FAQ: Commercial Law Germany–Italy

The law applicable to commercial contracts between German and Italian companies is determined by the Rome I Regulation (EC No. 593/2008), which applies directly in both Germany and Italy and enshrines the fundamental principle of freedom of choice of law – the parties may validly agree on German, Italian or any other law pursuant to Art. 3 Rome I.

Where no such choice-of-law clause exists, the Regulation connects in principle to the law of the habitual residence of the party required to effect the characteristic performance (Art. 4 Rome I) – in a contract of sale this is the seller, in a contract for services the service provider. In my advisory practice I therefore recommend including an express choice-of-law clause in every contract with an Italian party, as it avoids interpretative disputes about the applicable law from the outset and simultaneously allows the procedural law to be steered.

Both countries – Germany and Italy – have ratified the UN Sales Law (CISG), i.e. the Vienna Convention on Contracts for the International Sale of Goods, so that it generally applies automatically to cross-border contracts for the sale of goods between companies of both states, provided the parties have not expressly excluded it.

The CISG governs in particular the conclusion of the contract, the obligations of the parties, warranty rights and claims for damages, and as lex specialis takes precedence over the respective national substantive law – questions of the transfer of title or the validity of standard terms, however, remain within the domain of national law. From my advisory experience it should be noted that German standard terms frequently exclude the CISG, but such a clause only takes effect if it has been validly incorporated into the contract – otherwise the CISG applies without restriction.

In the B2B context, standard terms and conditions between German and Italian companies are in principle effective, but are subject to the incorporation requirements of both legal systems – under German law (§ 305 BGB) the party relying on its terms must expressly draw the other party's attention to them and give that party a reasonable opportunity to take note of them, while Italian law (Art. 1341 c.c.) treats standard terms as effectively incorporated if the other party knew them or ought to have known them applying the care required in commerce.

Of particular importance is the Italian rule on onerous clauses – so-called clausole vessatorie – which include, for example, exclusions of liability, unilateral rights of termination or jurisdiction clauses, and which under Italian law require a separate written approval in the form of a double signature. I therefore recommend that when using German standard terms vis-à-vis an Italian counterparty, both a translation into Italian be provided and the separate signing of the onerous clauses be ensured, in order to guarantee their validity under both legal systems.

Italian law provides for an ordinary limitation period of 10 years for commercial claims (Art. 2946 c.c.), which applies to most contractual claims, while claims in tort are subject to a shorter period of 5 years (Art. 2947 c.c.) – a remarkably long period by European standards.

By contrast, the standard German limitation period is only 3 years (§ 195 BGB), so that the choice of applicable law can have significant practical consequences particularly when enforcing older claims – where the parties have agreed on German law, the shorter German period applies. It should be noted that in Italy the limitation period can be effectively interrupted both by bringing an action – the notifica dell'atto di citazione – and by a registered letter of demand – the atto di costituzione in mora.

In the B2B context, both Germany and Italy are subject to the EU Late Payment Directive 2011/7/EU, which was implemented in Italy by decreto legislativo 231/2002 and establishes a uniform framework for payment discipline in cross-border commercial transactions – absent a contrary agreement, invoices must be settled within 30 days, although up to 60 days may be agreed contractually provided this is not grossly disadvantageous to either party.

From the first day after the due date, default interest automatically accrues at the ECB base rate plus 8 percentage points, and in addition the creditor may claim a minimum flat-rate amount of EUR 40 for recovery costs. In my advisory practice I recommend clearly specifying the due date on invoices addressed to Italian companies, formally notifying the default in writing and expressly claiming the statutory interest – this approach substantially strengthens the creditor's negotiating position in my experience.

Several instruments are available to a creditor for the enforcement of outstanding claims against an Italian company, each differing in suitability depending on the circumstances and the amount of the claim. As a first step, an extrajudicial letter of demand with a reasonable deadline – combined with the calculation of default interest from the first day of default – is advisable and in many cases already leads to payment. If payment is not forthcoming, a European Payment Order under the EuMahnVO may be applied for in respect of uncontested claims at the competent German court; once the period for opposition has expired, it is enforceable in Italy without any exequatur proceedings.

In addition, the decreto ingiuntivo – the fast and cost-effective Italian order for payment procedure – is available as a particularly efficient instrument, especially for claims arising from commercial and supply transactions. Finally, ordinary proceedings before the courts in Germany or Italy are also possible, with the Brussels Ia Regulation determining international jurisdiction. From my advisory experience, the decreto ingiuntivo is often the most effective instrument for amounts exceeding EUR 5,000 – particularly since provisional enforceability can usually be ordered immediately.

The decreto ingiuntivo – governed by Art. 633 et seq. c.p.c. – is the Italian court order for payment procedure and enables the creditor, on the basis of documentary evidence such as invoices, contracts and delivery notes, to obtain an enforceable payment order without the debtor being heard in advance. The court issues the payment order generally within a few weeks, whereupon the debtor has a period of 40 days after service to lodge an opposition – the so-called opposizione.

Of particular practical importance is the fact that in respect of claims arising from commercial and supply transactions, provisional enforceability – the esecutività provvisoria – is frequently ordered immediately, so that protective measures can be initiated before the conclusion of any opposition proceedings. If the debtor raises no opposition, or if the opposition fails, the payment order is declared definitively enforceable and enforcement proceedings can be commenced without delay.

Since the Brussels Ia Regulation (EC No. 1215/2012) entered into force on 10 January 2015, final judgments from EU member states are recognised in all other member states without prior declaration of enforceability – that is, without the exequatur proceedings formerly required – and may be directly enforced, which has substantially simplified cross-border debt enforcement.

