CMS Expert Guide to Foreign Investment Screening Laws in Italy

The Italian FDI regime is constituted by a complex system of provisions. The main rules are set out in by Law Decree No. 21 of 15 March 2012, converted into Law No. 56 of 11 May 2012. In addition, a number of Prime Ministerial Decrees describe in detail which activities are relevant from an FDI perspective and other procedural aspects.

Further, the EU-FDI Screening Regulation (EU) 2019/452 is applicable in Italy.

The Italian FDI regime applies to both EU and non-EU entities making an investment (share or asset deals) in an Italian company that operates in a sensitive national sector. Whether a transaction is caught depends on three factors:

• The type of transaction
• The activity of the Italian target entity
• The nationality of the direct or indirect acquirer

Transactions are caught by the Italian FDI regime in each of the following four scenarios:

• Scenario 1: Any acquisition of shares (no percentage threshold) of an Italian company operating in national security and (military) defence sectors by any investor, including Italian investors.
• Scenario 2: The acquisition of control over an Italian entity active in the sectors communication, energy, transportation, health, food and finance (including credit and insurance), if the direct acquirer and any controlling shareholder up to the ultimate beneficial owner are EU persons (intra-EU investments).
• Scenario 3: The acquisition of voting rights resulting the investor holding 10%, 15%, 20% or 50% of the voting rights in an Italian entity active in the sensitive sectors listed under Section 2.2 below if either the direct acquirer or any controlling shareholder up to the ultimate beneficial owner is a non-EU person (extra-EU investments), unless the transaction is already caught by scenario 1 or 4.
• Scenario 4: The acquisition of goods or services relating to the design, implementation, maintenance and management of broadband electronic communication services based on 5G technology as well as other services, goods, relationships, activities and technologies relevant to cybersecurity, including those related to cloud technology by any investor, including Italian investors.

Intra-group transactions may fall within the scope of the Italian FDI regime only if the transaction involves extra-EU entities and relates to intellectual property rights on artificial intelligence, semiconductor manufacturing machinery, cybersecurity, aerospace, energy storage, quantum and nuclear technologies, and food production technologies.

Greenfield investments are, in principle, within the scope of Italian FDI screening.

The Italian FDI qualifies as sensitive the infrastructures, technologies, productive factors, information and strategic economic activities that can be considered “critical” (for the purpose of the Italian FDI laws, “critical” means that they are essential for the maintenance of the vital functions of society, health, security, and the economic and social well-being of the population, as well as for technological progress) in the following sectors:

• National Security and (military) defence;
• Broadband electronic communication services based on 5G technology
• Energy, transports, communications, water distribution, electoral services;
• Health;
• Data processed for monitoring of public works, watersheds,
• Finance, including credit and insurance;
• AI, robots, semiconductors, cybersecurity, nanotechnologies and biotechnologies;
• Non-military space and aerospace infrastructures;
• Food;
• Dual-use items;
• Audio-visual media services.

If the transaction falls within the scope of the Italian FDI regime (see above 2), filing is mandatory and the transaction must not be closed prior to clearance.

During the screening procedure, the Coordination Group (Gruppo di Coordinamento) within the Prime Minister’s Office (Presidenza del Consiglio dei Ministri) examines whether the foreign investment is likely to affect the national security or strategic interests and assets.

FDI proceedings are coordinated by the Presidency of Council of Ministers (Presidenza del Consiglio dei Ministri) and, in particular, by the Coordination Group (Gruppo di Coordinamento) which is composed by: (i) member of Prime Minister Office (ii) representatives of the different Italian ministers.

The direct acquirer is responsible for the filing. The law however encourages joint filings by the acquirer and the target if possible.

Following the submission of the notification, the Coordination Group has up to 45 days to clear the transaction. This term can be extended up to 65 days in case additional investigations or information are needed.

When the notification is filed, the Coordination Group makes a first assessment and then transfers the file to the competent minister together with a proposal of the decision. The competent minister will provide the Presidency of Council of Ministers (at least 15 days before the deadline for the clearance) with a proposal to exercise (or not to exercise) its FDI rights (i.e. its power to intervene in the transaction). Within one day from the date of receipt, the members of the Coordination Group can provide their comments on the proposal. The draft of the decree containing the clearance of the transaction or the exercise of the FDI rights is transmitted to the Council of Ministers for its adoption.

It is also possible to file a prenotification in order to obtain a preliminary pre-clearance of a transaction. Prenotification submissions are decided within 30 days with a decision of (i) non-applicability of the FDI rules (ii) applicability of FDI rules and consequent request of submission for obtaining the clearance of the transaction.

In case a prenotification was already submitted with an outcome of non-applicability of the FDI rules, or in case intra-group transactions, the final decisions are taken directly by the Coordination Group. The process (in practice) is then easier and quicker.

No fees are imposed for the notification of a transaction.

FDI proceedings are not public and the Presidency of Council of Ministers does not publish its individual decisions or a list of pending cases.

Failing to comply with the notification procedure constitutes the risk of an administrative fine of up to twice the value of the transaction and in any event not less than one per cent of the aggregate turnover achieved by the undertakings involved in the last financial year.