Francesca Petronio, Partner, Litigation Department
Marilena Hyeraci, Associate, Litigation Department
Via Rovello, 1
20121 Milano, Italy
+39 (0)2 3041 4000
How is the fight against corruption progressing in Italy?
In response to the recommendations of international organizationsi and the high number of corruption scandals in recent years – including the cases which hit Expo 2015ii and the one related to the Venice flood barrieriii – Italy has devoted significant effort to tackling rampant corruption by strengthening preventive measures and spreading a culture of transparency in the public administration rather than concentrating solely on punishing the offences, as has happened in previous years. The main reform enacted in 2012, which received intense criticismiv, has been enhanced by recent laws in 2014 and 2015v. In a nutshell, the most recent reforms: (1) implemented multiple steps to enhance transparency in the public sector, (2) extended the scope of application of certain crimes of corruption and increased their sanctions and statute of limitations, (3) renewed the false accounting crime, and (4) extended the powers of the National Anti-Corruption Authority (“ANAC”)vi.
What is the impact of Law No. 114 of August 2014?
In 2014, Decree Law No. 90 of 24 June 2014, subsequently enacted into Law No. 114 of 11 August 2014 (hereinafter, “Law 114/2014”) implemented many measures to enhance transparency in the public sector. In particular the law:
i Expanded the scope of application of the rule requesting public entities to provide complete access to certain information and documents – including information on their organizations and the individuals appointed as directors and consultants and data on costs and personnel evaluations – and to publish such information on their web sitesvii. Law 114/2014 made this rule applicable, among others, to national, regional and local public entities, including non-economic entities, and non-territorial entities, public schools and universities, the chambers of commerce, institutions financed by the public administration and when applicable, to private entities controlled by the public administrationviii;
ii Introduced a monetary sanction (from €1k to €10k), for breaches by the public administrations in the adoption of the Anti – Corruption Plan – which was introduced in 2012ix and requires that each local administration assesses for a three year period its risk related to corruption and identifies the bodies appointed for the prevention of such crimesx;
iii Introduced, in the context of contracts for certain listed services particularly exposed to the risk of mafia infiltration (for example, transportation and waste management), a general duty for public administrations and public entities to obtain from the service providers a declaration of non-involvement in criminal proceedings for serious violations, including the crime of mafia organizationxi.
Moreover, with the same purpose of spreading a culture of transparency, additional measures adopted in 2014 encompass the executive regulations regarding the so-called “rating of legality”. Introduced in 2012 the rating of legality is a rate that the competent Italian Authority (the Antitrust Authority – Autorità Garante per la Concorrenza ed il Mercato) can attribute to companies operating in Italy with an income of more than €2M, in recognition of its ethical values, and provides an official position on its honest undertakings (i.e. the company shall declare that it has not been convicted of serious antitrust violations or for violations pursuant to Italian Legislative Decree No. 231 of 2001, which introduced the quasi criminal liability of corporations for crimes committed for its benefit by its managers or employees). In the context of evaluating companies for the concession of public funds, the rating of legality should be considered, even if it is not mandated by law. Law 114/2014 introduced a system of extraordinary measures to avoid unfavorable effects on public tenders when the companies awarding the works have subsequently become involved in investigations for crimes against the public administration (including bribery)xii. In these cases the President of ANAC has the power to propose to the local Prefect (a public official who represents the government at a local level) either (a) to order the reorganization of the corporate bodies of the corporation, by replacing the individuals involved in the alleged improper conducts; or (b) to appoint up to 3 new managers in charge of the extraordinary and temporary management of public tender contracts within the companyxiii. Finally, Law 114/2014 additionally reinforced the structure of ANAC, merging it with the authority responsible for the supervision of contracts for public works, services and supplies, whose personnel, duties and functions were absorbed by ANACxiv, and its powers and role, by:
i. Endowing ANAC with broader and more pervasive powers in the public sector (e.g. in the context of public contracts, concessions of public funds, project financing)xv; and
ii. Vesting ANAC with the power to receive notices on perceived or presumed illegal conduct according to the system of whistleblowing, as introduced in 2012xvi.
How has this work been continued in 2015?
