“NEGATIVA SUNT PROBANDA!” – ST. PETER’S DOME HASN’T COLLAPSED AND THE TIBER ISN’T DRY!
With its Order No. 35146/2021, the Court of Cassation finally dictated the principle of law according to which “the circumstance that a chapter of evidence by witnesses is formulated in the form of a negative question does not constitute, per se, a cause of inadmissibility of the request for preliminary investigation”.
Specifically, the ruling of the Court of Cassation originated from a dispute in which a citizen asked to prove by witnesses that he had suffered a fall due to “numerous non-visible potholes in the road surface”.
At first instance, the Court excluded the admissibility of the evidence for four different reasons, including its negative wording.
At second instance, the Court of Appeal confirmed the inadmissibility of the chapter because it dealt with “negatively formulated evaluative circumstances”.
Questioned on this point, the Court of Cassation immediately recalled that “no rule of law and no principle that can be inferred by way of interpretation prevents proof by witnesses that a fact has not occurred or does not exist. Thus, for example, it would not be forbidden to prove by witnesses that the dome of St. Peter’s has not collapsed; or that the Tiber is not dry.”
Not only that.
Continuing its analysis, the Supreme Court dwelt on the widespread orientation of the jurisprudence on the merits according to which the proof of a negative fact should be offered through the demonstration of a contrary positive fact and stated – even more clearly – that “the unacceptable opinion that the testimonial evidence chapter must be formulated in a positive manner, often repeated like a Mantra, in addition to being erroneous in law is also manifestly untenable in terms of logic…. To ask someone to deny that a fact is true, on the level of logic, is equivalent to asking him to state that a fact is not true. Hence, the opinion that does not admit the possibility of formulating testimonial evidence in a negative manner leads to the paradox of admitting or denying the evidence, not on the basis of its objective content, but on the basis of the type of response that is requested from the witness”.
Therefore, according to the Court of Cassation, the negative wording of the chapter of evidence is not (and cannot be considered) in itself a cause of inadmissibility of the investigative means.
This does not mean, however, that the negative formulation of the chapter of evidence is free from whatsoever rule, considering it agreeable and prudent to condition it to the proof of facts well circumscribed within certain circumstances of time and space. The above, always bearing in mind that the formulation of the chapter in any case shall not be generic, evaluative or, worse still, relating to the proof of an irrelevant fact (which is certainly not the circumstance that the dome of St. Peter’s is always in place!).
(with Chiara Gentile’s collaboration)
CAN A FOREIGN PARTNER ESTABLISH A LIMITED LIABILITY COMPANY BY MEANS OF A POWER OF ATTORNEY CONFERRED BY A NOTARIZED PRIVATE DEED?
In our legal system, companies are among the most common and widely used to carry out business activities. Among them, the simplest and most flexible form is the limited liability company (s.r.l.), which is an intermediate model between joint stock companies and partnerships.
Regarding the form of the articles of association of this type of company, the Civil Code provides that it must necessarily be drawn up by a public notarial deed, under penalty of nullity. The notary shall also provide for the filing of the public deed with the Registry of Companies (and the patrimonial autonomy can be said to have been acquired, only after registration with such Registry).
Moreover, from a comparative point of view, it should be pointed out that not in all European legal systems companies must be incorporated by public deed. The regulatory landscape on this point appears, in general, to be quite varied: while there are legal systems that, like Italy, provides the public form for the incorporation of companies (e.g. Germany, Spain), there are others in which the public form- in general, although known to these systems – is not required for the purposes of the incorporation of companies (as in the case of France). In addition, the Italian code provides that the nullity of the company can be declared in case of:
(i) failure to stipulate the articles of association in the form of a public deed;
(ii) illegality of the corporate purpose;
(iii) lack of any indication in the articles of association regarding the name of the company, or the contributions, or the amount of the share capital or the corporate purpose.
The legal framework on the subject of the company’s nullity is completed by the Directive of the European Parliament and Council No. 2009/101/EC, which requires the form of the public deed for deeds pertaining to the creation of and changes to companies, in the event that the reference system does not provide for preventive, administrative or judicial controls.
