Foreign Investment Controls in Europe: Italy
Introduction
The European Union ('EU') has one of the world's most open investment regimes. Nevertheless, there have been growing concerns in recent years about the impact of certain foreign investments on security and public order. A key issue has been the increasing level of Chinese foreign investment that takes place in the technology sector, with prominent examples in Europe including the takeover of the German robotics manufacturer Kuka by Midea and the attempted takeover of the chip equipment manufacturer Aixtron by Fujian Grand Chip Investment Fund.
Partly as a result of such acquisitions, member states of the European Union (the 'Member States') and EU decision-makers have become increasingly concerned about European know-how and consumer data being transferred to China and related security issues. In early 2017, Germany, France and Italy proposed in a letter to the EU Trade Commissioner that the Member States should be able to block investments from non-EU countries. At the same time, several Member States, including Germany and Italy, tightened or considered tightening their national investment control regimes. As of April 2020, 14 Member States[1] have national screening mechanisms in place aimed at preserving security and public order at national level. In November 2018, a political agreement was reached by the European Parliament, the Council and the Commission on an EU framework for screening foreign direct investment into the European Union and in March 2019 a regulation of the European Parliament and of the Council establishing a framework for the screening of foreign direct investments into EU was adopted. In March 2020, as part of the overall response to the economic effects of the COVID-19 pandemic, the European Commission issued guidance to the Member States concerning foreign direct investment and the protection of EU's strategic assets, in particular in healthcare-related industries.
Against this background, Ashurst Guantao (FTZ) Joint Operation Office seeks to give general insights into the foreign investment control regimes in the European Union and in the major European jurisdictions, including Belgium, France, Germany, Italy, Luxembourg, Spain, and the United Kingdom.
Please feel free to contact any of your Ashurst contacts in case of any questions.
The Ashurst Team
Italy
Italy generally does not put up barriers to international trade and foreign investments and does not discriminate between domestic and foreign investors. However, with respect to specific sectors which are deemed strategic, the Italian Government, in order to protect the national interest, has the right to veto certain transactions or to impose some prescriptions.
What are the key laws and regulations governing restrictions and controls of foreign investments?
The relevant laws governing restrictions and controls of foreign investments are: (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) of 26 September 2014, (ii) the Law 172/2017 (converting the Law Decree No 148/2017) and the Law 133/2019 (converting the Law Decree No 105/2019).
How is a foreign investor defined?
A foreign 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 and (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 or a member state of the European Economic Area but is controlled, directly or indirectly, by a natural or legal person falling under letter (a) above and/or where elements indicating an elusive behaviour towards the application of the 'Golden Power' rules exists.
Which transactions are scrutinised and which sectors are affected?
The transactions scrutinised include:
• Any purchase by non-EU investors of shareholdings entailing the control in Italian companies owning strategic assets,
• Any resolution, arrangement or transaction executed by companies (including EU companies) owning strategic assets in Italy which result in: (i) a change in the ownership or control of or in the availability of the strategic assets owned by such companies; or (ii) a change in the destination of such assets in the following sectors: national defence, national security, energy, transportation, communication and high-technology.
With respect to the acquisition of shareholdings in listed and non-listed companies operating in national security and defence fields the regulation applies when an acquisition (and each following acquisition) exceeds the thresholds of 3 per cent, 5 per cent, 10 per cent, 15 per cent, 20 per cent, 25 per cent and 50 per cent of the shares of such companies.
Who is the decision-maker?
The decision-maker is the Italian Government and its powers range from vetoing acquisitions to imposing specific obligations with respect to the security of supply and business continuity.
Is filing or approval mandatory?
The approval, also through the silent consent of the Italian Government, is mandatory.
What are the assessment criteria?
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.
What does the review process look like?
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 give 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 networks, 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.
What are the powers of the competent authorities and can they prohibit or otherwise interfere with a transaction?
As specified above, the Italian Government may veto the transaction or impose certain conditions.
How long does the review process take?
Please refer to the paragraph 'What does the review process look like?' above.
How much does the review process cost?
No particular costs or expenses are charged by the Government.
What is the degree of transparency?
The review process is transparent and the interested party may request access to the deeds of the proceedings.
What are the consequences of the lack of clearance?
Transaction deeds can be adopted until Government consent is given (including the silent consent), but to be effective the transaction will need the Government's clearance. 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 one per cent of the last financial year's turnover. In addition, the relevant deed or transaction is deemed null and void. With respect to the acquisition of assets and/or services relating to 5G networks, the administrative fine is up to 150 per cent of transaction's value and, in any case, not lower than 25 per cent of transaction's value.
Is there a right to challenge?
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.
Are any significant changes planned?
Further changes are currently envisaged as a consequence of the COVID-19 outbreak. In the meantime, all administrative proceedings have been temporarily suspended until 15 April 2020 by the Law Decree No 18/2020 and, therefore, the terms for any 'Golden Power' proceeding are suspended until such date.
[1] According to the List of screening mechanisms notified by Member States, dated 12 December 2019: Austria, Denmark, Finland, France, Germany, Hungary, Italy, Latvia, Lithuania, Netherlands, Poland, Portugal, Romania and Spain. The United Kingdom is technically no longer an EU Member State following its decision to exit the EU, although it remains subject to EU rules for a transitional period, which currently lasts until 31 December 2020. The UK does have a national screening mechanism, although there have been proposals to strengthen it.
Key Contacts
Belgium
David Du Pont
Partner
T +32 2 626 1923
M +32 471 129987
david.dupont@ashurst.com
France
Anne Reffay
Partner, Avocat à la Cour
T +33 1 53 53 54 99
M +33 6 11 49 04 71
anne.reffay@ashurst.com
Germany
Matthias von Oppen, LL.M.
Partner
T +49 (0)69 97 11 28 32
M +49 (0)170 63 26 165
matthias.vonoppen@ashurst.com
Luxembourg
Isabelle Lentz
Partner, Avocat à la Cour (Luxembourg)
T +352 2813 3222
M +352 621 798357
isabelle.lentz@ashurst.com
Spain
Jorge Vázquez
Partner
T +34 91 364 9899
M +34 676 622 948
jorge.vazquez@ashurst.com
United Kingdom
Neil Cuninghame
Partner
T +44 20 7859 1147
M +44 7917 064 750
neil.cuninghame@ashurst.com