The Italian economy has been among the fastest in Europe to react positively to the continuing crisis. Whilst only time can tell if this will hold true or not, this will strike many as somewhat surprising, since the Italian economy is generally regarded as the “chronically ill” region of the Eurozone. “But, at times, one should rather think of the Imaginary Invalid, after Molière’s play”, says Enrico Sisti, partner at Rucellai & Raffaelli. “Most Italian banks that were considered “dull” on the international markets and by many analysts, have instead performed amazingly well so far and this proved to be a key factor, as probably Italy could not afford those, more or less disguised, state aids that other countries have offered.”
Another important element may be the fabric of the Italian economy, which is largely comprised of small and medium sized enterprises, with a significant propensity to innovate. “This is correct”, confirms Sisti. “Whilst this state of things can work as a limitation in times of growth and expansion, it can be a formidable asset when a crisis strikes. Agility, focus on customers, innovative products and services, and cost containment are the main strengths of the ‘average’ Italian small or medium sized company”.
It would appear that similar descriptions may also fit Rucellai & Raffaelli law firm itself. “Indeed we are part of that fabric”, says Enrico Adriano Raffaelli, name partner of the firm. “Whilst our clients are for the most part international and multinational groups of the Forbes 500, we certainly consider ourselves as an Italian medium sized enterprise”.
Rucellai & Raffelli was founded by Cosimo Rucellai and Enrico Adriano Raffaelli, in 1979, as a spin-off of the then best known Italian firm with international vocation. Starting with a small organisation, the firm now employs approximately sixty lawyers and has offices in Milan, (in Palazzo Melzi di Cusano, one of the most beautiful buildings of the prestigious via Monte Napoleone), Rome and Bologna.
“I guess one could believe that ours was a fairly slow growth rate”, Raffaelli says, “but one should rather consider that our story is, if not unique, quite unusual on the Italian market of legal services. Our growth has been, and I think will be, exclusively internal. We have not suffered any spin-off. We have not taken part in any merger among competitors. We have resisted many offers to join alliances or networks – or simply to be bought out. As said, this is a very different story from that of many of our competitors”.
A fully Italian law firm with more than 25 years of undisrupted business is probably in the best position to tell how Italy has changed over the years in terms of doing business there.
“To me”, Raffaelli says, “the turning point happened in 1990, with the entry into force of the Italian Antitrust Law. Not because this alone brought dramatic changes, but because it showed that Italy and its law-makers were willing to enter a new era and adopt new approaches to the law, including being less formalistic and more economically oriented”. Raffaelli also heads the antitrust and competition department of the firm and is one of the leading lawyers in this field and speaker at various conferences, including the most important world wide held yearly at the Fordham University in New York. “Of course, it took some time: I can still remember when the Italian Antitrust Authority required notification of also intra-group mergers – that was still quite a formalistic approach, I would say. But now the legal environment and the attitude of the various authorities and powers are absolutely pro-competitive. By experience, they are so much more than in some other Member States, having a longer history for it. I am often quite surprised that this is not always fully appreciated elsewhere”. Rucellai & Raffaelli organise every two year what is probably considered as the main event in Italy by the international antitrust community, the Treviso Antitrust Conference, that is an ideal observation point.
Pro-competitiveness however, does not rely on transparency or fairness of conditions and behaviour among entrepreneurs only: it also massively depends on how a local legal framework responds to the needs of the enterprises and particularly of foreign investors. It may sound strange but is true that until 2003 corporate law in Italy was still, more or less, the same one as shaped in 1942 during the Fascist regime. “And one should consider”, says Sisti who is in charge of corporate and M&A practice, “that in some respects fascism was not unlike a socialist state in its attitude towards economy: for example, it considered issues like governance of a private company to an extent in the public interest and therefore not fully available to the will and decisions of the parties.”
With the Corporate Law Reform of 2003, this has completely changed. For example, in Italy parties can mainly chose between two types of limited liability companies, which now display very different features, with one of them (società a responsabilità limitata) allowing for a really significant degree of flexibility. “In addition,”, says the partner Sara Biglieri “ the società per azioni (which, unlike the former, can issue shares and bonds) can be governed not only through the traditional Italian structure (board of directors, an internal committee of auditors and the shareholders meeting), but also by the so called “dualistic” model (not unlike the governance structure in Germany and France), or by the so called “monistic” model (shaped after English experience). Maybe even too much”.
However, flexibility is not the only feature of the latest corporate developments. “There are also a number of corporate controls” says Biglieri “which aim at closely monitoring the action of the board of directors and of its delegated bodies. Among these controls a special mention is deserved, since 2001, by the vigilance committee for compliance with the corporate model for the prevention of a selected, but increasing number of corporate crimes. In the absence of such model and committee, the company is directly deemed liable for such crimes, whenever committed by executives and employees in the interest or for the advantage of the company itself. For this reason, our law firm is playing a relevant role in tailoring suitable compliance models for corporate clients and in participating in vigilance committees”.
