In 2012, the Law Decree no. 21/2012 was enacted in order to set forth a new framework for governmental investment review, by defining the conditions for exercising the Italian Government’s special powers on companies, bringing at the same time the national regulation in line with the rules provided by the “Treaty on the Functioning of the European Union”. In particular, Law Decree no. 21/2012 has outlined, among others: (i) the perimeter of the companies which may be subject to the special powers of the Government; (ii) the perimeter and the conditions for the exercise by the Government of each of its special powers; as well as (iii) the procedure for notifying the Presidency of the Italian Council of Ministers the transactions which fall within the scope of application of the “golden powers” regulation and (iv) the instruments which the Government is provided with when exercising the special powers. The original set of rules introduced by Law Decree no. 21/2012 has been the object of significant normative changes in the direction of stricter control on foreign investments, consistently with a tendency that spread, in the last decades, all over Europe.

In short, pursuant to Law Decree no. 21/2012 the Italian legal framework on foreign investments restrictions provides the Italian Government with certain special powers (including the power to veto the transaction under scrutiny or to impose certain discretionary conditions for its execution, also known as the “Golden Powers”) over certain transactions concerning companies operating in sectors deemed “strategic” for the essential interests of the Italian State; such powers are exercised upon the occurrence of certain triggering events.

The subjection to the Italian Golden Powers does not depend on the nature of the company (private or listed), or on its registration in a special public register or list, but is left to the technical discretion of the Italian Government within the boundaries and the categories set forth by the applicable laws, which is exercised according to a principle of the prevalence of substance over the form.

In order to allow the Italian Government to evaluate whether or not to exercise its Golden Powers, the “strategic” company is required to file a prior notification to the Presidency of the Council of Ministers containing information on the transaction under scrutiny before the latter is executed (and the notification imposes a standstill period so as to allow the Government to carry out its review of the investment). It remains understood that the competent authority may initiate the scrutiny over a transaction deemed relevant for these purposes even in the lack of such notification.

Provided that differences may arise as to the criteria underpinning foreign investment restrictions depending on the specific sector considered, generally speaking, the exercise, by the Italian Government, of its Golden Powers requires and presupposes the existence of a threat of serious prejudice to the essential interests of the national security and public order, or a threat of serious prejudice to the public interests relating to the safety and operation of networks and installations and the continuity of supplies.

A foreign investor is any investor foreign to Italy, being both a non-EU entity and an EU-based or non-Italian investor. Please note that the events that trigger a filing under the Italian foreign direct investment screening regime (and the related thresholds) vary depending on the EU membership (or not) of the national State of the investor.  

More specifically, the law further specifies that any non-EU person shall mean:

1. any individual person or legal entity that is not resident, habitual resident, does not have the registered office or the administration office or the principal place of business in a State Member of the European Union or of the European Economic Area or which is not established therein;
2. any legal person having its registered office, central administration or principal place of business in a Member State of the European Union or of the European Economic Area, or which is otherwise established there, and which is controlled, directly or indirectly, by a natural person or a legal person referred to in subparagraph (i) above;
3. any natural person or legal entity which has established its residence, habitual abode, registered office or administration or principal place of business in a member state of the European Union or of the European Economic Area, or which is in any event established therein, where there are elements indicating elusive conduct with respect to the application of the Golden Powers regulations.

The economic sectors/targets in/with respect to which the Italian Government may exercise its special powers pursuant to Law Decree no. 21/2012, as amended, are:

1. defense and national security (Art. 1 of Law Decree no. 21/2012), as further specified by the Decree of the President of the Council of Ministers no. 108/2014;
2. electronic broadband communication services based on 5G technology (Art. 1-bis of Law Decree no. 21/2012. In this sector, the identification of the assets to which the regulation applies is left solely to primary legislation, since a Decree of the President of the Council of Ministers for the identification of further strategic assets has not yet been adopted);
3. energy, transports, and communications (art. 2 of Law Decree no. 21/2012) as further specified by the Decree of the President of the Council of Ministers no. 180/2020;
4. the economic sectors/targets listed in Art. 4 of EU Regulation no. 452/2019, as recalled by Article 2 par. 1-ter of Law Decree no. 21/2012 and as further specified by Decree of the President of the Council of Ministers no. 179/2020. Among these sectors it is worth noting: (i) energy sector, (ii) water sector, (iii) health sector, (iv) treatment, storage, access and control of sensitive data and information, (v) electoral infrastructure, (vi) financial sector, including credit and insurance sector, and financial market infrastructure, (vii) artificial intelligence, robotics, semiconductors, cybersecurity, nanotechnologies and biotechnologies, (viii) non-military aerospace infrastructure and technologies, (ix) supply of production factors and food sector, (x) dual-use items, (xi) freedom and pluralism of the media.

