Investment services: breach of disclosure obligations.
By judgment No. 24010 of September 6, 2021, concerning damages for breach of information obligations in the provision of investment services, the Court of Cassation clarified some procedural and liability aspects relating to the joint and several liability of financial promoters (“promotori finanziari”) and intermediaries.
In particular, with regard to the alleged breach of the disclosure obligations under Articles 26 and 29 of Consob Regulation No. 11522/1998 and Article 21 of Legislative Decree No. 58/1998 (“TUF”), the Court of Cassation clarified that the information obligations are not less extensive if the financial transaction is executed on the basis of an order given by the customer. Indeed, according to the Supreme Court, information must be provided in any event, even when the provision of financial services takes place through an individual investment service pursuant to Article 1, paragraph 5, of Legislative Decree no. 58 of 1998 (i.e. by means of trading, reception and transmission of orders), under different conditions depending on the purchaser and on the moment in which the transaction is executed. Consequently, the protection of the client is in any case entrusted to the fulfilment, by the intermediary, of specific and personalised information obligations, pursuant to Article 21 of the aforementioned Legislative Decree No. 58 of 1998.
In the case at hand, the Supreme Court deemed that the failure to report the inadequacy of the investment is per se a breach which justifies the award of damages.
From a procedural standpoint, the Court also clarified that when an unlawful act is attributable to more than one person, the question of the seriousness of their respective faults and the extent of the resulting consequences can be examined by the first instance judge, seised by the injured party, only if one of the co-debtors has brought an action of recourse against the others or, in view of a recourse, he/she has expressly requested such an assessment in order to internally share the burden of compensation with the co-responsible parties. Such a request, however, cannot be derived from the objections by which the co-debtor excluded his/her liability in the different relationship with the injured party (Court of Cassation, December 20, 2018, no. 32930, Court of Cassation, August 25, 2006, no. 18497). Therefore, the question relating to the allocation of liability between the intermediary and the promoter cannot be raised ex officio, but must be the object of a specific request or objection by the defendant as co-author of the damage. Such a requirement would not have been necessary if the issue had been raised ex officio (see Court of Cassation May 20, 2011, no. 11259).
Software decompilation performed by the purchaser of a copy of the program: is it lawful?
By means of a decision delivered on October 6th 2021, the Court of Justice of the European Union (“CJEU”) has recently ruled upon the scope of the exclusive rights provided for under Directive 91/250/EEC on the legal protection of computer programs (the “Directive”), applicable ratione temporis to the case under analysis, with particular reference the act of “decompilation” carried out by the lawful purchaser of a copy of the program, in order to correct errors affecting the operation thereof.
The request has been made in proceedings between a software manufacturer and the Belgian State concerning the decompilation performed by the Selection Office of the Federal Authorities (Belgium), of a computer program developed as part of an application in respect of which that selection office holds a user licence.
Against this background, the Brussels Court of Appeal has stayed the proceedings and referred two questions to the CJEU for a preliminary ruling, namely:
«(1) Is Article 5(1) of [Directive 91/250] to be interpreted as permitting the lawful purchaser of a computer program to decompile all or part of that program where such decompilation is necessary to enable that person to correct errors affecting the operation of the program, including where the correction consists in disabling a function that is affecting the proper operation of the application of which the program forms a part?
(2) In the event that that question is answered in the affirmative, must the conditions referred to in Article 6 of the directive, or any other conditions, also be satisfied? ».
As regards the first question, the CJEU has preliminarily agreed with the interpretation provided by the Advocate General in his conclusions, stating that “decompilation” is intended to reconstruct the source code of a program from its object code, the latter being understood as the result of a transcription of the source code in an executable form, obtained via compilation.
On that basis, the Court has observed that decompilation does not generally enable access to the original source code, but to “a third version of the program concerned called ‘quasi-source code’, which can, in turn, be compiled into an object code, allowing that program to function”. In other words, decompilation is tantamount to an alteration of the program’s code involving the reproduction – at least a partial and temporary one – of that code, and a translation of the form of that code, which are all activities considered to fall within the list of restricted activities pursuant to Article 4 of the Directive.
However, the Court explains, Article 5(1) of the Directive provides that the lawful purchaser of a computer program may perform all the acts listed in Article 4(a) and (b) of that directive, including those consisting in the reproduction of the code and in the translation of the form of that code, without prior authorisation from the right holder, provided that that act is necessary for use of that program, including for the correction of errors affecting the functioning of that program.
