Legal Requirements for Expanding Business in Italy

This report provides key information on the legal requirements for expanding business operations in Italy. It covers topics such as types of contracts, sources of contract law, legal requirements to create a contract, remedies for breach of contract, appointment of agent, and other specific regulations. The report is aimed at helping companies understand the legal aspects of doing business in Italy.

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Business Law
Italy

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Executive Summary
 The objective of this report is to provide key information to Cosmos Group that
wanted to expand its operations in Italy.
 Although there are various factors that might create challenges for the company
such as low growth rate, high public debt and regular political changes; however, it
will also receive many benefits such as low private debt and a sophisticated
customer base while exporting in Italy.
 The company has to form various legal contracts while exporting its products to Italy
which include contract for collecting certificate and license for food export,
employment contract, banking contract, the insurance contract and contract with
agent.
 The key sources of contract law in Italy include the legislative provisions given under
the Civil Code of 1942, various statutory laws, customs and equitable principles and
judicial decisions.
 In order to form a valid contract in Italy, there are some legal requirements which
are necessary to be fulfilled by the parties which include an offer and acceptance,
causa, the object and the specific form of contract.
 The element of good faith plays a major role in the contract law of Italy and
remedies for breach of contract include termination, performance and monetary
relief.
 The company is not obligated to hire an agent while expanding its operations in Italy;
however, it is preferable that the company appoints the agent to comply with
relevant legal provisions. A Free Trade Agreement has not formed between Australia
and India.
 Some other key regulations which the company had to comply with include
employment law, insurance law, company act and taxation law.

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Table of Contents
Introduction...............................................................................................................................3
Market Profile of Italy................................................................................................................4
Types of Contracts......................................................................................................................4
Source of Contract Law..........................................................................................................5
Legal requirements to create a contract...............................................................................5
Remedies for breach of contract...........................................................................................6
Appointment of Agent...............................................................................................................7
Free Trade Agreement (FTA)......................................................................................................7
Other Specific Regulations.........................................................................................................8
Conclusion..................................................................................................................................9
References................................................................................................................................10

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Introduction
While conducting business in a foreign country, it is important that companies must
familiarise themselves with local laws and policies which govern their operations.
Compliance with these laws is important to make sure that the companies did not face by
legal consequences and they understand their rights. Similarly, an Australian company that
wanted to expand its operations in Italy has to take into consideration various factors to
make sure that it did not violate any local laws and it is able to effectively conduct the
business operations (Salacuse, 2013). The objective of this report is to identify the key legal,
contractual requirements which an Australia business has to take into consideration while
expanding its operations in Italy. The businesses which are selected for this report is
‘Cosmos Group’ which operates in the food and beverages industry; the company offers a
wide range of organic and fresh products to its customers across the globe.
The company has decided to expand its operations in Italy to increase its customer
base. The key contractual requirements which the company has to take into consideration
will be analysed in this report along with identification of the potential business opportunity
in Italy. This report will identify the sources of contract law in Italy and evaluate the key
legal requirements that are essential to create legally binding contracts. This report will also
focus on evaluating the remedies available for breach of contract and discuss whether
Australia has entered into a Free Trade Agreement with the country or not. Lastly, any other
specific regulations that apply on Cosmos Group while expanding its business in Italy will be
evaluated in this report.

