All questions

Private enforcement

i Forms of action

Security claims may be brought before ordinary civil courts. The relevant procedural traits are outlined below in Section II.ii.

The heads of liability of most security claims are as follows.

Liability for breaches of the rules of conduct imposed on financial intermediaries

In the context of their activity, financial intermediaries shall abide by the general principle of good faith, which constitutes a basis of the Italian legal framework governing contracts.

In addition, intermediaries shall comply with the standards of due diligence, fairness and transparency set forth by Article 21 of the Consolidated Law on Finance, and with the 'know your customer' or 'suitability' rules – as implemented by the subsequent CONSOB regulations – to protect the investor's best interests and to ensure that they are actually provided with adequate and correct information. As a consequence, financial intermediaries are to be held liable for damages occurring to the investor due to breaches of their obligations, either on a pre-contractual or contractual basis, depending on whether the damage arises before or following the execution of the relevant investment agreement.

Liability for wrongdoings by credit rating agencies

Pursuant to Article 35-a of Regulation (EC) No. 1060/2009 of the European Parliament and the Council of 16 September 2009 on credit rating agencies, as subsequently amended by Regulation (EU) No. 462/2013, rating agencies shall be held liable for the damages incurred by investors and issuers on the basis of a credit rating affected by the rating agency's gross negligence or wilful infringement.

Liability for the wrongdoings of directors

Pursuant to Articles 2395 and 2396 of the Italian Civil Code, directors or general managers shall be held liable for the damages incurred to shareholders and third parties as a consequence of their wilful misconduct or negligence.

The above claim may be particularly complex in terms of burden of proof, as the plaintiff is required to give evidence that the damage suffered is not a mere reflection of the damage suffered by the company (by way of example, the damage arising from the write-off of financial investment caused by the mismanagement conducts carried out by the administrative body).

Liability for the failure to propose mandatory takeover bid

Pursuant to Article 106 of the Consolidated Law on Finance, anyone who, following acquisitions or increased voting rights, has a 30 per cent shareholding or more than 30 per cent of the voting rights of a company, must propose a mandatory takeover bid to buy the entirety of the securities related to the same company admitted for trading on a regulated market. As a consequence, in the event of failure to propose the mandatory takeover bid, security shareholders may seek compensation for damages that, according to recent case law, shall be considered as contractual in nature (see Supreme Court, Judgment No. 20560/2015).

Prospectus liability

Pursuant to Article 94, Paragraph 8, of the Consolidated Law on Finance, the issuer, offeror or guarantor or any other person or entity responsible for the information contained in the prospectus, shall be held liable, within the limits of their duties, for the damages suffered by an investor who has reasonably relied on the truthfulness and completeness of the information contained therein.

In addition, pursuant to Article 94, Paragraph 9, of the Consolidated Law on Finance, liability for false information or omissions that are likely to influence the decisions of a reasonable investor may also lie with the intermediary responsible for the securities' placement. The issue of whether prospectus liability claims are contractual, pre-contractual or tortious in nature has been a much-discussed item among scholars and in case law. In this respect – although most recent decisions tend to recognise the tortious nature of prospectus liability – it is important to consider that the relevant framework provided by the Consolidated Law on Finance ultimately makes this debate less crucial, as it is expressly provided that (1) the statute of limitation is five years, which is typical of tortious claims; and (2) with regard to the burden of proof, the defendant is considered liable unless he or she proves that due diligence was adopted to ensure that the information was consistent with the real situation and did not contain omissions capable of affecting its meaning. Such shifting of the burden of proof is typically observed in contractual claims under Italian law.

Liability for the lack of diligence of the auditing companies

Pursuant to Article 15 of Legislative Decree No. 39/2010, auditing companies shall be held liable, jointly with the person in charge of the auditing activities, for the damages suffered by the commissioning company, their shareholders and third parties, as a consequence of their failure to observe due diligence in the execution of their duties.

Liability for the failure to perform the duty of supervision of the supervisory authorities

Supervisory authorities might be held responsible for the losses incurred by the investors also due to their failure to perform their duty of supervision. The authorities' liability is by nature in tort.

Depending on the circumstances, the claim may be brought by the claimant either on an individual basis or through a class action, which was introduced in the Italian legal system nearly 10 years ago. Pursuant to Articles 139–140 bis of the Consumers Code (Legislative Decree No. 206/2005), referred to in Article 32 bis of the Consolidated Law on Finance, consumers or users may collectively advance a claim if they hold homogenous positions with respect to the same offence carried out by the same enterprise.