Finally, the Court has clarified that, whereas Article 5 is intended to enable the lawful purchaser of a computer program to make use of it “in accordance with its intended purpose”, Article 6 was conceived since the Directive’s travaux préparatoires as a provision intended specifically to govern the question of the interoperability of programs created by independent authors, “without prejudice to the provisions intended to enable the lawful purchaser of the program to use that program normally”.
In light of the above, the CJEU has answered to the first question by stating that Article 5(1) of the Directive must be interpreted as meaning that the lawful purchaser of a computer program is entitled to decompile all or part of that program in order to correct errors affecting its operation, including where the correction consists in disabling a function that is affecting the proper operation of the application of which that program forms a part.
With reference to the second question, the CJEU ruled that, since the exception laid down in Article 6 of the Directive has a different scope and purpose to that laid down in Article 5(1) thereof, the requirements of Article 6 are not applicable to the exception provided for in Article 5(1) of the Directive.
On the other hand, the Court observes that Article 5(1) of the Directive expressly provides that the acts constituting decompilation of a computer program must be “necessary” for the use of the computer program concerned by the lawful purchaser in accordance with its intended purpose, including for “error” correction, provided that such errors are commonly understood, in the field of computing, as defects affecting a computer program which are the cause of the malfunctioning of that program.
In addition, the Court suggested an interpretation of Article 5(1) – allowing errors to be corrected subject to “specific contractual provisions” – in light of recital 18 of the Directive, meaning that the parties cannot prohibit any possibility of correcting those errors by contractual means while remaining, on the other hand, entirely free to agree upon any corrective maintenance of the program in question to be performed by the copyright holder.
Therefore, the CJEU has answered the second question by stating that Article 5(1) of the Directive must be interpreted as meaning that the lawful purchaser of a computer program who wishes to decompile that program in order to correct errors affecting the operation thereof is not required to satisfy the requirements laid down in Article 6. However, that purchaser is entitled to carry out such a decompilation only to the extent necessary to perform that correction and in compliance, where appropriate, with the conditions laid down in the contract with the holder of the copyright in that program.
Article 6 of the Directive introduces, in fact, an exception to the exclusive rights of the copyright holder in a computer program, allowing reproduction of the code and translation of its form without the prior authorisation of the right holder, insofar as those acts are indispensable to achieve the interoperability with an independently created program.
According to the Court’s findings, it cannot be inferred from the wording of Article 6 of the Directive, read in conjunction with recitals 19 and 20 thereof, nor from the general scheme of that provision, that the EU legislature intended to exclude any possible reproduction of the code of a computer program and the translation of the form of that code other than where those acts are carried out in order to obtain the information necessary to achieve the interoperability between an independently created computer program and other programs.
In this regard, it should be noted that whereas Article 6 of the Directive concerns the acts necessary to ensure the interoperability of independently created computer programs, Article 5(1) of the Directive aims to enable the lawful purchaser of a program to use it in accordance with its intended purpose. Those two provisions therefore have different purposes.
It follows that no limitation to decompilation activity can be inferred from the wording of Article 6 of the Directive, nor from the preparatory works for the Directive, nor from a coordinated reading of Articles 5 and 6 of the Directive.
All in all, whereas the above decision may sound as positive for all subjects acquiring rights upon the copy of a computer program, insofar as it deems as legitimate those acts of reverse engineering for the purposes of correcting errors affecting operation without the prior consent of the copyright holder, it however shots a warning message addressed to both software producers and developers, the latter being called upon now to carefully establish maintenance as well as correction activities within their sale/license provisions, in order to prevent any undesirable activity performed by the end user.
RED II Decree – changes in approval: what’s new?
On November 4th, 2021, the Council of Ministers approved the legislative decree transposing Directive (EU) 2018/2001 (the so-called RED II Directive) on the promotion and development of renewable energy sources.
The text of the decree has not yet been published in the Official Gazette. As a result of the consultative activity carried out by the parliamentary committees, the Government has made a few changes to the original scheme of the decree, which we have already covered (http://www.macchigangemi.com/en/insights/n-25-fb-mr-mpe-eng/). Here are the main ones.
In Article 5, which defines the general characteristics of the incentive mechanisms, it is now specified that the system must be proportionate to the cost of the investment in order to ensure fair remuneration of the investment and operating costs, also taking into account the specific costs and characteristics of the various applications and technologies used in the plants. In addition, it is now expressly provided that, if the conditions are met, the incentives provided for can be combined with the tax benefits granted for the construction of the plants and storage systems. Finally, the mechanisms may provide for the possibility of integrating the revenues resulting from participation in the electricity market in favour of renewable source plants that continue to be operated at the end of the period of entitlement to the incentives, always in compliance with the rules on State aid.
