Foreign direct investment in Italy: what the 2023 annual activity report tells business about the government's 'golden power'

The Presidency of the Council of Ministers sent its annual report on activities carried out from 1 January to 31 December 2023 on the basis of the special powers to the Houses of Parliament, as provided for in Article 3-bis of the Italian Decree-Law No. 21 of 15 March 2012 (DL Golden Power).

We briefly review its contents in order to provide an overview and identify useful indications to guide investors and companies in the assessment of their transactions, with particular reference to the advisability of using the pre-notification instrument, in light of the first report on its application in practice. 

The government's screening performance 

The annual report on the exercise of special powers confirms, once again, an increase in the number of transactions reported to the Presidency of the Council of Ministers, probably also by virtue of the partial consolidation of the transitional regime introduced to deal with the pandemic emergency. 
On the other hand, the timing of the handling of application procedures was among the fastest in Europe.

During 2023, 727 transactions, being both notifications (577) and pre-notifications (150), were scrutinised: almost a hundred more than the previous year (651).

Rather than indicating an increase in investments in Italy, this growing trend is, in our opinion, an indication of the persistence of multiple interpretative uncertainties related to the application of the golden power rules and the presence of numerous "grey areas", where it often appears decidedly complex to determine when a notification obligation arises and thus parties opt for a "prudential" notification.

The tendency towards a precautionary use of the instrument is confirmed by a comparison of the number of notifications made with the occasions when the special powers were actually exercised: in no less than 317 cases (that is, more than half of the scrutinised transactions), the notified transactions were found to be outside the scope of the DL Golden Power.

With regard to notifications deemed to fall within the scope of the framework, however:

• 222 proceedings ended with a resolution not to exercise special powers (of these, 51 concerned intra-group transactions and in two cases the companies involved received recommendations);
• 30 proceedings required the exercise of special powers.
   

In this regard, it is interesting to note that the number of circumstances in which the government decided to impose prescriptions and conditions increased considerably, 20 cases compared to only two outright oppositions (the remaining eight cases concerned requests for approval of 5G annual plans, to which specific prescriptions applied). 

This seems perfectly in line with the ultimate goal of the legislation and its remedies, which see the use of the veto as an extreme hypothesis, especially in view of the fact that the conditions imposed have often made it possible to authorise previously blocked transactions.

Once again this year, the vast majority of transactions received were in the sectors referred to in Article 2 of the DL Golden Power (energy, transport, communications and sectors referred to in EU Regulation 2019/452), accounting for around 90% of the total number.  

Pre-notification focus: is it really worth it?

The 2023 annual activity report provides, for the first time, an overview of the development of the pre-notification institution, allowing some reflections on the appropriateness of using this new instrument.

Introduced at the end of 2022, precisely in order to address the considerable increase in the number of notifications sent to the government in recent years, the pre-notification instrument immediately found itself exposed to quite a few criticisms due to the numerous open points.

While allowing the companies concerned to engage in preliminary discussions with the government and to request an initial assessment of whether or not the exercise of special powers was applicable to a given operation, the pre-notification, in fact, risked being inconclusive and sometimes even slowed down the proceedings.

This is because, in the absence of a response from the government within the time limits provided for by law (30 days from receipt of the information notice), pre-notification leads to the opposite effect of obliging the company to make a formal notification, with the consequence that, in addition to the timeframe dictated by the pre-notification procedure, it may also be necessary to wait for the timeframe of a formal notification procedure.

Considering the uncertainties about the timing and outcome of the pre-notification procedure, making a concrete assessment as to whether it is appropriate to anticipate the transmission of a disclosure is inextricably linked to the application practice, on which it is now possible to gather initial indications.

In fact, in 2023, there was a massive use of pre-notification, involving as many as 150 transactions. Of these:

• One was declared lacking in essential elements and not suitable for evaluation;
• 93 were declared to be outside the scope of the applicability of DL Golden Power;
• 32 were declared to fall within the scope of applicability of the DL Golden Power, but manifestly lacked the prerequisites for the exercise of special powers;
• 24 were declared to be within the scope of applicability of the DL Golden Power and a formal notification was requested. 
   

These numbers seem to confirm the rationale of the instrument and its potential.

The most decisive element to focus on, over and above these numbers, is, in our opinion, that in no case were the pre-notifications received by the competent offices left unanswered: on the contrary, the speed with which these procedures were concluded, together with the fact that in 85% of cases it was not necessary to further investigate the transaction, would seem to give hope for the effectiveness of the instrument and its use. 

Consistent with the purpose of the pre-notification institute, there was also a higher percentage of cases in which the DL Golden Power was declared inapplicable than in circumstances where this was done against formal notifications. 

Osborne Clarke comment

This briefly summarised picture confirms the need for companies to analyse each individual transaction with extreme caution and utmost care, even in view of the considerable economic and practical consequences of a failure to notify.

The institute of pre-notification would seem to represent an instrument that, while it is certainly not decisive, is at least useful for dealing with the ambiguity of the legal dictate in all those cases in which the discretion that accompanies special powers openly clashes with the demands of legal certainty.

In this context, it becomes essential, therefore, to be able to anticipate the use of golden power at an absolutely preliminary stage of the transaction under discussion, so as to be able to define the path most suited to the case at hand, with the ultimate aim of not hindering the timing of the business transaction more than necessary.