy of the Transactions? Here Foxton J wrongly in my view simply refers to lex fori, English law. In reality of course it is the Rome Convention that does so, although as I have pointed out before, neither the Rome Convention nor Rome I excels at clarifying.
 ff then follows lengthy analysis of the issues of capacity under Italian law as the lex causae, with the conclusion being that Venice did indeed so lack capacity under Italian law.
The issue of mandatory Italian law replacing the English lex contractus as a result of Article 3(3) Rome Convention’s ‘purely domestic contracts’ rule, is dealt with obiter. It fails at the first hurdle with Foxton J holding  that the scenario is not purely domestic. He does not much entertain the issue of whether under Italian law (lack of) a theory of contractual consideration might be of mandatory nature, referring  to the similar issues of consideration and privity of contracts under English law (which in effect might subsequently become relevant under the overriding mandatory rules of the forum).
An interesting judgment.