That said, given that the peculiar characteristics of the s.r.l. in Italy contribute to encouraging the use of this form of company in the event that foreign entrepreneurs wish to make investments in Italy, it is necessary to question the form of the preparatory deeds for the establishment of the company performed abroad (i.e.: power of attorney). In particular, can a foreign shareholder who intends establishing an s.r.l. and who cannot personally intervene in the company’s deed of incorporation, be represented by a third party with a power of attorney conferred by means of a notarized private deed?
In general terms, pursuant to Article 1324 of the Civil Code, a power of attorney constitutes a unilateral deed by which one person confers to another the power to represent him. In terms of content, the power of attorney can be general, if it relates to the affairs of a given subject, or special, if it concerns a specific business, as is usually the case of the incorporation of a limited liability company. With regards to the formal validity of the power of attorney, as mentioned above our legal system provides the principle of parallelism of form, by reason of which the power of attorney must have the same form as the contract or legal deed to be concluded through the power of attorney.
Consequently, the form of the public deed prescribed for the incorporation of a limited liability company would necessarily require the adoption of the same form in order to grant the power of attorney.
Therefore, at a first glance, this rule would seem to exclude the validity of the incorporation of the company in Italy where the power of attorney is conferred by a foreign shareholder by means of a notarized private deed.
However, it should be noted that the aforementioned principle of parallelism of form appears to be mitigated by the rules set forth in Law No. 218 of May 31, 1995, reforming the Italian system of private international law.
In particular, on the subject of voluntary representation, paragraph 2 of Article 60 of said law provides that “the act of conferring powers of representation is valid, as to form, if it is considered as such by the law governing its substance or by the law of the State in which it is carried out.”
As can be easily perceived, this is a favorable rule aimed at facilitating the circulation of what is the most frequent type of foreign deed, precisely the power of attorney.
Thus, for the purpose of recognizing the formal validity of the power of attorney conferred abroad, the rule provides an alternative twofold criterion regarding the form to be observed. In the present case, given the necessity of the form of the public deed according to Italian law, it is necessary to question what is the minimum form required in the country where the power of attorney is conferred for the establishment of a limited liability company or similar type of company, and if the foreign legal system contemplates the establishment of such type of company by means of a notarized private deed, the same form must be considered sufficient also for the drafting of the power of attorney (in that country) to be used in Italy (where appropriate duly legalized or with apostille).
AMENDMENTS TO THE CHARTS FOR LAWYERS’ FEES LIQUIDATION: WHAT’S NEW UNDER THE SUN?
The document containing a proposal for the modification of the Ministerial Decree n. 55, March 10th, 2014, is under review by the Italian Parliament. The proposal contains several updates to the Decree’s charts on which lawyers’ fees are calculated.
The Senate is evaluating a draft which should amend the Ministerial Decree n. 55, March 10th, 2014; such amendments represent the natural continuance of a previous set of amendments introduced by the M.D. n. 37 of 2018. The latter has introduced more generous rises/decreases of the fees provided by the general parameters contained in the charts: a rise has been foreseen for digital court documents redacted with means apt to ease their fruition and consultation; then it has regulated the remuneration for procedures of mediation, assisted negotiation etc. The Minister of Justice is expected to adopt such amendments after reviewing the opinion of the Italian Bar Association, dated February the 17th, 2022 (deliberation n. 535) and the opinion n. 183/2022 issued by the Regulatory Committee of the Administrative Supreme Court.
Among other news it must be noted that judges are allowed to increase the average compensation provided by the ministerial charts by up to 50%, not by up to 80% as it was under the previous regulation (see art. 2 of the regulation).
Then, the term “normally”, which is included in various provisions of the M.D. 55/2014, with respect to the percentage of rise or reduction of the average compensation parameters. In fact, according to the Bar Association, the term has given too much judicial discretion in determining lawyers’ fee.
Another interesting provision is the introduction of compensation for the so-called activity of “studying the case” for the lawyer that takes over the defence after the procedure has already started (see new article 4, paragraph 5-bis M.D. 55/2014). Such circumstances are not uncommon for the Courts.
Amendments to the institute of procedural liability, regulated by article 96 of the Italian Civil Procedure Code, are also expected. Whenever procedural liability is found or the suit is declared inadmissible, the losing party’s lawyer fees will be reduced by 75% – not by 50% as previously provided – (see new article 9 a, paragraph 9 M.D. 55/2014). Nonetheless, such previsions are little more than empty words since the losing party is rarely awarded with the legal expenses.
