Private international law: the condition of reciprocity

As already mentioned in the previous article, Italian international law is governed by Italian law (Law no. 218 of 31 May 1995, “Reform of the Italian system of private international law”, which must be integrated with European Union law. provisions of Law 218/1995 “do not prejudice the application of the international conventions in force for Italy” (art. 2), in the interpretation of which their international character and the need for their uniform application must be taken into account.

The law is basically divided into two large blocks.

The first relates to the jurisdiction, in which the cases in which the Italian jurisdiction is applicable are defined, or when an Italian judge is competent to decide a particular issue.

The second relates to the applicable law. It provides the criteria on the basis of which to understand which law must be applied, for example the Italian or the French one in the event that a citizen has a French residence.

Most countries have ad hoc laws regulating private international law in each of them, in order to resolve the same doubts that Law 218/1995 faces in Italy.

In Spain similar rules are contained in Chapter IV of the Preliminary Title of the Civil Code and in Law 29/2015.

Law 218/1995 regulates, together with the International Conventions ratified by Italy (with a specific ratification law issued by the Parliament), legal situations with elements of extraneousness, i.e. all situations in which it is necessary to decide which judge to refer to or which law to apply. .

Outside, and before talking about Law 218/1995, it is essential to analyze the concept of the general condition of the foreigner (i.e. citizen having citizenship, or company based in any country not a member of the European Union), which, on the contrary, wishes to voluntarily set up a legal transaction in Italy.

More simply, we answer the question: can every foreigner easily make an “investment” in Italy?

“Investment” means any asset invested by investors of one contracting party in the territory of the other, in accordance with the laws and regulations of the latter.

Among the most common investment hypotheses are: property rights on real estate, movable and other real rights; monetary credits and other services for consideration deriving from contracts; acquisition of existing companies or shares of them; creation of new businesses; copyright and industrial property rights; legal concessions, such as those for the exploration, extraction and exploitation of natural resources.

In general, a relationship between two Italian persons (legal or natural) is governed by Italian law, except for derogations from agreements, as permitted, as better described below.

In the case of “foreigners”, the main Italian reference standard is Article 16 of the Provisions on the law in general (the so-called “preleggi”), approved with R.D. n. 262 of 16 March 1942, which states that “” the foreigner is admitted to enjoy the civil rights attributed to the citizen on condition of reciprocity and subject to the provisions contained in special laws. This provision also applies to foreign legal persons ”.

The jurisprudence itself defines the principle of reciprocity as a “condition of effectiveness of the rule that attributes a right to a foreigner”, further specifying that reciprocity is “not as the foundation of the law, but as a condition of effectiveness of the aforementioned rule” (Cass. SS. UU. Sent. 18 March 1999 n. 147).

Following laws subsequent to the approval of the Civil Code and entry into the European Union (as it is known today), the scope of the “reciprocity condition” must be restricted.

It does not apply to persons with citizenship or seat of an EU Member State by virtue of the “automatic reciprocity” established by Community law, as also stated by the European Court of Justice (among the many ECJ case C-184/99 of 20/09 / 2001).

Automatic reciprocity is also envisaged for foreign citizens holding an “EU residence permit for long-term residents” issued by another member state (pursuant to article 9 of Legislative Decree no. 286 of 25 July 1998 – Consolidated provisions concerning immigration regulations and regulations on the condition of the foreigner), as well as for foreign citizens holding a residence permit for subordinate work or self-employment, for the exercise of an individual business, for family reasons , for humanitarian reasons and for reasons of study, and for their relatives in good standing with the stay (pursuant to art.1 of Presidential Decree no.394 of 31 August 1999, containing the implementing rules of the consolidated text of the provisions concerning the discipline of immigration ).

In summary, as confirmed by the Ministry of Foreign Affairs, pursuant to Legislative Decree 25 July 1998, no. 286 (Consolidated Law on Immigration) are equal to Italian citizens and, therefore, exempted from verifying the condition of reciprocity:

• citizens (natural or legal persons) of EU member states as well as citizens of EEA countries (Iceland, Liechtenstein and Norway);
• non-EU citizens residing in Italian territory and holders of a residence card or a regular residence permit issued for subordinate work, self-employment, for the exercise of an individual business, for family reasons, for humanitarian and for study purposes;
• stateless persons residing in Italy for at least 3 years;
• refugees residing for at least 3 years.

It is also appropriate to specify that the fundamental rights of the human person provided for by the rules of internal law, by the international conventions in force and by general international law are recognized to foreigners present at the border or in the territory of the State.

For all other citizens, or non-EU companies, unless special International Conventions or bilateral agreements on the promotion and protection of investments (Bilateral Investment Treaties, or BITs) have been ratified in Italy, the said “reciprocity principle “.

