Urgent measures concerning the exercise of special powers in the sectors of strategic relevance

Introduction

Further to the outbreak of Covid-19 in Italy and in addition to the other measures adopted to support the national economy, the Italian Government with Law Decree 8 April 2020 n. 23 ("Liquidità Decree"), effective as from 9 April 2020, enacted certain measures aimed, inter alia, at strengthening the powers of the Italian Government to veto or impose specific prescriptions upon transactions concerning companies or assets operating within certain specific strategic sectors (so called "Golden Power"). 

Specifically, the new measures contained in the Liquidità Decree:

• broaden the strategic sectors subject to the Golden Power procedure to the sectors indicated in the European Regulation no. 452/2019, and namely to the financial, credit and insurance sectors, critical infrastructures and technologies (including energy, transport, water and health, food safety, access to sensitive information, including personal data, artificial intelligence, robotics, semiconductors, cybersecurity, as well as nanotechnology and biotechnology);

• provide for the power of the Government to start the relevant procedure also if the notification obligations provided by the Golden Power procedures are not fulfilled by the relevant parties;

• extend - on a temporary basis until 31 December 2020 - the application of the Golden Power procedure also to: (i) transactions carried out by EU resident persons and concerning the acquisition of control of "assets with strategic relevance"; (ii) transactions having a value greater than Euro 1 million carried out by non-EU resident persons concerning the acquisition of shareholdings greater than 10% in companies owning "assets with strategic relevance"; (iii) transactions carried out by non-EU resident persons entailing the acquisition of shareholdings in companies owning "assets with strategic relevance" exceeding the thresholds of 15%, 20%, 25% and 50%.

Please find below a brief summary of the provisions concerning the Golden Power, as recently amended by the Liquidità Decree.

Legal framework

The legal framework governing the Golden Power is constituted by: (i) the Law No 56 of 11 May 2012 (converting Law Decree No 21/2012, the so-called "Golden Power Decree") implementing presidential decrees (DPR) No 85 and 86 of 25 March 2014 and Government Decree (DPCM) No 108 of 6 June 2014; (ii) the Law 172/2017 (converting the Law Decree No 148/2017); (iii) the Law 133/2019 (converting the Law Decree No 105/2019); (iv) the Law Decree No 23/2020 (so called "Liquidità Decree").

Golden power procedure

Further to the recent amendments, the Golden Power provisions basically provide that the Italian Government shall review transactions concerning Italian public and private companies which:

• Carry out activities of “strategic relevance" in the defence and national security sector ("Activities of Strategic Relevance"); 

• carry out services related to, and/or own assets falling within, the 5G network communications sector ("5G Assets");
• hold “assets with strategic relevance” in the energy, transport and communication sector ("Assets with Strategic Relevance");

• hold “assets with strategic relevance”: (i) in the financial, credit, insurance, high-tech (including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defence, energy storage, quantum and nuclear technologies as well as nanotechnologies and biotechnologies) sectors; (ii) relating to critical infrastructure (including water, health, media, data processing or storage, aerospace, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate crucial for the use of such infrastructure); (iii) relating to the supply of critical inputs (including energy or raw materials, as well as food security); (iv) relating to the access to sensitive information sector (including personal data, or the ability to control such information); (v) relating to the freedom and pluralism of the media ("Assets of National Interest").

Transactions scrutinized

The power entrusted to the Italian Government is to review any transaction which: (i) with reference to the Activities of Strategic Relevance, may damage or constitute a material threat to Italy’s essential interests; and (ii) with reference to 5G Assets, Assets with Strategic Relevance and Assets of National Interest, may damage or constitute a material threat to the Italy’s fundamental interests relating to the security and public order and the operation of networks and systems and the continuity of supplies. In such cases, the Italian Government may exercise a veto right on the transaction/corporate action or impose specific restrictions or conditions with respect to the security of supply and business continuity.