The economic sectors/targets in/with respect to which the Italian Government may exercise its special powers pursuant to Law Decree no. 21/2012, as amended, are:

1. defense and national security (Art. 1 of Law Decree no. 21/2012);
2. electronic broadband communication services based on 5G technology (Art. 1-bis of Law Decree no. 21/2012);
3. energy, transports and communications (Art. 2 of Law Decree no. 21/2012);
4. the economic sectors/targets listed in Art. 4 of EU Regulation no. 452/2019, as recalled by Article 2 par. 1-ter of Law Decree no. 21/2012 and as further specified by Decree of the Presidency of the Council of Ministers no. 179/2020. Among these sectors it is worth noting: (i) energy sector, (ii) water sector, (iii) health sector, (iv) treatment, storage, access and control of sensitive data and information, (v) electoral infrastructure, (vi) financial sector, including credit and insurance sector, and financial market infrastructure, (vii) artificial intelligence, robotics, semiconductors, cybersecurity, nanotechnologies and biotechnologies, (viii) non-military aerospace infrastructure and technologies, (ix) supply of production factors and food sector, (x) dual-use items, (xi) freedom and pluralism of the media.

Each sector has its own specific peculiarities in terms of events triggering a filing for foreign investment review. Therefore, a detailed overview can be provided only on a case-by-case basis. This being said it is worth highlighting that filing undertakings are generally triggered by:

1. any resolution, action or transaction to be adopted or carried out by the shareholders’ meetings or by the board of a company resulting in the loss of ownership, control or availability of the relevant assets that pertain to one of the strategic sectors mentioned above. This includes – but is not limited to - resolutions of the shareholders’ meeting or of the board of directors concerning mergers or de-mergers, the transfer of the registered office abroad, the transfer of a business or business unit abroad which includes any relevant assets or the assignment of any relevant asset as a guarantee;
2. any resolution, action or transaction to be adopted or carried out by the shareholders’ meetings or by the board of a company resulting in a change of use of the relevant assets, as well as in any change of the corporate purpose, the dissolution of the company, or else in certain amendments to the by-laws;
3. any acquisition by both EU or non-EU entities of controlling interests in companies owning or operating any relevant asset, if such equity investment(s) implies a stable position of the purchaser, due to its control of the company; however, with reference to the cases sub a) and sub b), the obligation for EU (and non-Italian) subjects solely arises if the company owns or operates assets in the communications, energy, transport, health, agricultural, and financial sector.
4. non-EU entities are required to notify the Presidency of the Council of Minister also of any acquisition of interests in companies owning any relevant asset which grant voting rights or a portion of the corporate capital of at least 10 percent, taking into account shares or quotas already directly or indirectly held and whose overall investment value is equal to or higher than Euro 1 Million, or those resulting in the exceeding of 15 percent, 20 percent, 25 percent and 50 percent thresholds;
5. the incorporation of a new entity exercising strategic activities or owning strategic assets (with the exception of greenfield investments in the defense and national security sectors, only in the event that at least one shareholder is a non-EU investor owning 10 percent or more).

Finally, with specific reference to the sector of electronic broadband communication services based on 5G technology, Art. 1-bis of Law Decree no. 21/2012, identifies the relevant triggering events as follows:

1. the signing of contracts or agreements having as their object the acquisition, for any cause, of goods or services relating to the design, construction, maintenance and management of networks connected to the services when implemented with non-EU parties;
2. the acquisition by non-EU parties, for any cause, of technology-intensive components used for the aforesaid construction or management;
3. other services, assets, relationships, activities and technologies relevant to cybersecurity, including those related to cloud technology to be identified. 

However, in this sector, the object of the filing is not the individual transaction but an annual plan containing specific information (e.g. the sector concerned; the detailed information data of the notifying party; the purchasing program; a description of the goods, services and technology-intensive components functional to the design, implementation, maintenance and management of activities related to broadband electronic communication services based on 5G technologies; a full disclosure of the current contracts and the prospects for the development of the 5G network etc).

Yes, if a transaction (or a resolution or any relevant act) meets both the “objective” (i.e. based on the nature and characteristics of the business) and “functional” (i.e. based on the kind of transaction carried out and/or the nationality of the investor) requirements, a notification to the Presidency of the Council of Ministers is mandatory.

In this regard, it is worth noting also that the Golden Powers regulation does not provide for the possibility of having an informal discussion with the competent authority prior to filing. However, through the Decree of the President of the Council of Ministers no. 133/2022, the instrument of pre-filing was introduced. Such procedure entails the possibility for the interested company, whenever the applicability of the Golden Power Regulation to a transaction is not clear-cut, to send an informative notice regarding the proposed transaction to the Presidency of the Council of Ministers, asking the latter to confirm whether said proposed transaction falls or not under the scope of application of the Golden Power Regulation. The pre-filing allows the conclusion of the FDI review at an early stage, given that the pre-filing can be submitted also before the signing of binding agreements. Within 30 days, the Presidency of the Council of Ministers will provide its view as to whether or not the Golden Power Regulation applies to the transaction, or whether the conditions for the exercise of the special powers are manifestly not met. In case no communication is received from the Presidency upon the expiry of the mentioned 30-day period, the interested economic operator will still be subject to the ordinary filing obligations.

The pre-filing has been introduced in order to avoid the borderline” cases, in which the operators involved opted for making precautionary filings that, whilst seeking a confirmation that the transaction did not fall within the Golden Powers Regulation, comply with all legal requirements.

The filing pursuant to the so-called Golden Powers Regulation imposes a standstill effect on the transaction. In other words, pending the review, the effectiveness of any significant transactions is suspended.

Therefore, in practice, the filing is usually made before closing (specifically, within 10 days after the signing of the relevant agreements) and the clearance thereof is treated as a condition to closing (similarly to a merger control CP).

Joining a wider global trend, the Italian Government has responded to the extreme volatility of the stock markets brought by the COVID-19 pandemic by strengthening and expanding the special powers that can be exercised to protect the strategic assets of companies active in key sectors of the Italian economy.

Accordingly, Law Decree no. 23 dated 8 April 2020 introduced significant innovations in each of the key aspects of the Golden Powers Regulation: the scope of the regulation on special powers, the conditions triggering the filing obligations, the related powers granted to the Italian Government in the event of a threat to national interests. The main innovations can be divided into 2 categories: (a) the introduction of ex officio powers in the event of a breach of a filing obligation) and (b) the extension of the mentioned regime in order to comprise any acquisition by foreign entities - both UE and non-EU entities - of controlling interests in companies holding strategic assets and relationships in the sectors referred to under Article 4, paragraph 1, letters a), b), c), d) and e) of Regulation (EU) no. 2019/452, as further specified by Italian implementing regulation or the strengthening of the threshold for acquisitions in the mentioned sectors carried out by foreign non-EU investors). The latter obligation was consolidated through Law No. 51/2022, which expressly specified that EU entities also include Italian nationals. However, the obligation for EU (and non-Italian) subjects solely arises if the company owns or operates assets in the communications, energy, transport, health, agricultural and financial sectors.

On the basis of the reports published by the Presidency of the Council of Ministers for the years 2012-2018, it must be acknowledged that the Italian Government has exercised its powers with great caution approximately in 10% of the cases submitted for review, vetoing only one transaction in six years of the practical application of the Golden Power Regulation. In 2019, we witnessed a slight increase in the percentage of cases in which the Golden Powers have been exercised, from 10 to 15%. In 2020, the cases in which special powers were exercised amounted to 12.5% of the total number of notified transactions, whereas, in 2021, special powers were exercised in 18% of the cases. Finally, it’s recent news that the Presidency has vetoed at the end of March 2021 the acquisition by a Chinese purchaser of an Italian company active in the semiconductors business. With regard to 2022, according to the report published by the Presidency of the Council of Ministers, 608 transactions were notified. Among these transactions, 314 were excluded from the scope of applicability of the Golden Powers Regulation and 294 were included in its scope (in particular, in 1 case the Presidency vetoed the transaction; in 3 cases it opposed the transaction; in 8 cases it imposed prescriptions and in 9 cases it exercised special powers by authorizing the transaction subject to recommendations). In 2022, 43 pre-filings were also submitted and 93% of the proceedings were concluded therein. Specifically, in 79% of the cases, the Presidency determined that the Golden Powers Regulation did not apply to the transaction; in the remaining 14%, it decided not to exercise its special powers.

See the response to "Is your regime focused on economic protectionism, national security, or a combination?"

Considering that the strategic assets, relationships, activities, and technologies that are relevant for the purposes of cybersecurity, including those relating to cloud technologies – of which there has been a constant increase in their use – have not yet been identified, it will be interesting to see in the next months if we are going to witness any kind of extensions or amendments or not.