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Market Profile of Italy
Despite some challenges in Italy such as regular political changes, high public debt
and low growth in the economy, there are many factors that make Italy a preferable option
for multinational companies to expand their operations due to factors such as a
sophisticated manufacturing base and low private debt (Austrade, 2019). In Europe,
Northern Italy is among one of the wealthiest nations. In the Eurozone, the country is the
third largest economy, and it is attracted some of the biggest multinational corporations as
it is the home to one of the large sophisticated consumer market. Along with the EU
regulations, there are many local regulations as well which multinational corporations have
to adhere in order to expand their operations in the country. Italy has a formal business
culture in which personal relationships play a major role in building business relations
(Berezin, 2018). Italy has a civil law system in which foreign companies have to comply with
various laws and acquire various licences while they expand their operations in the country.
Types of Contracts
There are various types of contracts which Cosmos Group has to form while
expanding its operations in Italy. The documents are prepared in a specific way in order to
make sure that parties comply with the requirements of import or export country. The
documents which are required to export goods in Italy are similar to other countries
worldwide. The company is required to get certificates and licences that are required to
export food products in Italy (McKenzie, 2016). The company has to comply with the EU
regulations while exporting the products to Italy. For example, animal and animal originated
products that are coming inside Italy from outside are subject to systematic checks before
they are sold in the country. These checks are carried out by the Border Inspection Posts;
therefore, Cosmos has to enter into a contract to get this certificate. The company has to
prepare Customs Entry documents which are signed by the company and the authorities to
enter into a contract that allowed the company to export its products in the country
(Schwenzer, Hachem & Kee, 2012).
Cosmos should also sign Customs bond with the exporting country government in
order to claim import benefits. The company will also have to enter into a legal contract

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with local distributors to make sure that they sale its products across the country (Mondaq,
2018). The company also have to contract with an insurance agency to make sure that it did
not face any loss in case its products are lost in transit. The company also have to enter into
a contract with the bank to make sure that it accepts its payment and sent it back to
Australia. This contract contains details regarding changes in currency to make sure that
Cosmos receive adequate payment for its operations. The contract for employment will also
be made if the company wanted to hire employees in Italy to handle its operations (Lamers,
Junginger, Hamelinck & Faaij, 2012). A contract can also be formed with the agent who is
appointed by the company in order to sell or distribute its products in the country.
Source of Contract Law
In order to make sure that the company effectively form these contracts, it is
important that the company understands the sources of contract law. There are various
sources of contract law in Italy which include the legislative provision given under the Civil
Code of 1942, customs and equitable principle, various statutory laws that are implemented
in order to regulate contracts and their specific aspects and judicial decisions taken by the
courts for implementing legislative rules (Zambrano, 2011). The concept of ‘freedom of
contract’ is not generally recognised as a principle of the Italian Constitution of 1948;
however, it is a key part that embodied in article, 2, 41 and 42 of the Constitution. These are
key sources of contract law in the country. Article 2 provides that the Republic recognise
and guarantees the inviolable human rights under which it ensures the performance of
unalterable duty to political, economic and social solidarity. In Title II of Book IV of the Civil
Code, arts 1321 to 1469 provides provisions regarding typical contract in which details
regarding requirements, interpretations, discharge, rescission, and validity of a contract are
given (Legalsl, 2014). The provisions regarding typical or nominate contracts is given under
Title III of book IV on Obligations, arts 1470 to 1986. All these provisions contain details
regarding the sources of contract law in Italy.
Legal requirements to create a contract
There are specific legal requirements which parties have to comply with in order to
ensure that they create a legally binding relationship with the parties. The standard way
through which parties can enter into a contract is through a contractual offer which is made

