This content is from: Local Insights

Italy

Article 113 of Law No 267 of August 18 2000, regulating modalities for the management of local public services, has been recently amended by Article 35 of Law No 448 of December 28 2001 (the 2002 Financial Law).

Article 113 of Law No 267, as amended, provides for a different regulation in respect of the management of industrial public services, on the one hand, and of non-industrial public services, on the other hand.

One of the most important changes concerns the separation of ownership of the infrastructure used for the delivery of the public services, which must be maintained by each local authority with the sole exception explained below, and the management of such infrastructures which, on the contrary, may be delegated to stock companies selected by the local authority through a public tender or directly delegated by the local authority to stock companies controlled by it.

Furthermore, the new regulation provides that the management and supply of local public services must be performed by delegating it to stock companies selected by the local authority through a public tender. Alternatively this can be done by directly delegating the same (without need of any public tender) to stock companies controlled by the local authority, but only if the stock companies are not already entrusted with the management of the infrastructure.

However, we believe that the legislator should provide further guidelines on Article 113.

Any other form of management of industrial local public services allowed under the previous regime has been abolished and the existing municipal enterprises (aziende speciali) must be converted into stock companies by December 31 2002.

Local authorities are no longer required to verify the opportunity to appoint stock companies controlled by the local authority in the light of the specific service and of its territorial extension. Any doubt, under the previous regime, concerning the possibility of a direct delegation without need of a public tender has been cleared up.

Another important change concerns the option granted to the local authority to assign, in whole or in part, its shareholding in the stock companies that manage the public services. The new Article 113 does not provide any limit or condition to such assignment, so that any private company could, in principle, succeed in the management of the local public services even though the company does not meet the necessary requirements which a public tender is aimed at verifying. As a result of the introduction of such an option, a material adverse effect might be produced on the financial transactions concerning the issue of bonds convertible into public stock companies' shares. In fact the assignment of the controlling, or the entire, shareholding owned by the local authorities to private companies without a public tender might affect the market value of such bonds.

Under the new regime it is also provided that the ownership of the infrastructure for the delivery of public services can be transferred by the local authorities to stock companies controlled by them. In such a case, though, no assignment of the shareholding of the local authorities is allowed. Furthermore a stock company which is controlled by the local authority cannot be both the owner of said infrastructure and the manager of local public services. However, if such stock companies are listed on a stock exchange or are in the process of being listed (the listing procedure having been approved by the relevant local authority before January 1 2002), the coexistence of both capacities (as owner and as manager) will be allowed as well as the assignment of the shareholding owned by the local authority.

Finally, in regards to non-industrial local public services, the new regulation has substantially maintained the previous organization of the management of such services providing for a direct delegation to institutions (istituzioni), municipal enterprises (aziende speciali) or to stock companies incorporated or participated by the local authority even in a minority share. As an alternative, where required by technical, economic or social needs, other private companies selected through a public tender could be entrusted with the management of non-industrial local public services.

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