1. THE ITALIAN LEGAL SYSTEM

The Italian legal system forms part of the civil-law tradition derived from Roman law that is shared by many continental countries. Typically such a system is primarily based on written law as opposed to the common-law or unwritten body of law based on judicial precedent which is a founding stone of the Anglo-American legal tradition. For a proper understanding of the Italian legal system as it affects foreign investors it is important to be aware of the main sources of Italian legislation and law. These are set out below:

a) The Constitution.- The written Constitution of the Italian Republic is the supreme law of the land 1. No statute, whether passed before or after the Constitution came into force, may be inconsistent with it. A special judicial body, the Constitutional Court, is vested with power to decide whether or not a statute is unconstitutional, and any statute which is declared to be unconstitutional is ipso facto abrogated. On an equal footing are "constitutional laws" which are those laws enacted to implement a constitutional principle.

b) Statutory National Law - At the heart of the Italian civil law system is a code uniforming civil and commercial law which is divided into six main arteries: the individual and the family; the law of succession; property law; obligations - contract law; labour law; rights and remedies; for a total of 2969 articles. Though the code is occasionally updated, the lifeblood of the civil code is a growing plethora of statutory laws concerning specific sectors which ensure the civil code is kept relevant to modern society. Statutes may be enacted in the form of either laws (“leggi”) or decrees ("decreti"). Laws are introduced into Parliament (comprised of two branches, Camera dei Deputati and Senato della Repubblica ) as draft legislation and after discussion and approval by that body are promulgated by the President of the Republic. Parliament may delegate legislative power to the Executive (comprised of a Council of Ministers forming the cabinet) with respect to specific matters or areas of interest and under strict limitations. The Executive drafts and issues decrees ("decreti legislativi") which have legislative power once they are promulgated by the President of the Republic.

The executive branch may also autonomously enact decrees to address urgent problems ("decreti legge") but such decrees must be approved by Parliament within sixty days of enactment but may be re-enacted and re-presented for approval if not approved within the time period foreseen.

Consolidating decrees (testi unici) govern a whole field of law and are usually issued by the Executive on the basis of authority delegated by Parliament. Decrees and laws covering complex matters are normally followed by regulations (regolamenti) enacted as decrees to implement them but which do not have legislative power.

Laws and decrees come usually into force fifteen days after their publication in the Official Gazette of the Republic (Gazzetta Ufficiale della Repubblica Italiana). Decrees enacted to cope with urgent problems ("decreti legge") may come into force immediately after their publication in the Official Gazette.

Statutes have the same force and effect but if the same matter is governed by two conflicting statutes, the more recent statute prevails.

c) subordinate legislative powers are granted to the Chief of the Executive, to single ministers and other local bodies , D.P.C.M.= "Decreto della Presidenza del Consiglio dei Ministri" D.M.= "Decreto Ministeriale" , "Regolamenti" . These kind of statutes are not binding whenever they are conflicting with higher level laws.

d) Ministerial Circulars.- Government departments often issue instructions ("circolari") addressed to local government offices explaining how certain statutes are to be applied and how specific problems are to be solved in accordance with existing statutes. These instructions are widely used with reference to tax matters and form the basis for the application of the statutes by local government offices. However, they are internal procedures and are not binding on the courts.

e) Regional laws. The territory of Italy is divided into 20 regions. Local bodies may enact locally binding laws on various matters on many of which (expecially in the 5 so called "Regioni a statuto speciale" i.e. Sicily, Sardinia, Val d'Aosta -french border- Alto Adige -austrian border - Friuli - croatian border- ), they have an exclusive legislative power.

e) Absence of Theory of Stare Decisis.- Unlike common law courts, Italian courts are not bound by prior judicial precedent. Only statutes enacted in conformity with the Constitution are binding on the Italian courts. However, lower courts customarily follow the legal principles set out in the decisions of the higher Courts (Corte Suprema di Cassazione, Consiglio di Stato, European Court of Justice)

f) Mercantile Customs.-Business practices and customs (consuetudine) may sometimes have the same status as statutory law when no applicable statutes exist, but the courts rarely resort to consuetudine as sources of law. Many of the various regional chambers of commerce publish reports of the mercantile practices and customs in their respective regions. If a particular practice is unknown to the court, the party relying upon it must furnish proper evidence of its existence.

g) European Union Law. - Certain provisions of the Treaty of Rome are to be applied directly by national courts of Member States. By virtue of Art. 189 of the EU, Treaty regulations enacted by the Community institutions are directly applicable in all Member States and binding in their entirety, both on individuals and the State.

Directives, which aim at harmonising the law throughout the EU in a particular field, may need to be implemented in some State by a specific internal law. However, the European Court of Justice has held that European Community (EU) directives, even if not binding unless implemented, may vest rights in individuals on which they can rely, if the directives are sufficiently clear, unconditional and do not require a specific action from Member States. These are known as "self-executing" directives.