Italy: Does The Extension Of Concessions Provided For By The So-called "Relaunch Decree" Also Apply To The Extension Of Business And Investment Plans?

As is well known, our government has taken specific measures to deal with the drop in traffic in Italian ports caused by the pandemic and the serious economic consequences for maritime operators.

These initiatives include, in particular, the automatic 12-month extension– provided for by Article 199, paragraph 3, letter b) of the "Relaunch Decree" ¹– of concessions pursuant to Article 18 of Law 84/94 ².

We do not intend here to judge the above-mentioned measure, which has received attention also from the Italian Competition Authority ("AGCM") ³, but simply to address an issue that the legislator has apparently not considered (at least expressly), but which is crucial for concessionaires.

This is the matter: Article 199, paragraph 3, letter b) of the "Relaunch Decree" has provided for the extension of concessions pursuant to Article 18 of the port law, but has set no provisions with respect to the time limits of business and investment plans underlying such concessions. So, can the time limits of the concessionaires' business plans and, above all, investment plans be considered extended as well?

To illustrate our reasoning, let's start from a basic consideration: concessions – we are always referring, in particular, to concessions pursuant to Article 18 of Italian Law no. 84/94 – are based on detailed business and investment plans. Said plans set out the traffic objectives that are to be achieved and the investments that are to be made throughout the period covered by the concession.

So much so that the duration of concessions depends – to a large extent – on the investments planned by the concessionaire, concurrently, of course, with the traffic volumes that the concessionaire undertakes to carry out.

From this very first consideration, it would seem reasonable to affirm that – where the time limit of the concession is extended by one additional year – also the time limits of the business and investment plans underlying that concession should be considered as extended by one additional year.

Moving on to a deeper analysis of the rule in question and considering the general context of the initiatives in which it is inserted (see, for example, the reduction of fees provided by the "Relaunch Decree", but also – although at a different level – the Temporary Framework ⁴), we believe it possible to see in the legislator's intention the will – in practice – to "grant" concessionaires in some way the year just gone by (as if it were a year "lost" and hence "to be made up for": so, one might think that this could be the rationale for the automatic 12-month extension).

It is clear that not all concessionaires had to face the same serious difficulties in the year just ended, but it is equally evident that said year has been exceptional for everyone.

There is another established fact, which we believe to be objective, and that is that the pandemic has "messed up" the operators' plans and created an objective uncertainty as to how traffic will develop in the near future.

If already before the pandemic it was difficult to make forecasts about future traffic, today it is undoubtedly even more difficult.

Yet traffic forecasts are, and must be, one of the key indicators for assessing the investments to be made and their timing.

Is it possible to think that the concessionaires' business and investment plans cannot be affected by an event such as the pandemic and by the crisis and uncertainty about the future that it has caused? In our opinion, this is not possible and, indeed, it is legitimate – also on the basis of the principle of good faith that must govern contracts, including concessions – to believe that business and investment plans should be reinterpreted in the light of the scenario we are witnessing today.

So, considering, on the one hand, the annus horribilis we have just experienced and, on the other hand, the uncertainty that this year has thrown on the future, we believe that there are valid reasons to affirm that also the time limits of business and investment plans should be considered at least "frozen" for the year that has just ended (due to the automatic extension of the relevant concessions provided for by the "Relaunch Decree").

Of course, this does not mean that the commitments undertaken by concessionaires must not be fulfilled, but we believe that it would not be fair to "pretend" that nothing had happened in 2020 and consequently to consider the deadlines set out in the business and investment plans as "untouchable". On the contrary, in our opinion, said deadlines should be "shifted" along with the concessions' deadlines (which, as we said, are based on the business and investment plans).

This is all the more so since the legislator – with its initiatives aimed at combating the economic consequences of the pandemic – has clearly shown that it has understood the exceptional nature of the year we have just left behind, by taking steps to provide concessionaires with an aid (which may be considered sufficient, or not) to overcome said consequences.

All of the foregoing notwithstanding any further consideration that could be made, but which we will not address here, about the instruments offered by our legal system to remedy contractual situations in which the bilateral nature (i.e., the balance) of the contract has been altered by an extraordinary event beyond the control of the parties.

In conclusion: given the silence of the legislator and subject, of course, to all the contingent situations of each individual concessionaire or each individual port, we would consider it legitimate to expect that the automatic extension of concessions provided for by the "Relaunch Decree" could (rectius: should) also result in an extension of the time limits set out in the business and investment plans underlying such concessions.

Footnotes

1 Decree Law No. 34 of 19 May 2020, converted with amendments into Law No. 77 of 17 July 2020.

2 Here, we refer, specifically, to concessionaires pursuant to Article 18 of Law No. 84/94 and therefore to port terminal operators, but Article 199, paragraph 3, of the "Relaunch Decree" has established a 12-month extension also for authorisations pursuant to Article 16 of Law No. 84/94, concessions pursuant to Article 36 of the Italian Navigation Code, concessions for the management of maritime stations and passenger support services and concessions for towage services.

3 In an ad hoc recommendation, the AGCM recalled the risk that automatic extensions, by postponing competition for the market, may prevent "exploiting the benefits that would derive from periodic competition for the awarding of contracts through public procedures". For this reason, the AGCM pointed out that "measures aimed at postponing competition should, therefore, be strictly temporary and directly functional to overcome the emergency. Any extensions of contracts should not, however, exceed the real needs of administrations, in order to allow as soon as possible the use of suitable instruments to facilitate an efficient use of public resources".

4 In brief, the Temporary Framework is an "instrument" adopted by the European Commission to allow Member States to take measures to help the economy in the context of the COVID-19 pandemic by derogating from the ordinary state aid rules.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.