National security in national and international investment law: the case of Italy

Over the last decade, several States introduced or expanded legislation regarding the protection of national security interests vis-à-vis foreign investment, mostly adopting a selective approach toward inward FDIs. In the EU, Italy has been at the forefront of such trend, arguably in light of the increased FDI flows into strategic sectors such as high-tech, agriculture and transport. Accordingly, Italy currently maintains both a relatively tight FDI screening procedure and a strict interpretation of the concept of ‘national security’. This latter has evolved significantly under Italian law over the past decade, partly to align to technological and geopolitical developments. When the notion of ‘golden powers’ was introduced, in 2012, next to that already existing of ‘golden shares’, it resulted at first in a definitory seism over the relevant Italian legal framework, with debate spurring for some time regarding the interpretation of core notions (and their combination) such as ‘activities’ of ‘strategic importance’ for the ‘national defense’ and ‘security system’. However, the golden powers regime has been gradually equipped with legal instruments that filled the existing gaps, at the price however of an arguably cumbersome legal framework. Nevertheless, the concept of national security in Italy remains broad, with great discretion of the government to exercise its golden powers. Arguably because of this, in recent years the number of notifications and proceedings under the golden powers’ legal framework has increased dramatically. Conversely, in the Italian international treaty practice, including the 2003 update of Italy’s model Bilateral Investment Treaty (BIT), the national security provision has become broader. In conclusion, while the balance between national security concerns and an agile business legal framework may not yet be fully attained, the latest updates of the law demonstrate a positive trend in this regard.