The types of transactions that might be covered are various in nature and may include:

• transactions entailing the purchase of shareholdings in listed and non-listed companies operating within the Activities of Strategic Relevance, when an acquisition (and each following acquisition) exceeds the thresholds of 3%, 5%, 10%, 15%, 20%, 25% and 50%;
• resolutions or transaction executed by companies operating within the Activities of Strategic Relevance concerning, inter alia, merger, demerger, asset transfer, amendments to the corporate purpose, transfer abroad of the registered office;
• transactions entailing the purchase of services of assets relating to 5G Assets in favour of a non-EU persons;
• resolution, arrangement or transaction executed by companies owning Assets with Strategic Relevance which result in a change in the ownership, control, destination or availability of such strategic assets;
• resolution, arrangement or transaction executed by companies owning Assets of National Interest which result in a change in the ownership, control, destination or availability of such strategic assets in favour of a non-EU persons and - on a temporary basis until 31 December 2020 - also in favour of EU persons;
• acquisition by non-EU persons of shareholdings entailing the control in companies owning Assets with Strategic Relevance or Assets of National Interest;
• on a temporary basis until 31 December 2020, acquisition by EU persons of shareholdings entailing the control in companies owning Assets with Strategic Relevance or Assets of National Interest and acquisition by non-EU persons of shareholding exceeding the thresholds of 10% and having a value greater than Euro 1 million as well as acquisition by non-EU persons exceeding the thresholds of 15%, 20%, 25% and 50%.

Therefore there is a difference of regime among transactions concerning the acquisition of shareholding in companies owning "strategic assets" and transactions regarding the assets themselves.

A non-EU investor is defined as: (a) any natural or legal person who does not have residency, the usual residency, a registered office, administration or a principal place of business in a Member State of the European Union or European Economic Area, or who is not otherwise established therein; (b) any natural or legal person who does have residency, the usual residency, a registered office, administration or a principal place of business in a Member State of the European Union or European Economic Area but is controlled, directly or indirectly, by a natural or legal person falling under letter (a) above and/or whether elements indicating an elusive behaviour towards the application of the Golden Power rules exists. 

Please find below a chart summarizing the transaction scrutinized.

Review process and assessment criteria

The Government must be notified of the transaction and provided with the transaction documentation within 10 business days of the transaction, acquisition, the arrangement or the resolution in any case, however, before they become effective.

The Government assesses the documentation and has the power to request clarifications, which must be provided within 10 business days in case the clarification is requested to the notified parties or within 20 business days in case the clarification is requested to third parties. 

If the Government does not request clarifications within 45 business days from the notification, its silence implies consent to the transaction. Otherwise, the term for silent consent is suspended until clarification is provided. Silent consent within the given time frame means the transaction becomes effective. In practice, a prior informal dialog with the Government may take place to obtain guidance before entering into a transaction.

With respect to the acquisition of assets and/or services relating to 5G Assets, the timeframe for the Government's decision is shortened to 30 business days, though it may be extended by up to 40 business days depending on the complexity of the case. It is save the power of the Government to request clarifications, which must be provided within 20 business days.

In case the notification obligations provided by the Golden Power procedure are not fulfilled by the relevant parties the Government has the power to start the procedure. In such case, the 45 business days term starts from the date on which the unfulfillment of the notification obligations has been ascertained.

The assessment is based on objective and non-discriminatory criteria. When scrutinising acquisition, the Italian Government assesses whether the situation resulting from the transaction affects the security of uninterrupted supply and management and maintenance of networks and plants and whether the transaction entails a threat of serious damage to the national interest. It also takes into account positions of the European Union, if any.

Fines and appeals

Transaction deeds and/or corporate actions can be adopted until Government consent is given, but to be effective the transaction will need the Government's clearance (including the silent consent).

The party which violates such provision is subject to administrative fines up to twice the value of the investment and in any case not less than 1% of the last financial year's turnover. In addition, the relevant deed or transaction is deemed null and void (and the administrative rights relating to the shareholding may be suspended). With respect to 5G Assets, the administrative fine is up to 150% of transaction's value and, in any case, not lower than 25% of transaction's value.

A negative Government decision may be appealed before the administrative court on the grounds that the decision is not well conceived and the process which led to the decision was unclear, unreasonable or contradictory.