In 2015, the Italian Parliament worked on a new piece of legislation on anti- corruption, Law No. 69 of 27 May 2015 (hereinafter, “Law 69/2015”), and it was definitively approved on 21 May 2015 and became effective on 14 June 2015. The cornerstones of the newly enacted Law 69/2015 are (1) an extension of the scope of application of certain crimes of corruption, and the increase in the sanctions and the statute of limitations regimes for such crimes, (2) the reform of false accounting rules and (3) an additional impulse to the powers and role of ANAC. As for the new provisions regarding the crimes against the public administration, Law 69/2015 provides:
i. The extension of the scope of application for the crime of “misconduct of the public official” (concussione), that will now, in addition to public officials, be applicable to anyone in charge of providing a public service (i.e. whoever performs a public service for whatever reason – public service being an activity that is governed in the same way as a public function, except that the power vested in the latter is absent, but the performance of basic ordinary tasks and exclusively manual work is excluded);
ii. A general increase in the duration of imprisonment and in the amount of monetary sanctions for specific crimes, such as bribery, bribery in judicial proceedings, mafia association and false accountingxvii;
iii. An increase in the statute of limitations (prescrizione) for the above mentioned crimes, in Italy, the period of limitations to prosecute crimes depends, among other conditions, on the maximum term of the sanctions provided for the relevant crimexviii;
iv. An increase in the duration of the prohibition to participate in public tenders (up to 5 years) for any entrepreneur found guilty of corruption crimesxix;
v. A reduction of the sanctions for the individual offenders who effectively strive to avoid corruption activities which produce further illicit consequences, or to those who effectively cooperate in gathering evidence and identifying other offendersxx;
vi. Confirming case law, the express provision that plea bargaining for bribery crimes is admitted only if perpetrators pay back the money gained from their corrupt activityxxi.
As for the reform of false accounting rules, Law 69/2015 renews the provision of this crime in relation to non-listed companies and introduces the same crime to listed companiesxxii. More in detail, the crime of false accounting now punishes directors, officers, statutory auditors and liquidators who, in order to achieve an illicit profit, either provide false information or omit information prescribed by law, in balance sheets, corporate reports or other communicationsxxiii. Law 69/2015 eliminates the non-liability clauses for non-material omissions, and introduces reduced sanctions for lesser offencesxxiv. Law 69/2015 also increases the fines companies face (up to € 929k approximately) for false accounting crimes pursuant to Italian legislative decree No. 231 of 2001xxv. Lastly, Law 69/2015 gives a boost to the role of ANAC, requiring the Public Prosecutors to inform ANAC in cases of prosecution for offences against the public administration, including corruptionxxvi.
What else has ANAC gained?
ANAC has also been given monitoring and control over certain categories of public contracts, e.g. those requiring special security measures pursuant to specific laws and regulations, and those relating to energy and waterxxvii. Moreover, ANAC recently approved the guidelines on the application of preventive measures on corruption and transparency, to public economic entities and to private companies and private entities either controlled or owned by the public administration, and it further underlines the crucial role of the new anti-corruption measuresxxviii. In compliance with the recommendations received by the OECD Working Group on Briberyxxix and GRECOxxx, which primarily demand that bribery cases are decided before the expiry of the statute of limitations, the Italian Parliament is also working on a Bill regarding the statute of limitations for crimes against the public administration, including corruption.
According to Transparency International’s Corruption Perception Index of 2014xxxi, Italy is still ranked as the most corrupt country in Europe and is sixty-ninth in the world. The most recent EU Anti-corruption Report of 2014 shows that despite the implementation of new measures against corruption and similar offences, the lack of confidence towards public institutions (including political parties and public officials) is widespread.
As discussed in this article Italy has made significant effort over recent years to tackle this negative trend, conform to the European recommendations and guidelines, and gain trust from its citizens and from foreign institutions and investors. Moreover, as reported in the OECD Annual Report, Italy’s Prosecutors and Judges are doing their best to prosecute bribery offences, including those of legal entitiesxxxii. In February 2015, the OECD Economic Survey on Italy recommended that “reducing corruption and improving trust must remain a priority” and added that ANAC “needs stability and continuity as well as support at all political levels.” The OECD also recommended “support for active and independent action by the anti-corruption agency [ANAC], complementing the pursuit of increased efficiency in the judicial system”xxxiii. Looking at what has been done in Italy over the past three years, there are still obstacles, but they can be overcome.
–i Such as the European Commission, see the Anti-Corruption Report of 3 February 2014 in http://ec.europa.eu; the OECD, see the Report of the OECD Working Group on Bribery of 16 December 2011 in https://www.giustizia.it.