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by a party to another, and a valid acceptance must be received on such offer (article 1326 of
the Italian Civil Code). Article 1325 provides that a contract must have a causa which
explains its purpose and it also justifies the obligation and promise of the parties that is
characterised by the concept of cause suffisante, raisonnable et juste (Cappelletti, 2013).
This article also provides key requirements that are necessary for enforceability of a
contract which includes (i) an agreement between parties, (ii) causa, (iii) the object and (iv)
specific form of the contract (written/notarial form – for real estate or others). A contract is
legally binding between parties pursuant to Italian Contract Law in which typical economic
exchange has made between parties (Translexitalian, 2018). In this element, the causa
requirement is fulfilled which is considered as the essence of the contract. The object of the
contract focuses on obligations which means that it must be legal and determinable as
provided under article 1346.
There are specific common clauses that also govern the contractual relationship
between parties based on which parties can agree on a number of conditions that become a
part of the contract (article 1353). Article 1355 provides that parties can agree on
occurrence of a future event; however, such event must not be exclusive to one party’s will
(Legalsl, 2014). Moreover, the wordings of the contract should be clear, and ambiguity
should not arise between parties regarding its terms. The contract comes into existence
when the party who made the offer gains knowledge regarding the acceptance of another
party. The element of good faith is a key part of contract law in Italy which is highlighted in
several articles by the Civil Code. For example, article 1336 provides that the contract must
be interpreted by the parting while relying on good faith. Article 1175 provides that the
debtors and creditors must behave accordingly while complying with good faith and fair
dealing (Cappelletti, 2013). Article 1337 provides that the parties must maintain the element
of good faith during the pre-contractual bargaining and contract drafting.
Remedies for breach of contract
There are different remedies available for parties in case of a breach of contract in
Italy than compared to Australia because the Australian contract law is based on common
law whereas the Italian contract law is based on civil law. It means that the legal provisions
in Italy are codified and the courts are expected to proclaim the law rather than interpret it

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(Rowan, 2012). The first remedy available in a breach of contract is the termination of the
contract regarding which provisions are included in Article 1453. This section gives the right
to contractual parties regarding the termination of a contract and section 1453 to 1681
provides provision regarding termination of the contract in case the contractual terms are
violated by parties due to deliberate or negligent actions. Article 1455 provides provisions
regarding a judicial termination of the contract for a negligent breach under which three
conditions must be fulfilled which include non-performance of the contract, the non-
performance as a result of the responsibility of the promisor and it must be serious in
nature (Febbrajo, 2016).
The second remedy is the performance of the contract for which provisions are given
under article 1453 in which a contractual party can demand performance as a remedy for
the breach. This also includes ‘alternative performance’ which provides that the promise can
be performed by some other way in order to provide damages to the party. Article 1453
provides that the option of performance and termination is available for parties of a
contract; however, if the contractual party claims for termination, then the right of
performance terminates as well (Zimmermann, 2014). Furthermore, the parties of contact
have the right to demand monetary relief under the contract law in accordance with article
1453 which provides that an aggrieved party can claim damages in the form of
compensation. These are the key remedies available in the contract law for parties.
Appointment of Agent
There are no laws implemented in Italy that makes it mandatory for the company to
hire an agent while conducting its operations or exporting in Italy. However, it is
recommended that foreign companies must enter into a contract with a sales agent in order
to manage their operations in the country (Seyoum, 2013). Since there are many major
differences between the legal structures of Australia when compared with Italy, it would be
suitable for the company to make sure that it receives help from a local agent who is aware
with the local laws.

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Free Trade Agreement (FTA)
Currently, the Australian and Italian government have not entered into a mutual
agreement to form a Free Trade Agreement (FTA) between the countries to promote trade
relationships and removing tariffs and duties to make sure that more companies are
encouraged to expand their business in both countries. However, the government has
launched negotiations to form an FTA with the European Union on 18 June 2018 which will
result in increasing export of Australia products to Italy and it will also increase the demand
of Australian grown products in Italy which will benefit Cosmos Group (Bolger, 2018).
Other Specific Regulations
Following are some other specific regulations which Cosmos Group has to comply with
while expanding its operations in Italy.
 National Labour Law: It governs the relationship between companies and their
employees and Cosmos has to comply with its guidelines while hiring employees in
Italy (Matteis, Accardo & Mammone, 2019).
 Insurance & Reinsurance Law: These laws govern the relationship between the
insurance agency and the company which apply on Cosmos as well when it insured
its products while exporting them in the country.
 Company Act: Cosmos will also have to comply with the Italian Company Act which
provides various guidelines for the foreign company regarding mandatory
disclosures.
 Taxation Law: The Company has to comply with the taxation policies in Italy because
it has to pay tax from its operations in the country. It also includes policies regarding
value-added tax (VAT) and other taxation policies.

