Private and Public law

lesson 6The principles of the Italian constitutional order:

the economic relationships

INDEX

Art. 41 to 47 of the Constitution: Constitutional principles governing economic relationships

- the right to carry out business activities- the right to work

- ownership

art. 41 to 47 of the Italian Constitution

Public intervention in the economic system

Regulation of the economic initiative (both private and public)

Regulation of ownership rights

Art. 41 to 47 of the Constitution_________________________________

Four different models:

- free market- public monopoly / public intervention- “self-production”- arts & crafts

Art. 41 to 47 of the Constitution_________________________________

free market:

- art. 41 and 42

- “the” Constitutional option

- it goes hand in hand with regulations, limitations and rules of conduct

- specific sectors are generally held as “sensitive” -> public services

Art. 41 to 47 of the Constitution_________________________________

“public services”:

- services rendered by either public or private subjects, in order to meet interests or needs of the community (social purposes in a broad sense): e.g., transports, energy and other utilities, supply of water, etc. Services addressed to specific individuals are generally not considered as “public services”

- they may be outsourced to private entities by means of:(i) a competitive bid(ii) a mixed company(iii) “in-house” providing

Art. 41 to 47 of the Constitution_________________________________

“public services” – competitive bid

The bid may have as object: (i) works (ii) services (iii) supplies

- “triangular” or “bilateral” relationship

- Green Paper “on public-private partnerships and Community law on public contracts and concessions” (EU Commission): selection of the private partner; public disclosure of the public entity’s intention to launch a bid; contractual stage

Art. 41 to 47 of the Constitution_________________________________

“public services” – “mixed” companies

- the company is purely a private subject- its corporate purpose must be restricted to performance of the activity to which it is “dedicated”- the private partner must be selected by means of a competitive bid- the majority stake must not necessarily belong to the public stakeholder- the private partner may not by a mere “financing” stakeholder: it must also participate to the service rendering - the private partner may not assign / dispose of its shares- once the service (to which the company is “dedicated”) is interrupted, the private partner must assign its shares

Art. 41 to 47 of the Constitution_________________________________

“public services” – in-house providing

the service is entrusted to a company which is wholly-owned by public entities. The company must meet the following requirements:

1- the corporate capital must be entirely held by public entities2- shareholders must have the same control over the company which is exercised on their own services3- the company must carry out the major part of its activity in cooperation with its controlling entities

Art. 41 to 47 of the Constitution_________________________________

State-owned undertakings:

- the State may influence the structure of corporate governance- the State is entitled to exercise shareholders’ rights - the State is entitled to influence and determine the company business and its targets / priorities

Art. 41 to 47 of the Constitution_________________________________

Art. 43 - the State is entitled to maintain control (or mandatorily transfer control) of business activities. Such power, however, is conditional upon the following:

(i) general purposes must be at stake(ii) essential public services/energy sector/monopoly(iii) predominant general interest

Art. 41 to 47 of the Constitution_________________________________

Art. 45: “models” other than free market

- “self production” / cooperative methods / associations are also encouraged: mutual interest and no “speculative” purposes (e.g., “società cooperative”). Manufacturers are often also consumers; employees may be compensated by means of goods manufactured or benefits to purchase them

[- arts and crafts: manufacturers do not usually resort to employees or to a significant corporate structure]

Art. 41 to 47 of the Constitution_________________________________

Art. 41, paragraph 1: in principle, private individuals are free to undertake a business activity:

- a general provision- directly applicable (no need for any implementation)- it is also binding on the State, which is not entitled to hamper application of art. 41, para 1

exceptions (limitations)

Art. 41 to 47 of the Constitution_________________________________

Limitations to private initiative

- limitations depending on the relevant social / historical context

- “Economic activities may not be carried out in contrast with social wealth or in such manner that could damage safety, liberty, and human dignity” (Art. 41, paragraph 2)

Art. 41 to 47 of the Constitution_________________________________

- no express definition; this depends on the historical context (e.g., privacy issues, environmental awareness, etc.); average of the progress gained by public welfare as a consequence of a given economic activity. Community is not seen as the “aggregate” of all individuals, but as a single and autonomous “subject”

- an absolute / unconditional limitation; no possibility to deviate or depart from it

- in order to stop an economic activity, conflict with “utilità sociale” must undoubtedly arise (nor room for discretion or interpretation)

A definition of “social wealth” (“utilità sociale”)?_________________________________

Other limitations to private initiative

- subjective limitations: e.g., professional requirements to be fulfilled in order to perform an economic activity