–ii See articles “Italy’s Expo and other public projects hit by corruption claims” in http://www.theguardian.com and “Fresh corruption probe hits Milan Expo 2015” in http://www.lagazzettadelmezzogiorno.it.
–iii See article “Mayor of Venice arrested on lagoon barrier project corruption charges” in http://www.telegraph.co.uk/.
–iv Law No. 190 of 2012 and Legislative Decree No. 33 of 2013. v Decree Law No. 90 of 2014, subsequently converted into Law No. 114 of 2014, Law No. 186 of 2014, and Law No. 69 of 2015.
–vi Introduced by Law No. 190 of 2012.
–vii See Sections 11 and following of Legislative Decree No. 33 of 2013.
–viii See Section 24 bis of Decree Law No. 90 of 2014 and Law 114/2014.
–ix See Section 1 of Law No. 190 of 2012.
–x See Section 19 of Decree Law No. 90 of 2014 and Law 114/2014.
–xi See Section 29 of Decree Law No. 90 of 2014 and Law 114/2014. Previously these declarations were mandatory only in certain circumstances (.i.e. for contracts of certain amounts).
–xii See Section 32 of Decree Law No. 90 of 2014 and Law 114/2014.
–xiii See Section 32 (1, 2) of Decree Law No. 90 of 2014 and Law 114/2014.
–xiv See Section 19 (1, 2) of Decree Law No. 90 of 2014 and Law 114/2014.
–xv See Section 19 of Decree Law No. 90 of 2014 and Law 114/2014.
–xvi See Section 19 (5) of Decree Law No. 90 of 2014 and Law 114/2014; see also Section 54 bis of Legislative Decree No. 165 of 2001.
–xvii See Sections 1, 4 and 5 of Law 69/2015.
–xviii See Sections 157 and following of Italian Criminal Code.
–xix See Section 1 of Law 69/2015 and Sections 32 ter and 32 quater of Italian Criminal Code.
–xx See Section 1 of Law 69/2015 and Section 323 bis of Italian Criminal Code.
–xxi See Section 6 of Law 69/2015 and Section 444 of Italian Code of Criminal Procedure.
–xxii See Sections 9, 10 and 11 of Law 69/2015, amending Sections 2621 and 2622 of the Italian Civil Code.
–xxiii See Section 2621 of the Italian Civil Code as modified by Law 69/2015.
–xxiv See Sections 9 and 10 of Law 69/2015, amending Section 2621 of the Italian Civil Code.
–xxv See Section 12 of Law 69/2015 and Section 25 ter of Italian Legislative Decree No. 231 of 2001 on the liability of corporations, as modified by Law 69/2015.
–xxvi See Section 7 of Law 69/2015 and Section 129 of Italian Legislative Decree No. 271 of 1989.
–xxvii See Section 8 of Law 69/2015, Section 1 (2) of Decree Law No. 90 of 2014 and Sections 17 and following of Italian Legislative Decree No. 163 of 2006.
–xxviii See ANAC’s Guidelines of June 17, 2015, in http://www.anticorruzione.it.
–xxix See the Annual Report 2011 of the OECD Working Group on Bribery, mentioned above.
–xxx See the Evaluation Report on Italy of GRECO, of March 2012, in www.coe.int.
–xxxii See the Annual Report 2011 of the OECD Working Group on Bribery, mentioned above.
–xxxiii See the OECD Economic Survey on Italy of February 2015, in http://www.oecd.org/eco/surveys/Overview_Italy_2015_ENG.pdf, page 18.
Francesca Petronio is a partner in the Litigation practice of Paul Hastings and is based in the firm’s Milan office. Ms. Petronio has extensive experience in litigation, domestic and international arbitration, bankruptcy, corporate and commercial litigation matters, as well as the management of pre-litigation situations. In addition, she deals with compliance programs-related issues, white collar crimes, and providing assistance to domestic and international clients in internal investigations.
Marilena Hyeraci is an associate in the Litigation department of Paul Hastings Milan. Ms. Hyeraci focuses her practice on litigation, civil and commercial matters, as well as international private law. Over the years, Ms Hyeraci has also developed a strong expertise in internal investigations, data privacy law, white collar crimes and Law 231 of 2001 related matters.
The ETHIC Intelligence Experts’ Corner is an opportunity for specialists in the field of anti-corruption compliance to express their views on approaches to and developments in the sector. The views expressed in these articles are those of the authors.
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