Supreme Court proceedings will undergo amendments as well: the fee for the phase of decision of the case may be increased by 50% after the submission of the memorandum provided by art. 378 of the Civil Procedure Code (see new art. 4, para. 10-quarter M.D. 55/2014).
A specific chart for insolvency proceedings is also expected to be incorporated, precisely for the verification of bankruptcy liabilities and for proceedings of judicial liquidation (see new chart n. 20-bis). The latter follows up on the existing chart n. 20, which covers only the proceeding for declaration of bankruptcy. Speaking of numbers: for such proceedings the fee will be 20% lower than the fee established for ordinary proceedings of first instance (chart n. 2); frankly this lower fee is a little puzzling, given the technical complexity of the issues handled by lawyers during insolvency proceedings.
When the insolvency procedure involves the admission of the credit to the liabilities set up and the appeal of such set up for credits arising from employment contracts, lawyers’ fees may be even 50% lower than the one for ordinary proceedings (see art. 4, para. 10-quinquies M.D. 55/2014).
Moreover, the proposal of amendments contains a regulation for hourly fees: when such remuneration mechanism is agreed upon by the parties, the parameters foresee a minimum of €200 and a maximum of €500 per hour, or per fractions of an hour superior to 30 minutes (see new art. 22-bis M.D. 55/2014).
Last but not least, a useful amendment will be the partitioning of the parameters for non-judicial activities: according to the previous set up, the fee is awarded with a forfeit formula respectively for each business operation; instead, the new piece of regulation provides that, if the business operation is composed of different phases, each of the latter can be considered as a single entity subject to a different fee (see new art. 18, para. 1 M.D. 55/2014).
Clearly there are several updates; however, for further comments and opinions it will be necessary to wait for the final approval of the draft, which is now under review at the Senate.
TRANSFER PRICING: ON MAY 24, 2022, THE ITALIAN TAX AUTHORITIES PUBLISHED CIRCULAR LETTER NO. 16/E PROVIDING OPERATIONAL INSTRUCTIONS FOR THE CORRECT INTERPRETATION OF THE NOTION OF “ARM’S LENGTH RANGE”.
The correct application of the most appropriate transfer pricing method can lead to obtaining a range of values, as opposed to a single value, that all comply with the arm’s length principle. Operational instructions on this point have recently (and finally) been published by the Italian tax authorities.
By Circular Letter no. 16/E of May 24, 2022 (the “Circular Letter“), the Italian tax authorities (Agenzia delle Entrate) provided operational instructions on the correct interpretation of the notion of “arm’s length interval” outlined in Article 6 of the Decree of the Minister of Economy and Finance of May 14, 2018 (the “Decree“), setting forth guidelines on transfer pricing provisions.
The Decree is based on the OECD Transfer Pricing Guidelines (whose domestic regulation is included in Article 110, paragraph 7 of the TUIR) and establishes, in particular, that:
– cross-border transactions between associated companies (i.e., with participation in management, control or capital) should be valued in accordance with the arm’s length principle;
– by means of certain methods (so-called “methods to determine transfer prices”) that allow the valuation of a controlled transaction through transfer prices.
Article 6 of the Decree additionally introduces the concept of “arm’s length range”, defining it as that range of values defined by the financial indicators chosen in the implementation of the most appropriate method relating to each transaction between independent third parties that falls within the scope of the controlled transaction.
In this event, the Circular Letter highlights that the range formed by the financial indicators when applying the most appropriate method for each transaction between independent third parties compared to the controlled transaction, is to be considered in compliance with the arm’s length principle.
A controlled transaction, or a set of aggregate controlled transactions, shall be considered as complying with the arm’s length principle if the relevant financial indicator is included in the range.
Two distinct scenarios are identified:
– if the transactions have the same degree of comparability with the controlled transaction, the entire range of values resulting from the application of the chosen financial indicator should be considered (so-called “full range”);
– on the other hand, if the transactions do not have the same degree of comparability, then reference shall be made to the “statistical tools” identified by the OECD Guidelines in order to narrow the range (so-called “narrow range”).
In both of the above cases, all values included within the range are considered to be in compliance with the arm’s length principle.
It further follows that if the financial indicator falls outside the arm’s length range, the company must provide the relevant documentation in order to avoid the tax recovery; if such evidence is not provided, or if it is not satisfactory, the recovery is made by identifying the “point” that mostly satisfies the arm’s length principle within the range.
