Pre-notification and simplification: a historical turning point for the Italian FDI regime (Golden Power)

The Presidency of the Council of Ministers is about to issue a decree (the Decree) – implementing Law Decree No. 21/2022 of 22 March 2022  – finally introducing long-awaited simplifications to the foreign direct investment notification procedure (the so-called Golden Power). The Decree – which will become effective from its publication on the Republic of Italy’s Official Gazette – will finally set out (inter alia) the discipline of the so-called “pre-notification”. Through this new pre-notification instrument, stakeholders will finally be able to receive from the Government an assessment on whether a transaction must be notified or not. This procedure will therefore avoid “precautionary” filings, which are often the source of delays in the completion of transactions. No substantial modification to the Decree prior to its publication are expected.

Overview

The foreign direct investments regime in Italy, the so-called “Golden Power” regime, allows the Italian Government to scrutinise transactions that concern “strategic” industrial sectors and grants it the power to apply conditions to such transactions or even veto them in the case of a threat to the national economy or security. The regime was introduced in 2012 by means of the Golden Power Decree and was reinforced in order to cope with possible threats arising from the Covid-19 pandemic. More recently, Law Decree 21/2022 (as converted into law) has introduced substantial modifications to the Golden Power regime, inter alia enlarging the scope of application of the FDI scrutiny (overview of Law Decree 21/2022 available here.

 Among others, Law Decree 21/2022 required the Government to adopt an implementation decree in order to regulate a pre-notification filing, to receive an assessment on the applicability of the Golden Power Decree to the transaction.

Pre-notification procedure

The Decree will introduce the so-called pre-notification procedure. According to the Decree, any interested company can submit to the Presidency of the Council of Ministers a so-called “project” of transaction. Said project will outline the main features of a particular transaction, based on the information and documents available as of the date of filing.

Through this filing, the company will ask the Government to assess whether the transaction falls within the Golden Power regime or not. Within 30 days, the Government must complete the assessment, with one of the following outcomes:

(a) The transaction does not fall within the scope of application of the Golden Power legislation. Therefore, no filing will be due; or

(b) The transaction falls within the scope of application of the Golden Power legislation. Therefore, a filing will be due; or

(c) The transaction falls within the scope of application of the Golden Power legislation. However, it is evident that no special powers will have to be exercised, therefore no filing will be due.

The assessment above is carried out by the so-called “Coordination Group”, i.e. a group or representatives of the various Ministers (and/or other interested authorities), chaired by the Secretary (or vice-Secretary) of the Presidency of the Council of Ministers.

In the event that a filing is due, the deadline provided under the law will not change (i.e. ten days from closing or ten days from the date in which the company’s deliberation to sell/transfer a strategic asset becomes effective).

In the cases under (b) and (c), the Government may give the company recommendations (presumably, on how to implement the transaction).

In the cases under (a) and (b), the Ministers participating to the Coordination Group can request that the relevant company files in any case a notification. The same request can be made by the company itself. In this case, a filing will be due.

Finally, in the event that the Government does not respond to the pre-notification request within 30 days, the company will have to make a Golden Power filing, within the usual deadline.

The Decree does not specify how to proceed in the event that, following the issuance of the assessment, the structure of the transaction would change. Presumably, the notifying subject will have to re-submit the filing asking the Government to confirm that the changes to not affect the conclusions of the Government’s assessment.

Other simplification measures

Before the Decree, unless the transaction was out of the scope of application of the Golden Power legislation, any decision of the Coordination Group to not exercise any special power had to be ratified by the Council of Ministers. With the Decree, the decision not to exercise any special power can be taken directly by the Coordination Group, without any further steps. This simplification aims at speeding-up the process in the event of transactions that would theoretically fall within the scope of the Golden Power legislation but that do not trigger any risks for National security/economy. However, according to the Decree, the representatives of the authorities within the Coordination Group or even the parties to the transaction may always request that the file passes through the Council of Ministers.

Conclusions

The Decree is going to introduce long-awaited simplifications to the Golden Power procedure. This is mostly due to the fact that, given the vagueness of the regulation on the industries to be considered as “strategic” (vagueness has increased over the years), the number of filings in the last two years had increased exponentially. Companies and operators have been making “precautionary filings” whenever there was even the little uncertainty as to whether a transaction was captured by Golden Power or not. The sanctions in case of failure to notify are in fact very burdensome and no company had wanted to take the related risk.

The simplifications introduced by the Decree will have the effect of: (i) on the one side, through the pre-notification procedure, clarifying whether a transaction will need a filing, obtaining such assessment ahead of the transaction’s completion and within a 30-day (reasonable) term; and (ii) on the other side, in case of positive outcome of the Golden Power assessment, not having to wait for the Council of Ministers to be convened, will allow the conclusion of Golden Power procedures as soon as the Coordination Group examines the file, saving days (if not weeks) and making the procedure smoother for the companies.