- objective limitations: e.g., limitations regarding town-planning matters

Art. 41 to 47 of the Constitution_________________________________

Art. 43, paragraph 3:

“The law shall set out appropriate planning and controls, ensuring that public and private economicactivities are properly oriented and coordinated to

achieve social aims”

Art. 41 to 47 of the Constitution_________________________________

“oriented”: each economic activity should not just pursue the entrepreneur’s individual profit

“coordinated”: each economic activity should be harmonized with all other existing activities, in order to ensure that all of them are consistent with the aim to increase and promote social wealth

Art. 41 to 47 of the Constitution_________________________________

“programs”: ex ante (planning)

“controls”: ex post (checking if certain targets were reached)

- this is no “mandatory” intervention by the State- Interventions should be of a general nature and should not regard specific economic sectors- Interventions should not be discretionary and should comply with the aims set out by the Constitution

Art. 41 to 47 of the Constitution_________________________________

Conflicting opinions:

(A) State plans are mandatory and binding on companies and undertakings

(B) Plans should not impact on individuals’ right to autonomously lay down their business targets

Nowadays, the State is expected to legislate on competition, to regulate relationships among companies and to issue antitrust and antimonopoly norms: to that extent, the State may also issue “directives” to companies and businesses

Is the State entitled to enact “plans” (art. 41, para 3)? _________________________________________________

Is the State entitled to enact “plans” (art. 41, para 3)? _________________________________________________

Adoption by the State of “plans” / “programs”, setting forth the ultimate goals to be achieved within the relevant deadlines

Approval of the balance sheets for the relevant time period (investments and

economic / social targets)

The freedom to perform a business activity and the right to work

_________________________________Article 4 of the Constitution

The Republic recognizes the right of all citizens to work and shall promote all conditions to make this right effective. All citizens have the duty, according to their possibilities and individual choice, to carry out an activity or a function […].

Article 38 of the Constitution

Every citizen unable to work and without the resources necessary to live has a right tomaintenance and assistance. Workers have the right to be provided with adequate means for their needs in cases of accidents, illness, disability, old age and involuntary unemployment.

• The right of ownership

Art. 41 to 47 of the Constitution_________________________________

Right of ownership: art. 42

- Property is either public or private. Economic goods belong to the State, to public entities or to private individuals.

- Private property is recognized and guaranteed by the law, which determines the ways it is acquired, enjoyed and the relevant limitations, in order to ensure its social function and to make it accessible to all.

- Owned goods may be expropriated, in the situations provided for by the law, for reasons of general interest, provided that appropriate compensation is granted.

- The law shall set out the rules and limits of legitimate and testamentary inheritance and the rights of the State in matters of inheritance.

Art. 41 to 47 of the Constitution_________________________________

- the law may not limit individuals’ ownership rights except for the ways it is acquired and enjoyed

- expropriation may not occur to deprive an individual of his/her ownership rights and to grant those to another individual: expropriation may be only aimed at ensuring achievement of public goals (public interest)

Art. 41 to 47 of the Constitution_________________________________

ownership: art. 832 of the Civil Code

The owner has the right to enjoy and dispose of things fully and exclusively, within the limits and in compliance with the obligations set out by the law.

Art. 41 to 47 of the Constitution_________________________________

ownership: art. 834 of the Civil Code

No one may be deprived of ownership unless for public interest reasons, provided that: (i) such reasons are acknowledged in accordance with the law; and (ii) adequate compensation is paid to the person to whom expropriation is addressed.

Art. 41 to 47 of the Constitution_________________________________

- ideally, the Constitution envisages ownership as a tool to promote / increase social welfare, not as something which is enjoyed by the owner only

- owned goods should be dynamically “oriented” to production / trade, they should not just statically held by the owner

Art. 41 to 47 of the Constitution_________________________________

- soil / natural resources should be exploited for production purposes in accordance with the social needs and public interest

- production should be organized in accordance with the need to harmonize social relationships

- minor undertakings should be encouraged: special care is taken for agricultural businesses (in particular those managing small pieces of land). Limitations may be imposed to the extension of land owned

Art. 41 to 47 of the Constitution_________________________________

public property: State-owned goods (“beni demaniali” and “beni patrimoniali")

They are set to meet a public/general need or interest

In certain cases, they may not be disposed of

They may not be diverted from their public destination

Art. 9 of the Constitution:

The Republic promotes the development of culture and scientific and technical research. It safeguards

the natural landscape and the historical and art heritage of the nation

Art. 41 to 47 of the Constitution_________________________________

public property is also subject to limitations: