Italy adopts a pre-notification procedure for Golden Power filings: will it really be a turning point?

Italy’s foreign investment screening mechanism (the so-called “Golden Power” regulation or “GPR”) is well known for its far-reaching scope.

This is mainly due to the wide range of sectors covered, as well as the broad list of activities, assets and relationships that may, in principle, be regarded as strategic under the GPR.

As mentioned in our previous post, the Italian Government recently passed a reform aimed at, inter alia, introducing a pre-notification procedure, allowing parties in a transaction to know early on whether it is actually reportable under the GPR and whether the Italian Government foresees any issues with the deal. The task of outlining the actual pre-notification procedure was left to a future decree, which has now been published by the Italian Government on 9 September 2022 and will come into force on 24 September 2022 (i.e. Decree No. 133/2022 – the “Decree”). 

A long-awaited reform

This reform was long-awaited as a possible solution to one of the main inefficiencies of the GPR: the numerous (and constantly increasing volume of) notifications submitted on a precautionary basis, due to the inherent difficulty of charting the scope of application of the Italian foreign investment regime.

Indeed, GPR filings have grown exponentially in the past few years - from 83 in 2019 to 496 in 2021 - following the significant expansion of the sectors, activities, assets and transactions covered by the GPR that occurred in 2020.

However, approximately 56% of the transactions notified in 2021 were considered by the Italian Government as falling outside the scope of the GPR. Similarly, in 2020 approximately 45% of total notifications were considered as non-reportable. These figures clearly show the latent vagueness of the GPR, which prompts economic operators to resort extensively to precautionary notifications. This is also linked to the draconian sanctions for a missed filing, which may result in very severe monetary fines and the possible invalidity of the relevant acts and transactions.

The pre-notification procedure 

The new pre-notification procedure therefore has the difficult task of trying to make the implementation of the GPR more efficient and less painful for market operators. Will it be a success? We will need to assess its effects over time, but some initial insights can be drawn from the Decree.

First, the Decree states that market operators wishing to file a pre-notification form must provide, if available, all information that would be needed for a formal filing.

Second, to speed up the process, decisions on pre-notifications will be taken by a specific Golden Power "Coordination Group" – thereby avoiding involving the Italian Council of Ministers at this stage, whose meetings are less frequent.

Third, at the end of the pre-notification phase, a transaction may be:

(i) declared not reportable under the GPR (i.e. no formal notification is required); 
(ii) declared reportable under the GPR, stating that a formal notification is mandatory; or
(iii) declared reportable but stating that no formal notification is required, since it is self-evident that it does not pose any threat to essential national interests.

However, in scenarios (i) to (iii), one or more of the members of the abovementioned Coordination Group or the parties to the transaction may still request a formal notification to be submitted.

Fourth, a decision under the pre-notification procedure must be made within 30 days from filing. While this is shorter than the standard 45-day term for a decision following a formal notification, parties should note that pre-notification does not suspend the mandatory deadline for the submission of the formal filing. This means that the pre-notification procedure must be initiated promptly to avoid the risk of having to notify while the outcome of the pre-notification phase is still pending.

Our take on these reforms

The introduction of a pre-notification process is certainly welcome news, as is the procedural streamlining that will lead to a reduction in the number of transactions for which involvement by the Council of Ministers will be necessary.

As to the future application of this procedure, it will be interesting to see the amount of information that the Coordination Group will deem necessary for the analysis of a pre-notification. Indeed, should the pre-notification phase prove to be excessively demanding, this could have a negative impact on its success.