The spread of COVID-19 in Italy (a wide legal approach)

Our firm is committed to keep the pace of the situation related to COVID-19 and to monitor the events and their impact on our profession and the assistance we owe to our clients.

Global situation

National and local authorities have adopted a host of measures which we have listed in annex.

For the purposes hereto, it is worth noting that – among these measures – President of the Council of Ministers Decree of 1 March 2020, colour-coded certain geographical areas in Italy based on the severity of the spread of the virus and imposed accordingly-strict measures within those areas (Red Zone, Yellow Zone and Green Zone). This measure has been in part repealed by the very last one as adopted by the President of the Council of Ministers Decree on 9 March 2020 (the Decree) valid for the entire country, which has - inter alia - subjected the entire national territory to further stricter measures aimed at halting and mitigating the spread of the virus by severely limiting the movement of people throughout the nation and the opening of commercial activities and public institutions and places. The Decree is currently valid from 10 March 2020 to 3 April 2020.

Legal issues

A - commercial contracts

It is necessary to understand on a case-by-case basis whether a contract can be terminated, or its performance can be lawfully suspended – with no liability arising – when the current coronavirus emergency situation prevents a contractual party or both parties from performing some or all of their obligations under a contract.

Given the natural absence of a “one size fit all” general rule, the general common element is that the current COVID-19 emergency scenario can quite undoubtedly be classified as an “impossibility” event, as such, entitling the temporary suspension or the definitive termination of a contract based on the application of the provisions mentioned above.

Keystone provision in the Italian contractual frame is section 1218 of the Italian Civil Code which provides that the debtor which does not exactly perform its obligation shall pay damages to the other party unless it is able to prove that the lack or delayed performance is not attributable to the debtor itself.

The focus is therefore precisely on the impossibility of one or both parties to perform their obligations under a contract due to supervening factual and/or legal obstacles.

Taking into account agreements regulated by Italian law, main reference shall be made in the provisions concerning the (definite or temporary) supervening impossibility to perform a contract (Article 1256 and ff and Article 1463 and ff of the Italian Civil Code).

According to such provisions (art. 1256) an obligation terminates in case the performance thereof becomes definitely impossible for a reason not attributable to the debtor. If the impossibility is temporary, the debtor shall not be liable under the contract as long and for the entire duration of the impossibility, however the obligation terminates when – based on the nature of the contract – the impossibility persists so that the debtor shall not be further required to perform its obligation, or the other party has lost its interest in such performance. In bilateral contracts the party discharged from its obligations due to the supervened impossibility is not entitled to request the performance of the counter-obligation and shall return the one it might have already received (art. 1463).

In this framework it is also useful to recall section 1467 of the Italian Civil Code (eccessiva onerosità sopravvenuta) according to which, in continuing basis contracts, the party whose obligation has become excessively onerous due to extraordinary and unforeseeable event (e.g. a COVID-19 alike situation) is entitled to request the termination of the agreement. Specific cases have been already taken into account by the new legislative provisions¹.

Dealing with commercial contracts and situations, we need to take into consideration the "force majeure" as an element potentially discharging a party from its contractual obligations. This because the current emergency scenario in many cases very much entails the “force majeure” features.

Practical suggestions when dealing with written agreements – whether or not regulated by Italian law – include ascertaining whether a "force majeure" clause exists in the contract. If it does, it should be understood whether the clause expressly includes pandemics or, in any case, whether it allows the enforcement of the provision in the current coronavirus situation.

In any case, and also where no written agreement – or express force majeure clause – exists, it is likely that a party that is unable to (definitively or temporarily) perform its obligations under a contract would be entitled to claim the current situation to handle its inability to perform under the contract.

B - employment and management

The Decree adopted the following measures to safeguard public health and safety. Security measures:

• individuals are strongly recommended to limit any movements to cases in which this is strictly necessary;
• avoid individuals’ movements, except for;
  • proven employment needs;
  • situations of necessity; and
  • health reasons.

Individuals are allowed to return to their residence if elsewhere.

Recommendations:

• employees should work from home where possible, given the temporary simplified procedure to communicate these arrangements to the labour authorities until 31 July 2020 (subject to changes);
• if employees cannot work from home, the decree recommends that employers have employees stay home by using the employees’ holiday leave;
• if neither of the above solutions is feasible:
  • employers can issue a statement certifying the reasons why the employee is required to travel to any degree, indicating:
    (a) the employee’s type of duties/work;
    (b) the workplace and/or place where the employee needs to travel for work (eg customers, suppliers);
    (c) the employee’s working hours; and
    (d) why the employee cannot perform these tasks remotely.
  • as an alternative to the employer statement, the employee can sign a personal statement justifying his/her need to travel for work or health reasons; and
  • employers must guarantee health in the workplace (e.g. by sanitising offices) and the safety of its employees (e.g. avoiding meetings and business travel where possible).

