Art. 42, entitled “Conflict of Interest”, states that “The conflict of interest arises when the personnel of a contracting authority or a service supplier, even on behalf of the contracting authority, intervenes in the conduct of a procurement or award procedure or can in any way influence the outcome and has, directly or indirectly, a financial interest or any other personal interest that can be perceived as a threat to his impartiality and independency in the procurement and concessions procedure”.

Said Article, clear transposition of Art. 24 of Directive 2012/24/EU, breaks new ground in the new Procurement Code (Legislative Decree 50/2016). Its extent has not yet been assessed, because it is not clear what the legislator meant by ‘perceived threat’ or ‘intervention’ in a procurement procedure.

The ruling is the first decision of the Italian Council of State on the subject and results from the appeal against a sentence of the Regional Administrative Court of Pescara (I° 9/1/2017, n. 21). The Court was consulted on the case of an insurance company that won a tender for the provision of insurance services to a transportation company. In fact, it was found that the brokerage firm responsible for drawing up the tender acts, had ‘corporate and family ties’ with the insurance company that got the contract.

The Regional Administrative Court has therefore questioned these ‘ties’, in accordance with Art. 42 and challenged its non-abstention from the tender procedure, that was actually performed by one of ‘its’ brokers. As a result, the Court annulled the award decision.

The insurance company appealed against the decision of the Court, arguing that the preconditions referred to in Art. 42 were not met, since there was no relationship of dependency between the two and the broker could not count as company ‘personnel’.

However, the Council of State confirmed the judgement of the Administrative Court, stating that Art. 42 of the new Code should be interpreted as in subparagraph 2: “The situations that create a conflict of interest are, in particular, those that entail an obligation to abstention under the Presidential Decree no. 62 of 16 April 2013”. Said Decree states: “The employee shall not take part in the decision making, nor in activities that may involve their personal interest […] or people whom they regularly frequent […] with whom they have severe hostility or a credit or debit relationship […] or [if he is] CEO, director, manager of institutions, non-recognized associations, committees, companies, or factories [...]”.

In other words, the term ‘employee’ used in Art. 7 together with the phrase ‘in particular’, shall mean that there is certainly conflict of interest when the actor is an employee of the Public Administration.

Furthermore, the use of the phrase ‘in particular’ broadens the scope of said restriction. The phrase ‘personnel of a contracting authority’ shall be understood as not merely limited to employees, “but also to those who, based on a legal title (legislative or contractual) [.] for reasons of fact or of law, play such a significant role, that they could objectively influence its [the company’s] external activity”.

Accordingly, Art. 42 certainly applies to ‘employees’, but even more so to the governing bodies (managers and directors), who can undoubtedly affect the activities of companies and public authorities and trigger those situations of conflicts of interest that are sanctioned by the law.