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The Liability of the Directors of Government-held Companies Under Italian Law
The jurisdiction over liability actions of directors of Government-held Companies was one of the most complicated and debated issue in Italian Commercial Law, being not clear if such actions are subject to the ordinary jurisdiction or to the jurisdiction of the Court of auditors.
Just a quick overview: until 2003, in absence of legislative provisions, there was the opinion that:
- For the damages incurred by the Company during the business activity, the Directors were subject to the liability actions disciplined by Italian Civil Code (art. 2392 seq.);
- For the damages incurred in the conduct of organizational or non-authoritative activities, the Directors were subject to the jurisdiction of the Court of Auditors. In 2003, the Full Bench of the Supreme Court (Cass., SS.UU., 22.12.2003, no. 19667) decided that all the judgments related to Directors of Government-held Companies were subject to the Court of Auditors, being convinced that, by such Companies, the Government or the Public Entities didn’t make business activities, but pursue their administrative activities.
Four years later, by art. 16 bis of Leg. Decree no. 248/2007 provided that the liability actions against Directors of Listed Companies not controlled by Government (pursuant to art. 2359 Italian Civil Code) were subject to the ordinary rules of Italian Civil Code. However, it wasn’t still clear which was the jurisdiction in case of liability of Directors of Government-held Company other than (Government controlled) Listed Companies. In this fragmentary framework, a couple of judgments of the Full Bench of Supreme Court (Cass. SS. UU. 22.12.2009, n. 26806; Cass. SS. UU., 25.11.2013) has established that:
- The ordinary court has jurisdiction over the liability of Directors of Government-held Company for the damage caused to Company’s assets;
- The Court of Auditors has jurisdiction for judgments relating to liability for damage directly caused to the public partner, including damage to the reputation;
- The liability of the Directors of so-called “In-house Company” is subject to exclusive jurisdiction of the Court of Auditors.
Although these judgments constituted a milestone on the way of the division of the jurisdiction, there still wasn’t a clear legislative provision (with the exception of art. 16 bis of Law Decree no. 248/2007). Finally, with the art. 12 of the Leg. Decree no. 175/2016, the legislative omission has been filled. With reference to Directors, the new rule provides that:
- They are subject to liability actions provided by the ordinary rules of capital Companies (articles 2392 seq. Italian Civil Code) for the damages to Company’s assets; and, pursuant to art. 16 bis, Law Decree n. 248/2007 – still in force – if the Company is listed and participated by Public entities, the ordinary jurisdiction is the exclusive jurisdiction for liability actions;
- The Directors of “In house” Companies are subject solely to the jurisdiction of the Court of Auditors;
- The Court of Auditors has also jurisdcition in the case that the Director causes loss of profit directly to the Public Ent owner of stakes in the Government-held Company. As we can see, the art. 12, Leg. Decree no. 175/20016, to a certain extent, has made explicit the jurisprudence of the statements of the Supreme Court nn. 26086/09 and 26283/13 above mentioned.
From the combined provision of art. 16-bis, Law Decree no. 247/08 and art. 12, Leg. Decree no. 175/2016 emerge as follows: i) in the case of Listed Companies with less than 50% public participation, there is always ordinary jurisdiction; ii) in the case of an In House Company, the Court of Auditors is always competent; iii) for the other companies: iii.a) in case of damage caused directly to the Governmental shareholder of the public partner, the Court of Auditors has jurisdiction; iii.b) for the damage incurred to the Company, has jurisdiction the civil judge.
It’s all clear? No, because there could be interferences between jurisdictions: the same case, in fact, can be seen both from the point of view of the civil liability, subject to ordinary jurisdiction, and of the accounting liability, subject to the jurisdiction of the Court of Auditors. The art. 12, Leg. Decree n. 175/2016 doesn’t give provisions about the coordination between jurisdictions, so that there may be interference between the action in front of the Court of Auditors and the civil judgment on the administrator's liability, with the consequence that there could be a duplication of proceedings. Such supplication could be solved according to the ne bis in idem limitation, which involves that the Governmental shareholder (which is damaged by the Director of the Governmental-held Company) can not obtain compensation twice for the same damage.