It is strongly recommended that individuals with symptoms of respiratory infection and fever (higher than 37.5°C) stay home, limit social interaction as much as possible, and contact their doctor.
Recommendations: employees who have the above symptoms will be placed on sick leave.

Individuals who have been placed on quarantine or have tested positive for the virus are absolutely forbidden from leaving their homes.
Recommendations: employees who have the above symptoms will be placed on sick leave.

Businesses:

• Weekends: closure for large-scale businesses, businesses in shopping centres, and markets.
• Weekdays: business is allowed, as long as they can guarantee that customers:
  (i) avoid congregating; and
  (ii) maintain a safe distance from one another (at least one metre).

The following is also expected:

• closure of businesses that, due to structural or organisational reasons, cannot guarantee compliance with the 1-metre rule; and
• penalties/closure for businesses that fail to comply.

Recommendations: retail sector: shops must adopt procedures and measures to control how many customers enter shops and that guarantee that customers respect the 1-metre rule.

Anyone who, over the 14 days prior to the date the decree was published (9 March 2020), entered Italy after having been in an at-risk area must inform the prevention department of the local health authorities and their doctor.

Businesses – business must adopt measures to guarantee that customers:
(i) avoid congregating; and
(ii) maintain a safe distance from one another (at least one metre).

Penalties:
Failure to comply with the decree is punishable with up to three months of prison and a fine of up to €206 (Article 650 of the Italian Civil Code), with more severe penalties being applicable based on the nature of the infraction.

C - data protection

On 2 March 2020, the Italian Data Protection Authority (Garante per la protezione dei dati personali) stated that employers must not collect information from employees, clients, and suppliers or conduct investigations regarding coronavirus symptoms that these parties or their close contacts experience.

Only authorised institutional parties – eg health workers and civil defence – can collect the information necessary to help prevent the spread of the coronavirus.

Although employees have a general obligation to inform their employers of any situations that could affect health in the workplace – which naturally includes communicating coronavirus symptoms – how should employers in Italy safeguard health in the workplace, especially in the midst of the expanding coronavirus epidemic?

A practical suggestion is to provide a privacy notice at the entrance of the offices, which:

1. informs employees about the current health emergency and encourages “smart working”;
2. prohibits access to those who arrive from the red-zone territories or those who have been in contact with people resident in those territories; and
3. informs employees about the need to notify to competent authorities with any changes in the "biological risk" deriving from the Coronavirus, together with the other mandatory requirements regarding health surveillance of employees through the occupational physician, with the possibility of subjecting the most exposed employees to an extraordinary examination.

Another precaution could be the supply of a thermometer to employees who would be enabled to take their temperature and evaluate to leave the office and work from home. In such a scenario, the employer could not access these data and/or oblige employees to stay at their homes to safeguard data protection rights.

D - criminal aspects and 231 model

Companies that fail to adopt suitable security measures to safeguard their employees’ health in the midst of the coronavirus emergency can be held liable criminally under Legislative Decree No. 231/2001. To avoid this risk, it is essential that they have adopted a suitable 231 Organisational Model, with this model including the implementation of appropriate prevention measures proportional to existing risks.

During health crises – such as the current coronavirus emergency, given the high risk of contagion – companies must do the following:

• draw up, with the support of the doctor in charge of the medical surveillance and the Protection and Prevention Service Manager (RSPP), a risk evaluation on potential exposure to biological hazards (Article 271 of Legislative Decree No. 81/2008) and to identify the prevention measures that concretely exclude or limit the risk for employees;
• implement the above measures (eg by having employees use gloves, disinfectant soaps, masks, or by allowing telecommuting);
• make reference, in the 231 Model/risk evaluation document (DVR), to the specific risk evaluation carried out and the preventive measures adopted;
• ensure increased hygiene in the workplace; and
• inform employees and workers of the risks and adopted measures (Article 36 Legislative Decree No. 81/2008).

It is also recommended that:

• the competent company departments and supervising bodies (eg Compliance and Internal Audit departments, board of directors, 231 supervisory board - ODV) continuously supervise compliance with the prevention measures;
• employees and workers be completely and timely informed, also through paper or online brochures that illustrate the adopted prevention measures;
• the information that is given to employees be continuously updated, also by referencing the Ministry of Health’s dedicated webpage;
• companies subject to high risk (eg with frequent contact with the public) evaluate the possibility of implementing specific internal procedures for the adoption of specific measures against coronavirus as well as procedures to provide information regarding and supervision of the measures;

Companies make extremely clear that failure to comply with government measures and those taken by the company can result in disciplinary measures.

