ITALY Law and Practice Contributed by: Maria Chiara Malaguti, Filippo Rossi and Roberto Longhi, PedersoliGattai
to understand that it might decide not to do so it in the short term. It instead supports the EU-Mercosur Agreement currently under negotiation, and, as previ- ously mentioned, membership in the EU also has an impact on intra-EU agreements and disputes: mem- ber states cannot undertake investment obligations against other member states and have to terminate all existing BITs. Furthermore, they cannot use arbitration mechanisms for intra-EU disputes. 2.4 Interpretive Aids Each BIT has an Explanatory Note that helps in the interpretation of the agreement. In fact, the Explana- tory Note is related to the law ratifying the treaty and usually contains both a brief commentary on the law itself and an explanatory note on the signed agree- ment. This Explanatory Note is published in the Offi- cial Journal of the Italian Republic in accordance with internal transparency regulations. The Model BIT is not accompanied by any Explana- tory Note. 2.5 Investment Laws Italy does not have a general national investment law. Despite the lack of a specific law on direct invest- ment, Italy has adopted various norms over the years to encourage foreign investment; these are imple- mented through support measures that are currently mainly provided by the Interministerial Committee for the Attraction of Foreign Investment (CAIE) and the Ministry of Business and Made in Italy (MIMIT), through a special unit. Furthermore, as with many other countries, Italy has a comprehensive legal framework on so-called “Golden Power” (2012, with more recent amendments) to pro- tect strategic assets in key industries such as ener- gy, transport and telecoms. This framework grants authorities special powers to review and potentially block or impose conditions on foreign investments that could threaten national security or public order. International investment agreements undertaken by Italy usually contain provisions on protection of national security or public order as exceptions to the general principles on investment protection.
Although such kinds of legislation are thus legitimate in principle under international investment law (at least when submitted in accordance with certain conditions and/or qualifications), they add additional duties of due diligence and constraints for foreign investors. 2.6 Arbitration Clauses in Investor–State Contracts In Italy, investment contracts concluded by the State or State-owned enterprises are classified as public law contracts governed by administrative law. In prac- tice, direct (international) arbitration clauses are not the norm. Disputes are typically resolved before Italian administrative or civil courts. Domestic arbitration may occasionally be used, particularly in mixed conces- sions such as joint ventures with foreign investors (eg, before the CCIAA), but always under Italian law and with seat in Italy. Direct international arbitration is excluded, as such contracts are deemed to involve State aid/public contracts (subject to EU public procurement law) and fall under the jurisdiction of national courts and the oversight of the Court of Auditors. Direct international arbitration is frequent in corporate transactions with listed SOEs (eg, share purchase agreements). To date, the cases taken against Italy have all been under the ECT. In this context, the legal basis consist- ently invoked is the FET standard – particularly, its articulation of the sub-standard of legitimate expec- tations. The various awards have often elaborated in detail on the duty of due diligence of an investor enter- ing a foreign highly regulated market. The FET, in the specific formulation of Article 10 ECT, is similarly invoked to ensure the stability of the rel - evant legislation. In such instances, various consid- erations can be found in the awards on the balance between the right to regulate by a state and its obliga- tions under the ECT to maintain a stable legal frame- work, together with considerations on the scope and content of stabilisation clauses. 3. Substantive Protections and Breaches 3.1 Common Complaints
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