Renegotiation of public contracts during COVID.
Considering that jurisprudence has – in principle – always been against, given the COVID epidemiological emergency, today would it be possible to renegotiate service concessions as well as procurement contracts?
Over the years, jurisprudence was always and univocally in principle, against the possibility of the renegotiation of contracts awarded through open-tendering procedures, because this would be in breach of the principle of competition (Council of State, section V, 13 November 2002, no. 6231) and, when renegotiation was admitted, it was always a case where the contracting authority had agreed with the successful tenderer a limited divergence from the price offered during the tender, so as not to give rise to a new and different award (see Council of State, Section III, 28 February 2014, no. 923, and the previous ones referred to therein).
The issue has now become of particular importance and has recently been the subject of much debate following the COVID epidemiological emergency as an unforeseen and unforeseeable circumstance.
Regarding service concessions, article 175, paragraph 1, letter c) of the Code of Public Procurement states that concessions may be amended without a new award procedure in the event that the following conditions occur simultaneously: “1) the need for amendment derives from circumstances that a contracting authority could not foresee using ordinary diligence; 2) the amendment does not alter the general nature of the concession”. Art. 165, paragraph 6 of Legislative Decree 50/2016 (economic and financial risk and equilibrium in concessions) also provides for the “revision of the contract through the revaluation of the conditions of equilibrium in the case that events occur that are not attributable to the concessionaire and do not affect the equilibrium of the economic and financial plan“.
Similarly, in procurement contracts, Article 106, paragraph 1, letter c), provides that procurement contracts in the ordinary and special sectors may be amended without a new procurement procedure if: “1) the need for amendment is determined by unforeseen and unforeseeable circumstances for the contracting authority or contracting entity. In such cases, the changes to the purpose of the contract shall be referred to as variants in progress. These circumstances may also include the occurrence of new legislative or regulatory provisions or measures taken by authorities or entities responsible to safeguard significant interests; 2) the amendment does not alter the general nature of the contract”.
Therefore, in order to meet the requirements of both the concessionaires and contractors as well as contracting stations as a result of COVID 19, a careful study of the actual situation could lead to allow the renegotiation. The legal analysis to be carried out is, in fact, to understand whether the cases covered by Article 106, paragraph 1, letter c), Legislative Decree no. 50/2016 for the adoption of variants in progress and Article 175, paragraph 1, letter c), include concessions.
Furthermore, this interpretation would also be consistent:
1) with certain jurisprudence that stated how it was always be possible for the “revision of the business plan […] when linked to extraordinary and unforeseeable events, which go beyond the simple market fluctuations and the dealer’s own and normal risk “ (again, Council of State no. 3653/2016);
2) but especially with national legislation concerning ANTI-COVID. In this regard, in Article 3 of Law Decree 23 February 2020, no. 6, converted with amendments by Law 5 March 2020, no. 13, after paragraph 6, the following is inserted: “6-bis. Compliance with the containment measures set forth in this decree is always assessed for purposes of exclusion, pursuant to and for the purposes of articles 1218 and 1223 of the Italian Civil Code, of the debtor’s liability, also with regard to the application of any forfeiture or penalties connected with delayed or omitted performance”.
Published in Italian Official Gazette the Decree correcting the Code of Business Crisis and Insolvency integrating and and amending the Code of Business Crisis and Insolvency.
On November 5th, 2020, Legislative Decree no. 147/2020 was published in the Italian Official Gazette. The Decree integrates and corrects the Code of Business Crisis and Insolvency (Legislative Decree no.14/2019). The new provisions will enter into force on September 1st, 2021, together with the Code of Business Crisis and Insolvency (art. 389 paragraph 1 of the Code, as amended by Legislative Decree no. 23/2020 converted into Law no. 40/2020).