E - Litigation (commercial)

On 8 March 2020 Law Decree No. 11 has set out additional extraordinary measures for the functioning of civil justice which are applicable on the whole territory of the State.

Since 9 March 2020 until 22 March 2020 proceedings before civil Courts are suspended. This means that:
(a) all hearings (with the exception of those related to urgency proceedings) scheduled within this time frame shall be re-scheduled on a date after 22 March 2020; and
(b) procedural terms and deadlines expiring between 9 March ad 22 March 2020 are postponed to 23 March 2020 and if a term or deadline is supposed to start running between 9 March and 22 March 2020, it will start running on 23 March 2020.

In addition, the head of each office may adopt additional measures to ensure the safety of all involved in proceedings before national courts. This may include the followings:

• re-scheduling all hearings already scheduled between 9 March and 22 March 2020 to a date after 31 May 2020;
• organizing all hearings where the physical attendance of subjects other than the parties and their lawyers is not necessary to be held by remote connection; and
• cancelling all hearings where the physical attendance of subjects other than the parties and their lawyers is not necessary and their substitution with the exchange of written pleadings and submissions.

We also flag that the Italian association representing the legal profession (Organo Congressuale Forense) issued a resolution back on 4 March 2020 recommending that lawyers and judges avoid attending hearings and any other court-related activity from 6 March 2020 to 20 March 2020.

In any case, in a litigation scenario and also considering that we expect the government to issue additional decrees/regulations in the next weeks, for the time being, we suggest, if feasible, to carry out court activity as usual, even more so in relation to activities necessary to avoid forfeitures and time-barring.

Tax issues

The Italian Government has issued the following special tax-related measures amidst the spread of Covid-19, with these measures aiming to relieve the tax burden on individuals and corporate taxpayers due declining revenues and difficulty in making tax payments in an uncertain economic context:
(i) Ministerial Decree of 24 February 2020, whereby tax compliance deadlines and tax payments are suspended in specific zones of the Italian territory (the Affected Territories) ²:
(ii) Law Decree No. 9/2020³, whereby special tax measures concerning tax compliance and tax payments were introduced and apply: (a) to the Affected Territories, and (b) to the entire Italian territory; and
(iii) Law Decree No. 11/2020, containing special measures concerning tax proceedings.

Tax measures that apply to the Affected Territories⁴

Ministerial Decree of 24 February 2020 applies to individuals and legal entities with residence, registered offices, or operational headquarters in the Affected Territories as at 21 February 2020, with the following tax measures being adopted:

• deadlines to meet tax compliance obligations and pay taxes (e.g. periodic VAT settlement communications concerning Q4 2019 and VAT balance payments) from between 21 February 2020 and 31 March 2020 are suspended. However, these payments must be made in a single instalment by 30 April 2020;
• withholding agents are not required to apply withholding tax, mainly relating to employee income, from 21 February 2020 to 31 March 2020;
• deadlines relating to tax payment notices (cartelle di pagamento), assessment notices, and payment terms applicable to the scrapping of tax bills (rottamazione delle cartelle) falling between 21 February 2020 and 30 April 2020 are suspended. However, these payments must be made in a single instalment by 31 May 2020;
• deadlines to pay social security contributions and compulsory insurance premiums and due between 23 February 2020 and 30 April 2020 are extended until 1 May 2020 (with the possibility of paying in up to five equal months instalments); and
• the deadline to pay chamber of commerce registration duties is extended up to 31 May 2020.

Italy-level tax measures

Law Decree No. 9/2020 also introduced tax measures that apply to the entire Italian territory:

• tax calendar amendments introduced through Law Decree No. 124⁵ were brought forward to 1 January 2020 instead of 1 January 2021;
• the deadline to provide the Italian tax authorities with the form for each employee that shows remuneration, withholding tax, and tax deductions applied (certificazione unica) is extended to 31 March 2020;
• the deadline for third parties (e.g. banks, insurance companies, social security institutions, universities) to provide the Italian tax authorities with data to be included in taxpayers’ pre-completed tax returns is extended to 31 March 2020;
• pre-completed tax returns will be available to taxpayers on the Italian tax authority’s website on 5 May 2020; and
• pre-completed tax returns (730 form) must be filed with Italian tax authorities by 30 September 2020.

Law Decree No. 9/2020 also introduced specific tax measures to protect the tourist sector from a potentially huge decline in revenues due to decreased travel in this period. The new rules apply to tourism-oriented businesses, travel agencies, and tour operators in Italy, which will see certain tax deadlines suspended from 3 to 30 April and in particular with reference to:

• payments of withholding tax (mainly) relating to employee income; and
• payments of social security contributions and compulsory insurance premiums.

These payments must, however, be paid in a single instalment by 31 May 2020.