The example provided by the Circular Letter is that of a range identified by the company between 80 and 120, with a placement of the financial indicator on 80, whilst the Italian tax authorities identifies the range between 100 and 120: in this case, the reasonable price would be set at the minimum value of 100, resulting in an upward adjustment of 20.
If reference needs to be made to the more complex system of statistical tools, the placement of the financial indicator would occur within a “narrow” range, such as the one based on percentiles.
NON-APPLICABILITY OF STAMP DUTY IN PROCEEDINGS SUBJECT TO THE PAYMENT OF COURT FEES IN THE CONTEXT OF THE CONSOLIDATED ACT ON JUSTICE EXPENSES (PRESIDENTIAL DECREE NO. 115/2002) AND MINISTRY OF JUSTICE CIRCULAR NO. 83861.E, DATED SEPTEMBER 20, 2021.
As far as the discharge of the stamp duty due for the swearing in of expert reports and of translations in civil proceedings is concerned, the judicial offices – despite the fact that Article 18 paragraph 2 of the Consolidated Act on judicial expenses (“Testo Unico in materia di spese di Giustizia”) provides for an exemption for “antecedent and functional” acts in civil proceedings subject to the payment of Court fees (“contributo unificato”) – require the payment of the tax based on a peculiar interpretation of the Ministry of Justice Circular No. 83861.E, dated 20 September 2021.
The issue arises from an interpretative circular of the Ministry of Justice to which judicial offices give, as mentioned, a peculiar interpretation. Specifically, as a result of the aforementioned interpretation of the circular, the judicial offices are not applying the exemption from the payment of stamp duty provided for acts preceding, necessary or functional to civil proceedings already subject to payment of Court fees (“contributo unificato”) to the swearing of translations acts in judicial proceedings.
The matter is regulated by the Consolidated Act on judicial expenses (“Testo Unico in materia di spese di Giustizia”) (Presidential Decree No. 115/2002) (“Consolidated Act”). In particular, Article 18 of the aforementioned Presidential Decree provides that stamp duty does not apply to acts and measures in civil proceedings subject to payment of Court fees. The second paragraph of the same provision also extends the exemption to “all judicial acts, including those that are antecedent, necessary or functional.”
In September 2021, the Ministry of Justice – Department of Justice Affairs, issued a circular (No. 83861.E, dated Sept. 20, 2021, the “Circular”) clarifying the correct interpretation to be given to the provision of Article 18 of the Consolidated Act. According to said Circular, the exemption from stamp duty provided for in Article 18 of the Consolidated Act does not apply in the case of sworn translation or asseveration of certificates issued abroad or by the Italian state in matters of civil status, and this on the basis that:
– the asseveration of expert reports and the swearing of translations would be legally neutral acts and therefore lacking the elements of necessity, functionality and correlation with a judicial proceeding required by the second paragraph of Article 18 of the Consolidated Act (in particular, the circular refers to the asseveration of expert reports, which can also be used out of Court);
– it would also lack the requirement of being a party of the proceedings both with reference to the expert and with reference to the translator (on the other hand, the case in which it is the party itself or the lawyer who takes the swearing is not specified).
Ultimately, according to the Circular, the stamp duty could not be considered absorbed by the payment of Court fess with reference to sworn translation or asseverations of certificates issued abroad or by the Italian state in matters of civil status.
Pursuant to the aforementioned circular, the Judicial Offices in charge of swearing translations and sworn asseverations do not apply the exemption to certain acts including, inter alia, the swearing of translations of judicial acts rendered by parties of the proceedings.
In our opinion, the interpretation of the Judicial Offices is not in line with the text of the Circular and is blatantly contrary to Article 18 of the Consolidated Act for several reasons:
– the Circular refers exclusively to the sworn translation or asseveration of certificates issued abroad or by the Italian state in matters of civil status and not to every act of the proceeding
– the translation of the acts of the proceedings (such as writs of summons and pleadings), which, by the way, is a requirement for the foreign service of the acts, cannot be interpretated as lacking the elements of necessity, functionality and correlation with a Court proceeding required by the second paragraph of Article 18 of the Consolidated Act.
In summary, it is believed that the sworn translation of Court documents in civil proceedings subject to the payment of Court fee should fall within the scope of the exemption provided by Article 18 of the Consolidated Act.
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