For plants with a power output of more than 1MW, the downward auction mechanism is applied (Article 6), now providing for the possibility that the auctioned power quotas be differentiated by geographical area, to favour synergies with the development of the electricity system and the identification of suitable areas, as well as the possibility of access to these incentive mechanisms also for plants forming part of self-consumption configurations or energy communities.
With regard to the incentives for biogas and biomethane production, Article 11 has been amended, now providing for the payment of a specific incentive tariff that ensures the biomethane producer the same level of incentive for use in the transport sector and in other uses, including those for the production of electricity and heat in industrial cogeneration plants, district heating and heat networks, excluding non-cogeneration thermoelectric uses.
As is well known, the other major theme of the decree’s intervention is the simplification of authorisation procedures. In Article 19, relating to the establishment of a digital one-stop shop for Renewable Energy (Sportello Unico per le Energie Rinnovabili), the method for creating the platform for the submission of applications has been revised and now entrusted directly to the GSE. This platform will initially be used to submit applications for the single authorisation.
Requests for authorisations for the installation of systems serving buildings received by network operators through the simplified single model (Article 25) will also be submitted through the platform.
Additional requirements have also been envisaged for the ministerial decrees that will identify the areas suitable for the installation of renewable source plants (Article 20): in addition to setting out the selection criteria, these decrees will also have to establish the procedures for minimising the relative environmental impact. The Government has also decided to add to the areas deemed suitable, pending the adoption of the implementing decrees, also quarries and mines that have been closed down, not recovered or abandoned or in a state of environmental degradation.
The Government has also specified some aspects of the regulation on self-consumption and renewable energy communities.
The final text of the decree is expected to be published in the Official Gazette in the next few days. The firm’s Energy Team will keep you updated with ad hoc in-depth analyses.
The unfair use of closing statements.
In the first instance of a dispute or during the appeal, when oral discussion of the evidence of a case is not permitted, the parties are entitled to file closing statements of defence in order to structure and summarise the arguments used in the dispute in the light of all the evidence presented to the Court.
Above all, closing statements are a chance to summarise the arguments and to take a final position on the outcome of the investigation (if carried out) and on the decisions of the judge, and to clarify all the claims and any eventual counterclaims.
When a case is adjourned for decision after the last hearing, the Judge must allow the parties the option to file closing statements of defence, as set out in article 190 of the Italian Code of Civil Procedure, otherwise the decision could be annulled (see Italian Supreme Court 17.02.2021, n° 4202). The filing of the final statements of defence is not mandatory. If the option to file the written statements is granted by the judge, each party can decide to exercise or not that right. The lawyer for the defence has only the burden, but not the duty, to conduct a final defensive effort.
It is not possible to file new documents with the closing statement of defence. One example of unfair use of such written statements could in fact be the filing of documents during this phase. If it happens, the judge should adjourn proceedings to let all the parties examine any such documents (see Italian Supreme Court 14.02.1995, n° 1591).
With the final statements of defence, is it not possible to request investigations or object to counter-party requests – except for those identified ex officio or those linked closely to fundamental rights – nor to modify the conclusions already reached. Even if the parties accept the extension of the arguments, new issues may not be admitted in the dispute (see Court of Nola, decision 08.01.2020).
A further unfair use of the closing statements could occur during an appeal, where the written statements are less than in the first instance. At this stage the unfair behaviour of one party could seriously compromise the right to reply of the other party (at the expense of the appellant).
It might happen, for example, that the appellant, with the unscrupulous purpose of having the “final say” on the matter, files a final statement “of style” re-proposing the same arguments used in the act of appeal and avoiding taking a position on the respondent’s defence, waiting for the statement of reply (article 190 of ICCP), and preventing the respondent from responding to the appellant’s arguments.
As everyone knows, the replies to closing statements of defence are made to contest the final written statements only, and the unfair use of such defences should be declared inadmissible.
According to one famous legal textbook on the subject “… new arguments made by the party that were not filed with the final statement or that limited themselves to repeating arguments already presented must be considered inadmissible – because they are in violation of the adversarial procedure”. (see Mandrioli-Carrata, Dir. Proc. Civ, II, XXVII ed. Giappichelli, 141).