Law Decree No. 11/2020 also introduces specific measures that apply to the entire Italian territory with reference to tax proceedings:

• hearings regarding tax proceedings pending as at 9 March 2020 before all judicial offices are postponed until 22 March 2020; and
• deadlines to complete any steps concerning pending tax proceedings are suspended until 22 March 2020.

Annex 1

Measures

As at today’s date, the Italian national and regional governments have adopted the following emergency measures to contain the spread of COVID-19 (coronavirus) in Italy:

• Law Decree No. 6 of 23 February 2020, “Urgent measures to contain and manage the COVID-19 epidemic”;
• President of the Council of Ministers Decree of 23 February 2020, “Provisions implementing Law Decree No. 6 of 23 February 2020 setting out urgent measures to contain and manage the COVID-19 epidemic”;
• President of the Council of Ministers Decree of 25 February 2020, “Additional implementing provisions of Law Decree No. 6 of 23 February 2020 setting out urgent measures to contain and manage the COVID-19 epidemic”;
• President of the Council of Ministers Decree of 1 March 2020, “Additional implementing provisions of Law Decree No. 6 of 23 February 2020 setting out urgent measures to contain and manage the COVID-19 epidemic”;
• Law Decree No. 9 of 2 March 2020, “Urgent measures in support of families, employees and businesses affected by the COVID-19 epidemic”;
• President of the Council of Ministers Decree of 4 March 2020: “Additional implementing provisions of Law Decree No. 6 of 23 February 2020 setting out urgent measures to contain and manage the COVID-19 epidemic applicable on the whole territory of the State”;
• President of the Council of Ministers Decree of 8 March,2020: “Additional implementing provisions of Law Decree No. 6 of 23 February 2020 setting out urgent measures to contain and manage the COVID-19 epidemic”;
• Law Decree No. 11 of 8 March 2020 “Extraordinary and urgent measures to contrast the epidemic emergency of COVID-19 and to limit its negative effects on the administration of justice”; and
• President of the Council of Ministers Decree of 9 March,2020: “Additional implementing provisions of Law Decree No. 6 of 23 February 2020 setting out urgent measures to contain and manage the COVID-19 epidemic”.

Local ordinances have also been issued for the following colour coded zones:

‘Red Zone’:

• Ministry of Health Ordinance of 21 February 2020 in agreement with the President of the Lombardy Region

‘Yellow Zone’:

• Ministry of Health Ordinance of 23 February 2020 in agreement with the President of the Lombardy Region;
• Ministry of Health Ordinance of 23 February 2020 in agreement with the President of the Veneto Region;
• Ministry of Health Ordinance of 23 February 2020 in agreement with the President of the Emilia Romagna Region;
• Ministry of Health Ordinance of 23 February 2020 in agreement with the President of the Piedmont Region; and
• Ministry of Health Ordinance of 23 February 2020 in agreement with the President of the autonomous region of Friuli Venezia Giulia.

‘Green Zone’:

• Ministry of Health Ordinance of 23 February 2020 in agreement with the President of the Liguria Region;
• Contingent and urgent presidential order of 23 February 2020 of the autonomous province of Bolzano; and
• Contingent and urgent presidential order of 22 February 2020 of the autonomous province of Trent.

See our Coronavirus (COVID-19) feature for more information generally on the possible legal implications of COVID-19.

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¹ Operatively Law Decree No. 9/2020 has introduced, among others, the following provisions:

• reimbursement, under Article 1463 of the Italian Civil Code, of tickets for travel (eg via air, seat or rail) and tourist packages in all cases listed under section 28 of Law Decree No. 9/2020;
• suspension of terms of payment of duties and/or penalties due to the chambers of commerce in the municipalities included in the Red Zone;
• suspension of payments of insurance premiums;
• suspension and rescheduling of payment plans for utilities (energy, environment, etc.); and
• ordered the suspension of the terms to fulfil contractual obligations for persons residing or based in the Red Zone from 22 February 2020 to 31 March 2020, with these terms starting back up again at the end of the suspension period.

² Under Prime Minister Decree of 1 March 2020, the areas included are: (i) Bertonico; (ii) Casalpusterlengo; (iii) Castelgerundo; (iv) Castiglione D'Adda; (v) Codogno; (vi) Fombio; (vii) Maleo; (viii) San Fiorano; (ix) Somaglia; (x) Terranova dei Passerini in Lombardy, and (xi) Vò Euganeo in Veneto.
³ Law Decree No. 9/2020 must be converted into law by the Italian Parliament within 60 days of the date of its publication in the Official Gazette of the Republic of Italy.
⁴The Italian government is expected to issue a further decree amending the adopted measures and possibly covering other Italian territories.
⁵ Of 26 October 2019, converted with amendments into Law No. 157 of 19 December 2019.