What is the Golden Power? Practical cases and regulatory framework
Photo credit: Corriere della Sera
EU investment screening mechanism
Even if the European Union adopted an open approach towards foreign direct investments, there exist an investment screening mechanism under the Regulation (EU) 2019/452 of 19 March 2019 which applies in cases of suspected dangerous investments for security or public order. Recently, on March 25, 2020, the EU Commission also issued guidelines for foreign investment screening in a time of public health crisis and related economic vulnerability with the aim to preserve EU companies and critical assets, notably in areas such as health, medical research, biotechnology and infrastructures.
According to this mechanism each Member State, where the investment takes place, has to provide information, to notify cases which undergo national screening and request comments and opinions to other Member states and European Commision. Member state where the investment takes place has to take into account the comments and opinions received, but it has the final word on how to treat the investment.
Italian Golden Power
Italy since 2012 has already put in place its own national screening for foreign direct investments regulated by the Italian Law Decree of March 15, 2012 (converted in Law 56/2012). According to the Italian sceering mechanism, the government has the power (Golden Power) to control foreign direct investments in several strategic sectors such as defence and national security, energy, transport, communication and high-tech. Since 2019 the Golden Power was extended also to 5G infrastructure and components when non-EU parties are involved. After the issuance of EU Commission Guidelines of March 25, 2020, Italian Law Decree no. 23 of April 8, 2020 widened the Golden Power scope to:
water, raw materials, food security, healthcare, finance, banking and insurance sectors (from Euro 300 million net yearly turnover and 250 employees)
manufacture and distribution of medical equipment and personal protection devices
dual use technology, including artificial intelligence, robotics, cybersecurity (from Euro 300 million net yearly turnover)
The Italian government with DPCM n. 179 of 18 December 2020 and DPCM n. 180 of 23 December 2020 provided a detailed negative list, definitions and notification instructions.
Any direct or indirect acquisitions of 10% or more, change in the business scope, liquidation or other transactions must be notified within 10 days. After notification the Italian Government has the power to block the transaction or to impose conditions within 45 days from the notification date, otherwise it will be deemed to have no objections.
Anyone who does not comply with these obligations is subject to a pecuniary administrative sanction up to double the value of the transaction and in any case not less than 1% of the cumulative turnover achieved by the companies involved in the last year in which the financial statements were approved.
Practical cases in Italy
Last March 31, 2021, the Italian Government led by Mario Draghi invoked the Golden Power in the semiconductor sector, to block a Chinese takeover bid on a small firm based near Milan (in the North of Italy) called LPE SpA. The Chinese company was Shenzhen Invenland Holdings Co., that notified Italy’s government the aquisition of a 70% stake of LPE SpA on Dec. 21, 2020.
Another interesting recent case was the attempted acquisition of the Italian target company IVECO by the Chinese group FAW JIEFANG in the production of heavy vehicles sector. The Italian Government was about to invoke the Golden Power, but the owner of IVECO, the company CNH (Exor Group) finally refused the Chinese offer and no Golden Power was applied.
Avv. Lifang Dong and Avv. Chiara Civitelli
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