“But giving entrepreneurs legal flexible tools for accommodating their interest is essential to attract foreign investments”, says Sisti. “They flow not only where the business is promising and the broader context is trustworthy, but also were they know that – if and when their trust is breached – they can effectively pursue their interest”. That was not always the case before under Italian corporate law, where many things simply could not be agreed (of if agreed, had to be inserted in shareholders’ agreements – which in Italy are less binding than the corporate by-laws). “And why? Because of a rule dating to 1942, considered mandatory even if no interest of any actual party was jeopardised at all”.
Lawyers can play a role, and an important one, in developing society. This is what Shakespeare meant when he put the words: “First thing, let’s kill all the lawyers” in the mouth of Dick the Butcher in Henry VI – although many often misunderstand and misquote this line as expressing some kind of despise. “We do play a role and we can play it in many different ways”, says Cosimo Rucellai. “I think that a firm like ours, for example, has probably played a role, as some of our other competitors, in shaping and rendering in Italy more international our profession. This was achieved by comparing, integrating and assimilating foreign and international experience, by adopting an open minded professional culture and by stimulating critically the view that clients have of their own business”.
“At times this role has been quite direct”, continues Rucellai, Master of Laws, Harvard. “For example we have done the very first securitisations in Italy, opening the market. And we took a proactive and advisory role in the drafting and enacting of the relevant law, which at the outset simply did not exist”.
Whilst the market of legal services still seems to pursue the path of concentration and cross-border international, or multinational firms, one could wonder what the outlook is of an Italian ‘boutique’ like Rucellai & Raffaelli.
“Let me first say that we do not like the term ‘boutique’ when referred to us – and maybe to law firms in general”, says Sisti. “It makes me think of a small, cosy shop where you go and buy unnecessary, little expensive things. Well, the work we do is instead generally essential for our clients and often vital. We are everything but a ‘boutique’. Besides that, we cover everything from antitrust to labour, from M&A to financial services, from government and administrative law to commercial litigation. Lot of litigation, that – in many respects unfortunately, I should add – remains a huge hit in Italy”.
It is indeed a fact that, in Italy, the success of a litigator is measured not only by the quality of the law-suits handled, but often also basing on their sheer number.
“Italian central and local governments are, unfortunately, not very diligent payers so to speak”, clarifies partner Maddalena Palladino, the litigator who is in charge of debt collection activities. “And, based on surveys conducted by Confindustria (the trade association of large companies), the majority of Italian entrepreneurs consider delayed payments a mean of self-financing. And a “legitimate” one, needless to say. In this context, there should be little surprise if our courts are overloaded with work”. This state of things has lead to certain phenomena that are quite peculiar to the Italian market: “For example, the securitisation or assignment en masse to banks of receivables towards Italian health agencies, held by practically all the pharmaceuticals”, says Antonio Debiasi, the partner who has dealt with most of these transactions also in assisting Farmindustria (the Italian trade association of pharmaceutical companies). “In the end, a whole market in the financial services area stemmed from an attitude which one should consider far from virtuous”.
“I would expect that those lawyers will continue to do well whose specific work requires skills, intelligence and experience”, says Raffaelli. “For example: commercial litigation reaching a certain degree of complexity and size. Or M&A. I see less all that type of work which is probably more process oriented, like much of the regulatory, but also in part some of the work associated to capital markets and finance. Clients in Italy will sooner or later realise that process work is necessary-but that value added services are worth something else. Here, I refer to the area of practice where a talented lawyer can be really successful. Markets are another story: they will go up and down as they always did. Next, we may be seeing a revamp of IPOs. But who can really tell?”
“This is why we consider the balance between cyclic and counter-cyclic work as essential.” says senior partner Andrea Vischi in charge of the labour department. “For example, our labour and administrative departments – where we feel we are also particularly strong – have done extremely well in the downturn. I guess this may be very specific to Italy, but it is a fact that fully transactional firms have suffered in this context. Happy to say that was really not our case”.
“If we instead look at the economic sectors more broadly”, says Sisti. “Then one that seems as particularly hot, obvious as it sounds, are renewable resources and energy in general. Even if we set aside the nuclear option, which could be the biggest thing in Italy for decades, there is quite a lot of work on renewables. Indeed, Italy is good for wind, good for sun, good also for biomasses. State grants are enticing. Unfortunately what goes wrong is the part that deals with local governments. Too many authorisations, too much time and too much uncertainty. However, as often happens in Italy, a weakness may turn up becoming an opportunity: we are assisting more and more clients possessing know-how and willing to go and do their business elsewhere, for example in the Balkans area, with which infrastructure should also improve in due course. Or in India”.
Italy would look perfect also for a completely different business: private equity. While it has materially developed over the years, at least until crisis stroke, it remains in some manners underperforming if compared with the opportunities. “Probably not huge transactions”, says Sisti, “ but there are myriad opportunities of small or medium sized transactions. Economic fabric, at least in northern and central Italy, looks as a sort of ideal “game reserve” and the new laws help a lot. Here we suffer a gap not due to the PE players but probably attributable to the mindset of local entrepreneurs: which probably is at the same time exactly what makes their companies interesting investments but them reluctant sellers.”
However, also in changing this, Italian lawyers and professionals will surely have a role to play.