Owing to the scarce use of class actions by Italian consumers in recent years, the Italian legislator recently intervened with a general and overall reform of class actions.

Articles 139–140 bis of the Consumer Code have been replaced by Law No. 31/2019, which entered into force on 19 May 2021, as set forth by Law Decree No. 137/2020, converted with amendments by Law No. 176/2020.

Among the most relevant amendments that the repealing act introduced in the class action regulation, it is worth mentioning that (1) both physical persons and companies are entitled to bring class actions claiming a breach of homogeneous individual rights; (2) both contractual and tort liability are enforceable through the new class action; and (3) from a procedural point of view, conduct of the action through the fast-track summary proceedings provided under Article 702 bis of the Italian Code of Civil Procedure has been introduced. Similarly, the new regulation shapes the class action on an opt-in based model.

For the sake of the clarity, it is worth mentioning that Italy will have to implement Directive (EU) 2020/1828 of the European Parliament and of the Council of 25 November 2020 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC by 25 December 2022. Therefore, it is likely that Law No. 31/2019 will be at least partially amended or integrated in order to have the provisions of the Directive transposed into the Italian judicial system.

ii Procedure

No special features exist in the Italian legal system for proceedings regarding security claims brought before the ordinary civil courts. The procedure set out by the Italian Civil Procedural Code shall apply.

Claims are handled by local courts in the first instance and the Court of Appeal in the second instance. Proceedings before the Supreme Court may be brought only with the limited scope of claiming a failure in the correct application of law by the lower courts.

Before commencing a security claim concerning insurance, banking and financial agreements, the parties shall start the mandatory mediation procedure pursuant to Article 5 of Legislative Decree No. 28, dated 4 March 2010. Such a step is held to be a procedural requirement; as a consequence, lacking fulfilment of the mediation stage, the judge grants the parties a 15-day compliance period.

If the mediation procedure is not successful or if the claim does not fall under the list provided by Article 5 of Legislative Decree No. 28/2020, the security claims shall directly follow the ordinary path set forth by the Italian Code of Civil Procedure.

Ordinary proceedings are commenced with the plaintiff serving the initial complaint upon the respondent at least 90 days prior to the proposed date for the first hearing (this term is extended to 150 days if the defendant is located outside the Italian Republic). The above term is mandatory, it being established by the Civil Procedural Code to put the defendant in a position to duly present its case.

After the first hearing, the judge issues the parties with deadlines to file the three briefs pursuant to Article 183 of the Italian Code of Civil Procedure, in which the parties can provide further consideration on the merits and evidence requests and form a reply, arguing any evidence.

Once the investigation phase is completed and the judge considers the case ready to be decided, the parties are granted 60 days and 20 days for the filing of the final briefs and reply briefs respectively. The judgment is then issued within the following 60 days.

Given the above, there are some peculiarities that should be taken into account when dealing with Italian law procedure.

First, based on the general principles governing evidence under Italian law, the burden of proof depends on whether the claim in question is contractual or tortious in nature.

If the claim is contractual in nature, while the plaintiff is only required to claim that the defendant has not complied with the agreement, the defendant shall give evidence that it has duly performed its obligations; on the other hand, should the claim be tortious in nature, the plaintiff shall be requested to prove:

  1. the wilful or negligent conduct of the defendant;
  2. the damage suffered; and
  3. the causal link between the conduct and the damage.

However, besides the general principles described above, specific burden of proof provisions might be provided by the applicable laws governing security claims. Such exceptions are based, to a large extent, on the proof–proximity principle, and tend to allocate the evidential burden to the party to whom the evidence is available or who is better situated to easily lead it. By way of example, so far as damages deriving from the failure to propose the takeover bid are concerned, the plaintiff shall not prove the causal link referred to under point (c) above, but will only be required to prove its security-holder status at the time when the takeover bid should have been proposed and the loss of profits arising from the failure to propose the takeover bid.

Second, under Italian law the statute of limitation is 10 years for contractual liability and five years for liability in tort. However, if the breach also amounts to a crime (e.g., insider trading or market manipulation) and the applicable criminal law provides for a longer statute of limitation, then the longer criminal statute of limitation shall apply to civil actions.

