ANNOUNCEMENT 19 Feb 2014In February 2014, the government of Italy announced changed rules for foreign investors.
NUMBER OF INTERVENTIONS
UNCTAD. (2014). Eleventh Report on G20 Investment Measures. Available at http://unctad.org/en/PublicationsLibrary/unctad_oecd2014d11_en.pdf
Bird&Bird. (2014). The Italian Governments "golden powers" on strategic undertakings in the defence and national security sectors. Available at http://www.twobirds.com/en/news/articles/2014/italy/the-italian-governments-golden-powers-on-strategic-undertakings-in-the-defense-and-security-sectors
Gazzetta Ufficiale della Repubblica Italiana. (2014). Decreto del Presidente della Repubblica 19 febbraio 2014, n.35. Available at http://www.gazzettaufficiale.it/eli/id/2014/03/20/14G00048/sg;jsessionid=+a10cN3nqYcpxwI7ywndkA__.ntc-as5-guri2a
On 19 February 2014, the Italian President issued Decree n. 35, explaining the procedures for the implementation of special powers that were initiated by Article 1, §8 of Decree n. 21 in 15 March 2012 (Law n. 56, of 11 May 2014). The Decree assigns to the Italian Prime Minister powers to control foreign influence in the Italian defence and national security sector.
The special powers shall be exercised in connection with:
i) Acquisition, by entities other than the Italian State or Italian public bodies, of holdings in any company operating in strategic sectors;
ii) Adoption of shareholders' resolutions relating to corporate transactions such as mergers, demergers, transfer of business branches; transformation and dissolution of the company, changes to the business purpose of the company, amendment of statutory provisions.
In such circumstances, upon the submission of a mandatory preventative notification by the interested parties, the Government shall determine whether there are justified grounds to conclude that the operation might endanger national security and national defence.
A similar regulation, containing the same procedural requirements, is being adopted with reference to the sectors of energy, transport and communications.
Businesses falling within the scope of the regulation (e.g. strategic undertakings intending to adopt a shareholders' resolution; entities intending to acquire relevant holdings in a strategic undertaking) are required to submit a preventative notification to the Presidency of the Council of Ministers, giving a reasonable notice, providing all the essential information to assess the impact of the transaction. In particular, the notification must include a description of the transaction and the business plan, and can include specific commitments aimed at ensuring the integrity of public interests related to defence and national security.
Within 15 days, the administration needs to assess whether the situation requires the exercise of special powers and whether all the conditions for the exercise of special powers are met. The deadline for exercising the special powers may be suspended only once, if the administration needs to receive further information from the applicant. The administrative procedure involves the participation of the ministries of foreign affairs and economic development, and is concluded with the adoption of a formal presidential decree if a veto or conditions are imposed. A comfort letter or just silence can follow if the situation is deemed not to require the exercise of special powers - if no measure is imposed within the 15 days deadline, the transaction shall be considered cleared.
To ensure the special powers' effectiveness, not only the failure to submit a preventative notification results in the imposition of criminal penalties and administrative fines (ranging from one per cent of the combined turnover of the undertakings involved up to twice the value of the transaction), but any shareholders' resolutions adopted remains ineffective. Furthermore, the rights arising from shares that may have been acquired are suspended ex lege, resulting in the invalidity of any resolution for the adoption of which the votes of these investments have been crucial.
The Italian Government has exercised its special powers in the fields of defence and national security in a number of cases. While no veto has been issued, presidential decrees imposed specific obligations in relation to the acquisition of Avio SpA "field propulsion and power transmission" business branch by General Electric, which acted through its subsidiary Nuovo Pignone Holding SpA, as well as in relation to the acquisition of shares in Piaggio Aero Industries SpA by Mubadala Development Company, an UAE Government investment company.
In general, it appears that the Italian Government pays special attention to the preservation of programs co-financed by the Government or by the Italian armed forces and to business continuity, both in terms of management and of key employees.