In summary, the Decree introduces some amendments to Article 2 of the Crisis Code with regard to the notion of crisis and to Article 13 on the notion of crisis indicators. According to the new regulation, “crisis indicators are those imbalances of an income, equity or financial nature, related to the specific characteristics of the company and the entrepreneurial activity carried out by the debtor, taking into account the date of incorporation and the start of activity, which can be detected through specific indicators that show the non-sustainability of the debts for at least the following six months and the absence of prospects of business continuity for the current financial year or, when the residual duration of the financial year at the time of assessment is less than six months, in the following six months. For these purposes, significant indexes are those that measure the non-sustainability of debt charges with the cash flows that the company is able to generate and the inadequacy of equity compared to those of third parties. Additional indicators are repeated and significant crisis delays in payments, also on the basis of the provisions of art. 24“. The period “the company’s control bodies, when making the reporting, shall also inform the auditor or the auditing company without delay; likewise, the auditor or the auditing company shall inform the control body of the reporting made” is added to art. 14 of the Code. Art. 38 has been modified too. The provision regulates the role of the Public Prosecutor, who “lodges an appeal for the opening of the judicial liquidation in any case in which it has knowledge of the existence of a state of insolvency. The judicial authority that detects insolvency in the course of a proceedings reports it to the Public Prosecutor. The Public Prosecutor may intervene in all proceedings leading to the opening of crisis and insolvency regulation proceedings“. Other changes have been made to Articles 56 and 57 on out-of-court negotiation instruments and debt restructuring agreements, as well as to the rules governing the register of crisis managers and the composition of OCRI (the business crisis settlement body).
Trusts and tax monitoring rules: beneficial ownership reporting clarifications.
Law no. 97 of 6 August 2013 and Legislative Decree no. 90 of 25 May 2017 made relevant amendments to Law Decree no. 167 of 28 June 1990 providing the tax monitoring rules applicable in Italy. The above mentioned amendments have strengthened the theory according to which the tax monitoring rules shall be accomplished not only by the “formal” owners of qualified foreign investments and assets but also by those persons who can be considered the “beneficial owners” of the foreign investments/assets.
Italian resident individuals, non-commercial entities (including trusts and foundations) and partnerships, therefore, are required to report on a yearly basis for tax monitoring purposes any foreign investments and assets that may generate foreign-source income subject to tax in Italy.
The existence of an autonomous tax monitoring obligation is excluded in the event that a person is entitled to exercise a mere executive power (on behalf of the formal owner) in respect of the investments/assets located abroad.
The above interpretation has been confirmed by the Italian tax authorities by ruling no. 506 of 30 October 2020. The Italian tax authorities clarified that the tax monitoring rules (entailing the filing of “Section RW” of the annual tax return) do not apply to a resident protector of a foreign trust fictitiously interposed for the purposes of an Italian resident individual (beneficial owner).
The tax monitoring obligations in respect of the investments and assets held by the foreign trust shall indeed be accomplished by the Italian resident beneficial owner. The Italian tax authorities confirmed that the protector (having only a power to supervise the activity of the trustee) cannot be qualified as the beneficial owner of the foreign investments and assets of the trust, considering that he does not (and shall not) have any effective availability on the investments/assets of the trust.
The EU Regulation 1150/2019 starts a phase of a greater balance in the use of online intermediation services by the companies?
The EU Regulation n.1150 of June 20, 2019 on promoting fairness and transparency for business users of online intermediation services (the “Regulation”) came into force on July 12, 2020, confirming the importance of these services for the commercial success of companies. In this context – according to the second recital of the Regulation – it is crucial that business users “can trust online intermediation services with which they enter into commercial relationships”; this is particularly because: (i) the growing intermediation of commercial transactions through online intermediation services leads to an increased dependence of such business users, in particular small and medium-sized enterprises; (ii) secondly because given the growing dependence, the providers of such services often have superior bargaining power “which enables them to, in effect, behave unilaterally in a way that can be unfair and that can be harmful to the legitimate interests of their business users and, indirectly, also of consumers in the Union”.