The statute of limitation period cannot be extended or shortened by the parties, but in some cases set forth by the law it can be suspended or interrupted by the interested party.

Third, no disclosure phase is provided for by the Italian procedural system. Parties are generally free to choose which documents they need to file within the proceedings for presenting their cases.

However (and although this can in no way be compared to the document production carried out under the disclosure phase of common law proceedings), Article 210 of the Italian Code of Civil Procedure provides that the judge, upon the request of a party, may order the other party or a third party to produce documents or evidence deemed necessary for the proceedings.

iii Settlements

Generally speaking, the Italian Code of Civil Procedure provides that the judge, upon joint request of the parties, or by his or her own motion, may summon the parties to encourage them to settle the dispute.

In addition, as mentioned in Section II.ii, claims concerning insurance, banking and financial agreements are subject to the mandatory mediation procedure, pursuant to Article 5 of Legislative Decree No. 28/2010.

Furthermore, alternative dispute resolution mechanisms are provided by the applicable legislation. To elaborate on this point, in 2009 the Banking and Financial Arbitrator was established at the Bank of Italy, which is responsible for litigation concerning operations or banking and financial services. Starting from 1 October 2020, disputes concerning the payment of a sum of money may fall under its jurisdiction within a maximum cap of €200,000.

The Banking and Financial Arbitrator operates through a board comprising five members: the President and two members chosen by the Bank of Italy, one by the intermediaries' associations and the last one by the associations representing the clients (business and consumers).

The decisions made by the board are not binding (as the judicial ones are), but the breach can be made public (e.g., on the Banking and Financial Arbitrator website). After the decision, the interested party may still resort to the ordinary court.

As of January 2017, retail investors' claims against intermediaries' breach of their duties of diligence, correctness, information and transparency in providing investment services or activities, may be brought before the Financial Disputes Arbitrator at CONSOB. The investor can file a petition with the Financial Dispute Arbitrator, if:

  1. he or she has already sent a complaint to the intermediary;
  2. the intermediary did not answer during the following 60 days;
  3. no more than a year has passed after the complaint under point a above;
  4. the requested amount by the intermediary is not higher than €500,000; and
  5. there are no other alternative dispute resolutions pending with regard to the same facts.

The Financial Disputes Arbitrator operates through a board comprising the President, nominated by CONSOB, and four other members, two of which are appointed by CONSOB and two by the most representative consumers and intermediaries associations. After the decision of the board, the interested party may still resort to the ordinary court.

In March 2020, the Bank of Italy and CONSOB signed a memorandum of understanding to ensure cooperation between the Banking and Financial Arbitrator and the Financial Disputes Arbitrator. In the implementation of the agreement between the Bank of Italy and CONSOB, the first forum was held in November 2021.

As far as legal fees are concerned, Ministerial Decree No. 55/2014 sets forth certain guidelines for the quantification of the fees in litigation cases on a claim value basis. In the case of a dispute settlement, the value of the claim to be taken into consideration to quantify the legal fees shall be the value initially specified in the claim and considered at the initial time of the dispute, and not the sum actually obtained by the client, as recognised by the Supreme Court recently (Judgment No. 20547/2019).

However, attorneys are free to agree with their clients fees that they deem more appropriate. Article 13, Paragraph 8, of Law No. 247, dated 31 December 2012, provides that in the event of settlement of a dispute by means of agreements made in any form, the parties shall be jointly and severally liable to pay compensation and reimburse expenses to all the lawyers engaged in the preceding three years and to outstanding creditors, unless they expressly waive the benefit of solidarity.

iv Damages and remedies

As a general rule, parties are allowed to seek compensation for the damages incurred. These damages should be calculated on the basis of the actual damage suffered, corresponding to the actual loss and loss of profit.

Punitive damages are not allowed in the Italian legal system. Nevertheless, a recent judgment of the Supreme Court (No. 16601/2017) ruled on the admissibility of the enforcement in Italy of punitive damages granted in foreign decisions, provided that the punitive damage cases are sufficiently predictable as well as the conditions in which it they might be awarded.

Apart from compensation for damages, parties can seek the following remedies:

  1. voidance of the contract in cases of defects affecting the structure of the agreement;
  2. annulment of the agreement in cases of fraudulent consent; and
  3. termination of the agreements in cases of breach of the obligations specified therein.