Changes to Italian FDI regime in the electronic communications sector enters into force

With Law Decree no. 21 dated 21 March 2022, which entered into force on 22 March 2022 (the Energy Decree), the Italian government has adopted a suite of urgent measures aimed at addressing the economic and humanitarian effects of the crisis in Ukraine.

The measures include material changes to the Italian FDI regime. Some of these changes affect the general rules of the FDI regime, others are specifically addressed to the FDI regime applicable to the electronic communications sector. We will focus on the latter.

Main changes introduced by the Energy Decree in the electronic communications sector

The scope of application of the new regime

The new rules confirm that broadband electronic communications services (ECS) based on 5G technology are activities of strategic relevance for the national defence and security system and are therefore within the scope of the FDI regime.

In addition, the new rules pave the way to extend the FDI regime to any services, assets, relationships, activities and technologies relevant for cybersecurity purposes, including those based on cloud technology. The Energy Decree provides that the government, in agreement with the competent Ministries, may identify such additional services, assets, relationships, activities and technologies by means of future decrees.

The transactions subject to the notification duty

The new regime provides that any undertakings aiming to acquire, including by means of contracts or agreements, for any reason,

• assets or services regarding the design, realization, maintenance and management of 5G-based broadband ECS or cybersecurity related services, assets, relationships, activities and technologies; or
• technology-intensive equipment aimed at such realization or management,

are required to notify to the Italian government, before such acquisition, with an annual plan. The content of the annual plan is detailed by the Energy Decree (the Plan).

The new rules no longer refer to supply contracts or agreements put in place with non-EU providers or suppliers. This implies that the notification duty now applies regardless of the nationality of the providers or suppliers.

The following information must be included in the Plan:

• a description of the acquisitions project (ie details of the proposed purchases);
• the identification details of the suppliers (including potential suppliers);
• a detailed description, which includes technical specifications, of the assets, services and technology-intensive equipment necessary for the design, realization, maintenance and management of the activities concerned;
• complete information on the pending contracts and the perspective of development of the 5G network;
• complete information on any communications made pursuant to the National Cybersecurity regime (provided by Law Decree n. 105/2019), to allow security audits by the Centre of National Evaluation and Certification (CNEC).

Possible decisions of the government subsequent to the screening and timing

Subsequent to the notification, the government has a 30-day period for the screening of the Plan.

The 30-day term can be extended for up to 20 days if in-depth technical analysis is required. The term could be extended once for a further period of up to 20 days, if the analysis is particularly complex.

At the end of the screening the government may:

• approve the Plan unconditionally;
• approve, in whole or in part, the Plan for a certain timeframe, providing a term for the replacement of certain assets or services;
• approve the Plan conditionally, ie imposing conditions and prescriptions aimed at ensuring the protection of the national defence and security interests; or
• veto the Plan.

If the government finds that it is necessary to request information to the notifying party or to third parties, the above term could be suspended once, until receipt of the requested information (to be provided within ten days when requested to the notifying party or within 20 days when required to third parties). If the government finds that the notification is not complete, the 30-day term starts afresh from the receipt of the information which complete the notification.

Subsequent to the notification, pending the government screening, the Plan cannot be implemented (and therefore the relevant acquisitions cannot be completed), but it may be updated on a quarterly basis.

Consequences in case of violation

Should the agreements and contracts subject to the notification duty be implemented before the term for the governmental review of Plan expires, the government may order the undertaking to restore – at its own expenses and within a precise term – the situation before the implementation of the agreements or contracts concerned. An administrative fine may be applied if there is a delay in the performance of the order, up to one-twelfth of the 3% of the turnover achieved by the subject upon which the notification duty subsists for each month of delay.

Upon the breach of the notification duty, the government may apply an administrative fine of an amount up to 3% of the turnover achieved by the subject upon which the notification duty subsists. The same administrative fine can be applied in case of breach of the conditions and prescriptions or the veto imposed by government. Any contracts signed in violation of the conditions imposed or the veto by the government, or in breach of the notification duty, are null and void. Furthermore, the government may order the undertaking to restore – at its own expense – the situation prior to the violation, within a precise term. An administrative fine may be applied in case of delay in the performance of such order (up to one-twelfth of the 3% the turnover achieved by the subject upon which the notification duty subsists for each month of delay).

In case of breach of the notification duty, the government may open the screening procedure upon its own initiative (ie also in the absence of the notification).

The monitoring system

The new rule also introduces a monitoring system aimed at verifying the compliance with the conditions and prescriptions imposed by the government and their suitability and the adoption of adequate measures, including technology, implementing such conditions and prescriptions.

Monitoring activity is overseen by a committee, comprising one or more members of the government, the competent Ministries and CNEC.

To allow the monitoring activity, the undertaking concerned is required to communicate – complying with the terms provided by the government with its decision – every implementing activity carried out, including the signing of related contracts, providing technical details. The undertaking concerned is also requested to send a periodic half-yearly report describing the ongoing activities.

The monitoring committee has the power to carry out technical inspections and audits with reference to the assets and technology-intensive equipment functional to the design, realization, maintenance and management of the 5G-based broadband ECS or cybersecurity activities.