A German judgment against an Italian company may be presented directly to the competent enforcement authority in Italy – the ufficiale giudiziario – the creditor being required to attach the complete judgment, a certified translation into Italian and, in certain cases, a certificate under Art. 53 Brussels Ia (Form I). Where the claim is uncontested or the judgment was given in default, the European Enforcement Order under the EuVTVO may alternatively be used, which enables a particularly expeditious enforcement procedure.

Italian law does not have a direct equivalent to the German Vermögensauskunft – the former sworn statement of assets – but does have functionally comparable instruments that enable effective ascertainment of the debtor's assets in enforcement practice.

First and foremost is the ricerca con modalità telematiche under Art. 492-bis c.p.c., which allows the enforcement officer to obtain information electronically about bank accounts, land register entries and other assets of the debtor from the central tax register – the Agenzia delle Entrate – and from other authorities. In addition, the pignoramento presso terzi – the garnishment order against a third-party debtor – is a particularly effective instrument for directly attaching the debtor's bank balances and receivables, especially where the debtor's banking details are known. Finally, the ipoteca giudiziale – the judicial compulsory mortgage – enables the registration of a security mortgage over the debtor's real property, which prepares a subsequent forced sale. In my advisory practice, the combination of electronic asset tracing and garnishment against third-party debtors has proved to be the most efficient enforcement strategy in Italy.

An arbitration clause in a commercial contract excludes the state courts from contractual disputes and refers the parties to a private arbitral tribunal, which can offer considerable advantages in cross-border commercial transactions between Germany and Italy as regards confidentiality, duration of proceedings and enforceability.

In the German-Italian context, the ICC – the International Chamber of Commerce in Paris – is particularly well suited for major international cases, while the CAM Milano – the Camera Arbitrale di Milano – is recognised especially for disputes connected with northern Italy and the Lombardy economy, and the DIS – the Deutsche Institution für Schiedsgerichtsbarkeit in Cologne – is particularly recommended where German law has been agreed. I recommend specifying in the arbitration clause both the arbitral institution and the seat of arbitration, as well as the number of arbitrators, the language of the proceedings and the applicable substantive law, since arbitral awards under the 1958 New York Convention are enforceable in both countries – and in more than 160 states worldwide.

For the commencement of permanent business activity in Italy, German companies have essentially three structures available, which differ fundamentally in terms of liability, tax treatment and operational flexibility. The branch – the sede secondaria or filiale – is not an independent legal entity, so that the German parent company bears full liability; it must be registered in the Italian commercial register, the Registro delle Imprese, and is particularly suitable for companies seeking a direct local presence without establishing a separate legal entity.

The most common choice for a sustained market presence in Italy is the incorporation of a subsidiary in the form of an S.r.l., which offers both limitation of liability to the share capital and independent legal personality – the minimum capital is EUR 1 by law, though in practice at least EUR 10,000 is advisable. There is also the option of a representative office – the ufficio di rappresentanza – which is suitable for market observation and promotion without independent sales activity and is more favourable from a tax perspective, but remains narrowly limited in its activities. The choice of the appropriate structure ultimately depends on the scope of the planned activities, the tax framework and the respective liability considerations.

Since 2008, the transfer of shares – the quote – in an S.r.l. mandatorily requires either notarial authentication in the form of an atto notarile or signature by an authorised dottore commercialista with subsequent electronic filing with the Registro delle Imprese; the assignment takes full effect only upon registration in the commercial register and has constitutive effect both vis-à-vis the company and vis-à-vis third parties.

Of considerable practical importance is the fact that the articles of association – the statuto – may contain transfer restrictions, in particular pre-emption rights of co-shareholders – the prelazione –, consent requirements – the gradimento – or a complete lock-up of the shares. These clauses must be carefully reviewed before any transaction, and in the case of cross-border transfers – for example from one German shareholder to another German shareholder in an Italian S.r.l. – the tax exemption under the German-Italian double taxation agreement must also be borne in mind.

Commercial agency law in Italy – the contratto di agenzia – is governed by Art. 1742 et seq. c.c. and the EU Commercial Agents Directive (86/653/EEC), and is further supplemented in important respects by the collective agreements – the Accordi Economici Collettivi, or AEC – of the relevant economic sector, which gives Italian commercial agency law a distinctive character by European standards.

Of central importance is first the termination indemnity – the indennità di fine rapporto – which the commercial agent is entitled to upon termination of the contractual relationship and which is calculated according to the applicable AEC rates; this entitlement cannot be effectively excluded by contract. In addition, the AEC provide for minimum notice periods which are frequently considerably longer than the corresponding periods under German commercial law (HGB), and the territorial protection of the commercial agent must be precisely defined by contract. In my advisory practice it is particularly important to note that in the case of a commercial agent operating in Italy, the mandatory termination indemnity under the AEC may apply as an overriding mandatory provision pursuant to Art. 9 Rome I, notwithstanding a choice-of-law clause in favour of German law.

The franchise agreement – the contratto di affiliazione commerciale – is governed in Italy by Law No. 129/2004, which in particular establishes comprehensive pre-contractual disclosure obligations on the part of the franchisor. The franchisor is required to deliver to the franchisee at least 30 days before signing the contract a complete disclosure document containing, among other things, information about the company's financial data, the operation of the franchise system, the number of existing franchisees and any current or past legal proceedings.

The contract itself must mandatorily be in writing and must provide for a minimum term of three years, unless there are serious breaches of contract. In particular in cross-border franchise agreements – for example between a German franchisor and a franchisee operating in Italy – it should be noted that the mandatory disclosure obligations of Legge 129/2004 may apply as overriding mandatory provisions pursuant to Art. 9 Rome I even where the parties have agreed on foreign law.