In this economic framework, the Regulation pursues the objective of contributing to the creation of a competitive, fair and transparent online ecosystem and refers exclusively to online intermediation services, aimed at an offer to the final consumer (therefore not aimed at relations between companies): mainly with respect to these, in fact, has been found the position of dependence of business users.
The Regulation therefore identifies a series of obligations in the drafting of the general conditions by suppliers of online intermediation services, accompanied by the sanction of the invalidity of the clause that is in violation of these obligations. Inter alia, the terms and conditions shall be drafted in a plain and intelligible language, shall set out the grounds for decisions to suspend or limit the provision of service, shall inform clearly the business user on ownership and control of IPrigths (Article 3). The Regulation also regulates the access to data (Article 9), the conditions for restriction, suspension and termination of the service (Article 4), the internal complaint-handling systems (Article 11).
One of the central aspects of the new regulation is the ranking of goods and services provided by the user of intermediation service. Article 5 of the Regulation provides that providers of online intermediation services shall set out in their terms and conditions the main parameters determining ranking and the reasons for the relative importance of those main parameters as opposed to other parameters. Among the transparency obligations provided by the Regulation, it should be noted: (i) the obligation to set out the possibility to influence ranking against any remuneration; (ii) the obligation to mention the characteristics of the goods and services offered to consumers through the online intermediation services or the online search engine and the relevance of those characteristics for those consumers; (iii) the obligation to give the company access to the content of the report, if it has been reported by a third party.
The providers of online intermediation services will not necessarily have to go into the details of the functioning of the algorithms used (or detect them) for positioning, but will have to make transparent the criteria used so that certain choices are made by the algorithm, in line with the need for transparency repeatedly expressed by the European Commission with reference to artificial intelligence systems.
The Regulation thus opens a new path to the use of online platforms by companies: in fact, a more balanced bargaining era begins, with greater possibilities for the protection of commercial users, but also with their greater responsibility, since they will be called to a careful verification of the contractual conditions imposed, to assess compliance with the European standards in their favour.
The inspection activities of the Data Protection Authority for the protection of personal data during the second semester of 2020.
The Data Protection Authority shall inform about the categories of subjects that will be affected by the inspections until the end of 2020. With the same notification, the Data Protection Authority shall draw up a report of its own activities that will show a continuous increase of verifications and the sanctions applied.
Through its periodical communication briefs, the Data Protection Authority, has on the one hand underlined the importance of the new inspection plan for the second semester of 2020 and on the other outlined a report of its own activities which enables to identify, yet again a trend that is continuously on the increase.
The Data Protection Authority’s future inspection activities, carried out with the consolidated support of the Special Unit for the Protection of Privacy and Technological Fraud of the Guardia di Finanza (Tax Police), will focus on specific areas such as:
(i) electronic invoicing, (ii) whistleblowing, (iii) food delivery, (iv) data breach and (v) companies operating in the reputational rating sector.
In addition to the above, the Data Protection Authority will assess issues regarding (vi) certificates issued through the national register of the resident population and (vii) the marketing activities of the private and public sector.
The issues of greatest interest for the Data Protection Authority, especially with reference to the public sector, will focus on the processing of particular categories of data, information, consent and retention times. The aforementioned represent the fundamental elements regarding personal data protection which unfortunately, all too often, are neglected by data controllers and appear to be the cause of important sanctions.
The analysis of the activities and the results achieved by the Data Protection Authority as well as the activity planned for the second semester 2020 reiterate once again, the need for a strong privacy culture – both in the public and private sector – of all players operating in the market.
The protection of data and their free movement, coupled with the guarantees and protections provided by current legislation, specifically Regulation (EU) 2016/679 and the national implementing legislation, enables the fundamental rights of stakeholders to be protected and facilitates the development of increasingly sustainable and future-oriented business models.
In light of the above described and analyzed, economic operators whose activities are falling within the categories outlined above and in general all operators who process personal data, – given the constant increase of inspection activities – are invited to carefully assess and review their privacy management system in order to avoid sanctions by the competent authority with the inevitable reputational damages.
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