Does the principle “iura novit curia” apply in usury disputes?
In a claim concerning the application of usurious rates by banks, it is discussed whether it is the plaintiff’s burden to submit to the Court the Ministerial Decrees providing for the quarterly survey of the actual overall average rate (TEGM in Italian). In fact, the so-called threshold rate is based on the TEGM rate and above such rate the actual global rate applied by banks is regarded as usurious.
According to prevailing case-law, these Decrees represent administrative acts, to which the principle “iura novit curia”, laid down in Article 113 of the Italian Code of Civil Procedure, does not apply. Under this principle, the judge must consider all relevant law applicable to the case, including those that are not submitted by the parties. However, the case-law in question holds that the Court shall consider only the sources of law set out in Article 1 of the preliminary provisions of the Italian Civil Code, which do not include Ministerial Decrees. As a result, the party challenging the Bank’s application of usurious rates must submit such decrees to the court.
A minority opinion, on the other hand, holds that the Ministerial Decrees constitute acts integrating Article 644 of the Italian Criminal Code, according to which “the law establishes the limit above which interest is always usurious”. In fact, such Decrees provide for the survey of the TEGM, which is necessary for the purposes of determining the threshold. Accordingly, the Decrees, although formally issued as administrative acts, are in substance normative acts, insofar as they lay down general and abstract provisions to be applied in an indefinite number of cases and to the general public.
The majority opinion was reviewed by Court of Cassation (Supreme Court) Order No. 8883 of 13 May 2020, which has been upheld by the most recent Order No. 29240 of 20 October 2021.
More specifically, under the latest ruling, the regulatory provisions on the threshold rate integrate the general rules of criminal and civil law. Therefore, the judge having jurisdiction on the substance needs to be aware of such provisions and shall apply them to the case, even if the parties have not submitted the Decrees at issue. In fact, the judge may become aware of such Decrees either through his personal knowledge or with the cooperation of the parties or by requesting information from the public administration or by means of an opinion of an expert. On the contrary, this is not allowed before the Supreme Court, where it is not possible to submit any documents that were not submitted in the previous instances and the principle “iura novit curia” does not apply to such decrees, since they are administrative acts.
In short, the Supreme Court holds that the decrees can also be acquired ex officio by the Court having jurisdiction on the substance, but that such activity is no longer possible before the Supreme Court, where the submission of documents is no longer permitted.
This line of reasoning, however, seems to be lacking and contradictory. In fact, the acquisition ex officio of the Decrees by the Court having jurisdiction on the substance seems to be supported by the application of the principle “iura novit curia“. Should this be the case, it is not clear why, applying the same principle, the acquisition should not be allowed before the Supreme Court.
The Italian 2021 Budget Law: what will change in 2022 for the “esterometro”?
As is well known, following the introduction of electronic invoicing, the need to monitor “foreign invoices” arose for the Revenue Agency. To this end, the 2018 Budget Law introduced, among the new tax obligations foreseen for resident VAT-registered taxpayers, what is commonly called the “esterometro” (or “spesometro estero”), i.e.: the communication of data relating to transactions made and received with entities not established in the territory of the State.
2021 is however the last year in which this fulfillment is required; as from 2022 the data must be transmitted electronically to the “SDI” (Interchange System), in accordance with the format required for electronic invoicing.
In particular, in order to implement the provisions of the 2021 Budget Law, a specific Director’s Provision of the Revenue Agency was published on 28 October 2021. The latter establishes that:
– for the transfer of goods and the supply of services made and received, as of 1 January 2022, to and from entities not established in the territory of the State, resident VAT operators shall transmit the data to the Revenue Agency using the xml format provided for the electronic invoices and send the files to the Interchange System according to the compilation rules provided for by the technical specifications attached to the provision of 30 April 2018 and subsequent amendments. The transmission of the files relating to sales transactions is carried out within the terms of issuance of the invoices or documents certifying the amount due. For purchase transactions from entities not established in the territory of the State, the transmission of the files shall be carried out by the fifteenth day of the month following the month in which the document certifying the transaction is received or the transaction is carried out;
– what is described in the previous point remains an option for all transactions for which a customs declaration has been issued and those for which electronic invoices have been issued or received through the Interchange System.
In summary: the obligation to submit the “esterometro” for transactions made and/or received by foreign entities will end on 31 December 2021. This obligation is abolished from 1 January 2022 in view of the fact that foreign invoices (both active and passive) will have to be managed using the electronic invoice format.
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