ITALY Trends and Developments Contributed by: Maria Chiara Malaguti, Filippo Rossi and Roberto Longhi, PedersoliGattai
wording, depending on the agreement between the parties. With the above specifications, an operator wishing to invest in Italy will need to carefully analyse the possi- ble consequences of the Model BIT 2024, as will Ital- ian investors wishing to invest in one of the states with which the European Commission has not yet opened negotiations. There is one final factor that every investor must con- sider: the BITs currently in force must obviously be interpreted according to the principles of treaty law (the Vienna Convention on the Law of Treaties, 1969). The wording of many of these agreements is very different from the current Model BIT, and therefore it must be assumed that the trends described cannot be applied to bilateral treaties already signed in the past. However, the authors are also seeing a further trend among arbitral tribunals of a certain openness towards evolving investment law, especially regard- ing the right to regulate by states. While it cannot be assumed that the Italian Model BIT will serve as a tool for interpreting agreements signed in the past, any new investor cannot completely ignore these trends, at least when assessing the approach that a future arbitral tribunal might adopt in the event of a dispute. The Italian Model BIT recognises that its provisions are meant to preserve the right of the parties to regu- late within their territories in order to achieve legiti- mate public policy objectives, such as public health, safety, environment, public morals, financial stability, social or consumer protection, and the promotion and protection of cultural diversity. In parallel, it encour- ages enterprises operating within the territories of the two parties or subject to their jurisdiction to respect internationally recognised guidelines and principles of corporate social responsibility, including the OECD Guidelines for Multinational Enterprises, and to pursue best practices of responsible business conduct. Firstly, such principles affect the scope of certain protection standards. The fair and equitable treat- ment (FET) standard is breached only when one of the actions listed in Article 4 occurs – that is to say:
• denial of justice in criminal, civil or administrative proceedings; • fundamental breach of due process, including a fundamental breach of transparency in judicial and administrative proceedings; • manifest arbitrariness; • targeted discrimination on manifestly wrongful grounds, such as gender, race or religious belief; or • abusive treatment such as harassment, duress or coercion. Furthermore, legitimate expectations are covered only when “a Party made a specific representation to an investor to induce a covered investment that created a legitimate expectation, upon which the investor relied in deciding to make or maintain the covered invest- ment, but that the Party subsequently frustrated” (4.3). On the other hand, the Model BIT reaffirms the right of states to regulate and thus limits the application of protection standards. Among areas of regulation, Article 6 lists those relating to the protection of public health, social services, public education, safety, the environment (including climate change), public mor- als, social or consumer protection, privacy and data protection, and the promotion and protection of cul- tural diversity. Furthermore, it clarifies that the provi- sions of the agreement could not be interpreted as a commitment from a party not to change the legal and regulatory framework, including in a manner that may negatively affect the operation of covered investments or the investor’s expectations of profits. Moreover, corporate social responsibility standards, responsible business conduct, and measures against corruption are imposed on investors by a duty of due diligence in order to identify and address adverse impacts, such as on the environment and labour con- ditions, and in their operations, supply chains and other business relationships. Specific mention of the OECD Guidelines for Multinational Enterprises in the preamble of the Model BIT helps in understanding the scope of these duties. On their side, the state par- ties must promote the assimilation of corporate social responsibility or responsible business practices on the part of enterprises and investors, and must support the dissemination and use of relevant internationally agreed instruments that have been endorsed or sup-
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