201905.15
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Milan, 15 May 2019 - Law Decree No. 22 of 25 March 2019, the so-called ‘Brexit Decree’, containing “Urgent measures to ensure security, financial stability and market integrity, as well as protection of the health and freedom of residence of Italian citizens and those of the United Kingdom, in the event of the latter’s withdrawal from the European Union ”, introduced Article 1-bis, entitled “Special powers concerning broadband electronic telecommunications networks with 5G technology”, in the Law Decree No. 21 of 15 March 2012 (converted with amendments by Law No. 56 of 11 May 2012), relating to the golden power regulation.

Law Decree No. 21/2012 defines the objective and subjective context, the type, the conditions, and the procedures for the exercise by the State (and in particular, by the Government) of the so-called ‘special powers’, pertaining to the governance of companies operating in the sectors of defense, and of national security, or in sectors considered, in any case, strategic[1]. If, previously, the definition of activities of strategic relevance encompassed only those relating to the energy, transport, and communications sectors, the new discipline provides that among those activities are also included “broadband electronic communication services based on 5G technology”.

Under the new regulation - and this is certainly the most significant change compared to the previous legislation - the State protection mechanism will be triggered not only in the case of acquisitions of shareholdings, but also in the case of supply of goods and services. The second paragraph of the new Article 1-bis, in fact, provides that are subject to notification “contracts or agreements concerning the purchase of goods or services related to the design, construction, maintenance, and management of networks” concerning 5G services, as well as “the acquisition of high-tech components, functional to the aforementioned implementation or management, when concluded with subjects outside the European Union”.

The control, as before, will be activated only in the case of transactions carried out with non-EU subjects, even if the third paragraph of Article 1-bis, in providing the specific definition of ‘subjects outside the EU’, clarifies that, in this specific case, shall be considered as such also those companies that have their registered office or administration or their main activity center in an EU state (or in the European Economic Area) but are controlled, directly or indirectly, by a natural person or by a non-EU company.

Also as regards the range of powers attributed to the Government, nothing changes: the latter will have the right to veto the operation or to impose specific provisions or conditions. With only a clarification: the Government will also evaluate “the elements indicating the presence of vulnerability factors that may compromise the integrity and security of the networks and data passing through them”.

In fact, the passage mentioned above discloses the reasons underlying the measure put in place by the current Italian executive. The new discipline, as a matter of fact, finds its raison d’être in the significant and widespread fears over the effective security of the 5G networks of the Chinese company Huawei, which are accompanying the development of said technology also within the community borders.

The European Union, as of today, has taken a position of cautious openness, certainly “softer” than those adopted by Australia, New Zealand, and the United States, which have banned its use. Brussels, indeed, decided not to ban the use of the technology developed by the Chinese giant, but urged the Member States, through a recent Recommendation[2], to adopt a series of measures that guarantee high safety standards in the new-generation infrastructures, which will soon cross a large part of Europe[3]; this, regardless of the great pressures by the Trump administration, which called for the banning of the new 5G technology, to eradicate the risk of unlawful use of the data that will pass through it (or rather, the risk of espionage)[4].

In this context, the measures adopted by Italy, through the extension of the scope of application of the golden power, appear, in reality, to be an insufficient compromise solution. In the text of Article 1-bis, there are no traces of retroactive application. Therefore, all the investments already made in the 5G field are excluded from the new regulation. In addition, the amendment, designed as such, if on the one hand promises an increase in bureaucracy in managing supply contracts, on the other hand does not seem to ensure the high safety standards required by the European Union, which may be more effectively guaranteed through rules and instruments able to make the communication infrastructure neutral with respect to the content.

Besides, it should be added, if one looks at the important investments made in Italy by Huawei[5] and the recent approach to China for the new Silk Road, one could not think that the Italian government would have adopted an approach of closure.

It only remains now to await the conversion into law of the ‘Brexit Decree’[6] and the future developments on the matter.

[1] In the first two sectors mentioned, the Government can act in the event of a real threat of serious prejudice to the essential interests of defense and social security, through three special powers of intervention consisting in: a) the imposition of specific conditions in the event of purchase of shareholdings, for any reason, in companies that carry out activities of strategic importance for the national defense and security system; b) veto power on the adoption of resolutions of the shareholders or the administrative bodies’ meetings, of a company that carries out the aforementioned activities, concerning changes to the corporate structure, the change of the corporate purpose, the dissolution of the company, the transfer of rights relating to tangible or intangible assets, or the assumption of restrictions that condition their use; c) opposition to the acquisition of shareholdings, for any reason, in a company that carries out activities of strategic relevance in the defense and national security system, by an entity other than the Italian State, or by Italian public bodies, if the purchaser is going to hold, directly or indirectly, a participation in the corporate capital with voting rights capable of compromising, in the specific case, the interests of defense and national security.

As regards the energy, transport, and communications sectors, the Italian Government shall be notified of the resolutions adopted by a company that have the effect of changing its ownership, merging or splitting the latter. The Government also has the possibility of submitting to specific conditions, resolutions, acts or operations that give rise to a situation of exceptional real threat of serious prejudice to public interests relating to the safety and functioning of the networks and facilities and to the continuity of supplies.

Finally, the Government may exercise the veto power in the event that the purchaser originating from a non-European country establishes itself within the Union through the purchase of a company, which operates in the “protected” sector, or of one of its branches.

 

[2] Commission Recommendation of 26 March 2019 on Cybersecurity of 5G networks C(2019) 2335.

[3] In light of this circumstance, the Commission has identified the following next steps: i) by 30 June 2019, national risk assessment and updating of the necessary security measures; ii) by 15 July 2019, transmission of the national risk assessment to the Commission and the European Agency for Cybersecurity (ENISA) and, at the same time, start of the activities of coordination between Member States and the Commission within the cooperation group set up by the NIS directive; iii) by 1 October 2019, preparation of risk assessment at EU level; iv) by 31 December 2019, approval of the mitigation measures to address the cybersecurity risks identified at national and EU level by the cooperation group established under the NIS directive.

[4] Although this thesis may seem unreasonable, it should be remembered that Chinese companies, even private ones, must have, within their structure, a representative of the Communist Party and are answerable to the government of Beijing; those who oppose the technology exported by Huawei leverage this latter circumstance.

[5] Huawei, in 2016, invested 162 million euros in our country; currently: i) it is developing the 5G network in Milan and in the Bari-Matera area, where the investment is equal to 60 million euros; ii) it is working with 38 industrial and institutional partners to implement 41 projects ranging from health to safety, from surveillance to energy, from transport to smart cities; iii) it has agreements with public companies and supplies technology to all the 16 thousand Italian post offices.

[6] At present, the draft of the law converting Law Decree No. 22/2019 was approved by the Senate with some modifications (S. 1165). The text is now being examined by the Chamber of Deputies (C. 1789).

 

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