The latest geopolitical developments have exposed the flaws of a globalized economy. As countries aim to strengthen their national economies, Italy created a shield to protect its most valuable assets from foreign hands. It’s called Golden Power and gives the government special vetting powers to protect Italian companies that carry out activities considered strategic and of national interest. As global tensions continue to rise, understanding the new regulations becomes more important than ever.
Recent events like the Covid-19 pandemic and the Ukrainian war have exposed the flaws of a globalized economy. The benefits of globalization are undeniable but depending on foreign players also makes a country more vulnerable to disruptions. As governments around the world start to understand the importance of creating a strong national economy led by key national players, the Italian government realized that it could do so by protecting its most valuable assets from foreign hands with a shield called Golden Power.
By decree, the Golden Power allows the Italian Government to have special powers over all the companies that carry out activities considered strategic and of national interest. By exercising the golden power, the government can veto or regulate a corporate acquisition transaction by non-European parties in the following industries:
The Council of Ministers must be notified of any transaction, act or resolution having as object a change in the corporate purpose, the dissolution of the company, or the amendment of statutory clauses concerning the introduction of limits on voting rights or share ownership. The Council proceeds to the examination of the case to decide whether the powers are exercisable or not.
In the last couple of years, the number of notifications has increased at an exponential rate. In 2021, the Council received 496 notifications compared to 342 in 2020, 83 in 2019 and 8 in 2014. It is most likely that such rate continues to grow as the government keeps extending the golden power shield to more industries in an effort to protect the national economy from foreign threats.
According to the report of Roberto Garofoli, Secretary of the Council of Ministers, the golden power was exercised only 26 times in 2021, a small number compared to the 496 notifications. More than half of them did not even fall under the umbrella of special powers. These figures lead to a few assumptions. On one hand, that means that the government is meticulously exercising its power based on objective and non-discriminatory criteria and the Italian market is still open to foreign investment. On the other, it seems like the normative used to decide whether a transaction must be notified is not clear to the parties involved.
Most of the notifications received by the Council fall in the category of 5G Technology and involve private and public Chinese entities. As a matter of fact, the Copasir officially asked the Italian parliament to exclude Chinese corporations in 2019. Even if the parliament disregarded the petition, there is clearly a nagging concern that outsourcing the management of networks outside of the European Union to countries like China, may compromise national security.
With the current global landscape, it is most likely that the Italian government will extend its Golden Power shield. More activities and industries will fall under the umbrella of special powers as they start being perceived as "strategic and of national interest." The latest post-Covid regulations will allow the government to keep protecting their most valuable assets with new intervention tools. Cassa Depositi e Prestiti Group, a financial institution owned 100% by Government, is starting to buy substantial shareholding in some critical companies.
Understanding the economic and legal landscape also becomes particularly important for entrepreneurs, Funds and any financial institution. Recent and upcoming geopolitical developments on both the Ukrainian-Russian and Taiwanese fronts will oblige all parties to be attentive to these regulations more than ever.