The Italian Superior Court of public waters – known as “Tribunale Superiore delle acque pubbliche (TSAP)” – finally declared the nullity of the clauses and of all the conventions that grant royalties in favor of municipalities, because they are detrimental to the freedom of enterprise, without contractual cause and, moreover, in contrast with the European Union legislation.

That common and unjustified practice consisted, in fact, in the negotiation of agreements with the municipalities, which had as its main purpose the diversion in their favor of a part of incentives that the Italian Government recognized for the production of clean energy, in exchange for the renunciation of such local authorities to dispute the location of installations.

The judgment relating to the nullity of the abovementioned clauses is contained in the ruling No. 23/2016 of the TSAP which, rejecting with the ruling No. 2120/13 the appeal introduced by one of the municipalities against the decision of the Piedmont Regional Tribunal of public waters which had condemned it to repay the sums already paid by an hydroelectric company, has finally stopped this improper and unjustified practice.

Although the question was specifically about an hydroelectric plant, the decision and the principles of the ruling are also applicable to photovoltaics, aeolian systems and more generically to all renewable sources: the common aim consists in fact in the assignment in favor of the municipality of incentives that the Italian Government recognizes for the clean energy production in return for the renunciation of such local authorities to dispute the location of installations.

The decision represents a significant breakthrough for the renewable energy sector, an area in which frequently happens that operators are imposed clauses, not otherwise permitted by law, which require the payment of royalties in favor of local communities or the payment of substantial sums, even if detached from real production.

The national indulgence, frequent in the past, toward these unscrupulous and distortive practices of the Italian legal system, which are clearly in contrast with incentives, had the effect of confusing and destabilizing potential foreign investors.

The administrative justice has therefore restored the primacy of regulatory prohibition against the constant practice to which operators have been subjected for a long time also due to their financial difficulties: the ruling at hand has in any case confirmed that municipalities may not divert incentives aimed at achieving objectives of supranational industrial policy.