Private and Public law lesson 5 The impact of EU law on the domestic legal system; implementation of EU law into national legislations; Italy (and EU) external relations and relevant legal basis

INDEX 1. interaction between EU law and Italian law: the evolution of the Court approach 2. The new art. 117 of the Italian Constitution 3. The impact of non self-executing norms (EU law) on Italian law 4. The principle of supremacy of EU law 5. Technical implementation of EU law into Italian law

1. interaction between EU law and Italian law: the evolution of the Court approach

_________________________________ 1. Interaction between EU law and Italian law _________________________________ What is the ranking of EU law (within the Italian system of sources)? Equal to ordinary laws, constitutional laws, or other? - “lex posterior derogat priori” - what happens in case of conflict with a domestic rule? Need to identify a constitutional basis, justifying the application of EU law in Italy

_________________________________ 1. Interaction between EU law and Italian law _________________________________ Need to identify a constitutional basis, justifying application of EU law in Italy Art. 10, par. 1, of the Italian Constitution: “Italy conforms to commonly recognized international law” Art. 11 of the Italian Constitution: “Italy consents, on a reciprocity basis with other States, to limitations to sovereignty for the purpose of ensuring peace and justice among Nations; it promotes international organizations devoted to that purpose”

_________________________________ 1. The evolution of the Constitutional Court approach _________________________________ FIRST STAGE EU law has the same ranking as Italian ordinary laws SECOND STAGE Italian law conflicting with EU law is constitutionally illegitimate (art. 11) THIRD STAGE EU law is an autonomous and independent system, as opposed to Italian law (art. 11 + law implementing the EU Treaty): disregarding domestic law

_________________________________ 1. FIRST STAGE _________________________________ The “Costa vs. ENEL” decision: - EU law has the same ranking as Italian ordinary laws - in case of conflict, a norm prevails over those which were previously enacted

_________________________________ 1. FIRST STAGE _________________________________ The “reaction” of the European Court of Justice - The EU legal order is not “separate” from domestic legislations - the principle of supremacy of EU law is irrespective of the relevant implementation mechanisms - domestic rules conflicting with EU law should be held as totally ineffective - EU law is assimilated to “ordre public” rules (mandatory provisions of law), overriding domestic legislation

_________________________________ 1. SECOND STAGE _________________________________ - The “Frontini” decision: Italian law conflicting with EU law is constitutionally illegitimate (art. 11 of the Italian Constitution: “Italy consents, on a reciprocity basis with other States, to limitations to sovereignty for the purpose of ensuring peace and justice among Nations; it promotes international organizations devoted to that purpose”). An intervention of the Constitutional Court is required the doctrine of “counter-limitations”: EU law may not impact on fundamental rights of individuals, according to each domestic Constitution

_________________________________ 1. SECOND STAGE _________________________________ - The “Industrie Chimiche” decision: the Italian judge may not disregard the domestic rule of law. If ever, in case of conflict with EU law, he/she may submit the issue to the Constitutional Court

_________________________________ 1. SECOND STAGE _________________________________ The “reaction” of the European Court of Justice - The “Simmenthal” decision (the Italian judge must disregard domestic rules conflicting with EU law, both prior or subsequent to the EU norm, without the need for any intervention of the Constitutional Court) - The “Factortame” decision

_________________________________ 1. THIRD STAGE _________________________________ The “Granital” decision: - EU law and Italian law are autonomous and separate legal orders. EU law regulates areas from which Italian law “voluntarily withdraws” - therefore, the Italian judge should apply EU law and ignore/disregard the domestic rule conflicting with the EU provisions – this is by virtue of Art. 11 of the Constitution + the law implementing the EU Treaty in Italy - counter-limitations

_________________________________ 1. THIRD STAGE _________________________________ Other decisions of the Italian Constitutional Court: - The Italian Government challenged a decision issued by Umbria (Regional law) conflicting with EU law (1994) - The impact of EU law on the domestic (constitutional) system regulating competences and powers of the Regions and the central State (1996)