The “ATRIO” system was set up by the MEF (Ministry of Foreign Affairs), an Online Archive of International Treaties, by the Legal Affairs, Diplomatic Litigation and Treaties Service, with the aim of making information relating to the conventional framework in force in Italy on a bilateral and multilateral level is accessible.

For example, a citizen with only nationality of North Korea, will be able to buy a property in Italy only if the same purchase would be allowed to an Italian citizen in North Korea.

Let’s move on to a final example, longer, but certainly more accurate, concerning Switzerland.

A company under Swiss law XXX, with registered office in Lugano (SWITZERLAND), having in Italy (by declaration of the same) only “secondary office” and tax code, buys a condominium complex in Italy, namely 20 apartments for residential use, as well as related appurtenances (cellars and attics).

The company, as reported by the Italian Business Register, has as its corporate object a main activity other than the sale of real estate, namely: “Corporate purpose: the promotion and dissemination of musical culture with the possibility of selling equipment …”, adding then “The company can administer, manage, buy and sell real estate abroad.”.

The notarial deed of sale says nothing about the company’s requirements for the validity of the purchase.

There are questions about the validity of the aforementioned real estate purchase in light of the “condition of reciprocity” pursuant to art. 16 Avail. Prel. Civil Code

In Switzerland there is a law on the subject, the so-called “FL”, which in art. 2 provides that the foreigner, in order to purchase a property in Switzerland, must be expressly authorized by the cantonal authority, unless “the fund serves as a permanent establishment of a trade, an industry or another business exercised in commercial form, of a commercial company or a freelance profession “.

The key element is the correct interpretation of “permanent establishment” which should be considered as an objective and clear manifestation of the legal person in question to enslave what has been purchased as a stable center of interest, in accordance with its own social activity, an activity that must be presumed from what is declared to the Business Register.

It could be objected that, first of all, today the corporate purpose of the company is (in Italy, after the reform of company law) merely indicative and useful only for the purposes of liability towards third parties, and that consequently all the real activities carried out should be investigated. by the company in order to be able to state whether the property to be purchased can be considered valid in order to affirm the aforementioned reciprocity. Only the company concerned can assess the actual existence of these conditions, overcoming the presumptions of third parties who, in the face of a company statute, as reported in the Public Register of Companies, affirm that the activity of the company in question is not appropriate to being able to affirm that a property can serve as a permanent trading establishment. In the matter of private international law, if on the one hand we need good sense and flexibility, on the other hand we must also try to stick to the presumptions that can be deduced without many complications from the reality of the facts and from the public registers and documents.

Another subtlety to denote in the corporate purpose of the company in question is the disposition of the corporate purpose which, after a first incident, where the company’s activity is described, adds “The company can administer, manage, purchase and sell real estate to abroad”.

This incident is included in multiple company statutes in order to expressly give the company the possibility to operate also in the real estate field in order to better implement the real and prevalent corporate activity. The corporate purpose that identifies the management of residential properties as a real social activity is different. Only in this case could one discuss the validity of a property purchase by a Swiss company, which would therefore have an interest in purchasing a property for residential use.

Still different is the case of a purchase of a property, whatever its pre-purchase destination, in order to, post-purchase, change its destination and make the entire real estate unit as a “permanent establishment of a trade, an industry or of another company exercised in commercial form, of a commercial company or of a freelance profession “. The validity of such a purchase is questionable, and, although its validity could be hypothesized with a post-clearance check, it is advisable to take all due precautions, especially with regard to a Public Official, such as the Italian Notary who receives the deed of sale, which certainly cannot take charge of checking the real destination of the property after the purchase itself. Even in the aforementioned case it is useful and appropriate to consider legal only purchases that comply with the conditions required by the “LAFE” at the time of purchase.

A company under Swiss law (or SWITZERLAND) can therefore purchase a property in Italy only and exclusively when the property serves, I would add objectively, as a permanent establishment of a business. It is difficult to state how it is possible to verify whether the property being purchased has this requirement in reality. It is obvious that in the case in question it seems to be clear that a company, which does not have the purchase and sale of real estate as a social activity, cannot purchase a property for almost entirely residential use, since it is in contrast with the Swiss law, and therefore in lack of the required “condition of reciprocity”.

The lack of this condition leads to the nullity of the deed of sale pursuant to art. 1418 cod. civ. as contrary to the mandatory rule of law, and precisely to the aforementioned art. 16 of the Preleggios.

All the dispositive acts put in place by the alleged buyer will also be void as, with the nullity of the purchase deed, the possibility of disposing of the right to dispose is no longer possible.

In this case, the only possible solution to lawfully purchase a residential property, which is therefore not the subject of a permanent commercial establishment or other type of business, as required by the “FL”, would have been the purchase of a company governed by Italian law by the company governed by Swiss law, as the establishment of a company is fully covered by the right of reciprocity. Subsequently, said company under Italian law, although having the Swiss company as its sole shareholder, would have lawfully purchased the property, without any sort of problems.