_________________________________ 1. THIRD STAGE _________________________________ Other decisions of the European Court of Justice: - The Italian judge might disregard Art. 2909 Civil Code (the Court decisions bind all parties, their successor and assigns, as well as any third party involved in the dispute), if that hampers full application of EU law - the national judge should interpret domestic law (including non self-executing norms) in order to make it consistent with EU law

2. The new art. 117 of the Italian Constitution

_________________________________ 2. The new art. 117 of the Constitution _________________________________ Art. 117: “legislative power is exercised by the State and the Regions within the limits (and in compliance with the obligations) set out by EU law and by the international legal order”: a parameter for the Italian legislative bodies + Art. 11 of the Italian Constitution: “Italy consents, on a reciprocity basis with other States, to limitations to sovereignty for the purpose of ensuring peace and justice among Nations; it promotes international organizations devoted to that purpose”: the legal basis for the obligation for Italy to conform to EU law

3. The impact of non self-executing norms (EU law) on Italian law

_________________________________ 3. Non self-executing norms of EU law _________________________________ Self-executing norms the judge must apply the EU norm and disregard the Italian conflicting norm (“third stage”) ___________________________________________________________ Non self-executing norms the judge must submit the issue to the Constitutional Court

4. The Treaty of Lisbon and the principle of supremacy of EU law

_________________________________ 4. The Treaty of Lisbon and the principle of supremacy of EU law _________________________________ The “supremacy clause”: - the Treaty of Lisbon does not include it - It is stated in the Declaration No. 17 attached to the Treaty of Lisbon - It is mentioned in several decisions of the European Court of Justice - It is mentioned in several decisions of National Constitutional Courts

_________________________________ 4. The Treaty of Lisbon and the principle of supremacy of EU law _________________________________ The Principle of Supremacy is subject to the following: - the principle of conferral being complied with - who is competent to evaluate whether the EU competences were correctly exercised?

5. Technical implementation of EU law into Italian law

5. EU law implementation mechanisms _________________________________ Implementation may happen by means of: - an ordinary law (“legge comunitaria”) - The Parliament delegates to Government to implement EU law - [Deregulation] - implementation by administrative decisions

The implementation of: MiFID 2 MiFIR AIFMD Pratical examples The implementation of: MiFID 2 MiFIR AIFMD

MiFID 2 Recital no. 42: “In order to strengthen the protection of investors in the Union, it is appropriate to limit the conditions under which Member States may exclude the application of this Directive to persons providing investment services to clients who, as a result, are not protected under this Directive. In particular, it is appropriate to require Member States to apply requirements at least analogous to the ones laid down in this Directive to those persons, in particular during the phase of authorisation, in the assessment of their reputation and experience and of the suitability of any shareholders, in the review of the conditions for initial authorisation and on-going supervision as well as on conduct of business obligations”.

MiFID 2 Recital no. 71: “Member States should ensure that investment firms act in accordance with the best interests of their clients and are able to comply with their obligations under this Directive. Investment firms should accordingly understand the features of the financial instruments offered or recommended and establish and review effective policies and arrangements to identify the category of clients to whom products and services are to be provided. Member States should ensure that the investment firms which manufacture financial instruments ensure that those products are manufactured to meet the needs of an identified target market of end clients within the relevant category of clients, take reasonable steps to ensure that the financial instruments are distributed to the identified target market and periodically review the identification of the target market of and the performance of the products they offer”. 

MiFID 2 Art. 12, para 7: “Member States may not impose requirements for the notification to and approval by the competent authorities of direct or indirect acquisitions of voting rights or capital that are more stringent than those set out in this Directive”.

MiFID 2 Art. 24, para 12: “Member States may, in exceptional cases, impose additional requirements on investment firms in respect of the matters covered by this Article. Such requirements must be objectively justified and proportionate so as to address specific risks to investor protection or to market integrity which are of particular importance in the circumstances of the market structure of that Member State”.