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Conclusion
In conclusion, Cosmos Group has to form various contracts while exporting its
products in Italy which include contract for certification, licensing, employment, insurance,
agency and others. The terms of the trade are mentioned in these contracts under which
the parties of the contract are legally bound to discharge their duties, or they can hold other
parties liable for the contract. The company must understand the sources of contract law in
Italy which include legislative provisions, various statutory laws, customs and equitable
provisions and judicial decisions. The key requirements for forming a contract include an
agreement, causa, the object and the specific form of the contract. The Italian courts have
also provided various judgements regarding general legislative rules and applied equitable
principles on a case-by-case basis to ensure that parties act in good faith and fair dealing to
fulfil their duty of care by discharging their contractual obligations. Causa must be present
in the contract which is referred to the consideration in which a party promises to make an
exchange of economic nature for the fulfilment of a promise. The key remedies available for
parties in relation to breach of contract include termination, performance and monetary
relief. Although it is not mandatory for the company to hire an agent in the country;
however, it is a more suitable option to make sure that the company avoids legal
consequences and effectively expand its operations in the country. Currently, an FTA is not
created between Australia and Italy which governs the trade relationship between the two
nations. Other specific legislations include taxation law, company act, national labour law
and insurance law.

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References
Austrade. (2019). Export markets – Italy. Retrieved from
https://www.austrade.gov.au/australian/export/export-markets/countries/italy/
doing-business
Berezin, M. (2018). Making the fascist self: The political culture of interwar Italy. New York:
Cornell University Press.
Bolger, R. (2018). A free trade agreement between Australia and the European Union now
looks like a viable prospect, so what's in it for both parties?. Retrieved from
https://www.sbs.com.au/news/why-australia-really-wants-a-free-trade-deal-with-
the-eu
Cappelletti, M. (2013). Civil procedure in Italy. New York City: Springer.
Febbrajo, T. (2016). Good faith and pre-contractual liability in Italy: Recent developments in
the interpretation of article 1337 of the Italian Civil Code. Italian LJ, 2, 291.
Lamers, P., Junginger, M., Hamelinck, C., & Faaij, A. (2012). Developments in international
solid biofuel trade—An analysis of volumes, policies, and market factors. Renewable
and Sustainable Energy Reviews, 16(5), 3176-3199.
Legalsl. (2014). Contract Law in Italy: termination of the contract for non-performance and
the notice to comply. Retrieved from http://www.legalsl.com/en/contract-law-in-
italy-termination-for-non-performance-and-the-notice-to-comply.htm
Matteis, A.D., Accardo, P. & Mammone, G. (2019). National Labour Law Profile: Italy.
Retrieved from https://www.ilo.org/ifpdial/information-resources/national-labour-
law-profiles/WCMS_158903/lang--en/index.htm
McKenzie, B. (2016). Doing business in Italy - An overview of Italian legislation: Corporate,
Tax and Labor Law aspects. Retrieved from
https://www.lexology.com/library/detail.aspx?g=0eadd14a-227d-4309-b214-
a65d8cc7f274

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Mondaq. (2018). Italy: Requirements For Doing Business In Italy. Retrieved from
http://www.mondaq.com/italy/x/708574/Corporate+Commercial+Law/Requirement
s+for+doing+business+in+Italy
Rowan, S. (2012). Remedies for breach of contract: a comparative analysis of the protection
of performance. Oxford: Oxford University Press.
Salacuse, J. W. (2013). The three laws of international investment: national, contractual, and
international frameworks for foreign capital. Oxford: Oxford University Press.
Schwenzer, I., Hachem, P., & Kee, C. (2012). Global sales and contract law. Oxford: Oxford
University Press.
Seyoum, B. (2013). Export-Import theory, practices, and procedures. Abingdon: Routledge.
Translexitalian. (2018). The Formation of Contracts under Italian Civil Law. Retrieved from
http://translexitalian.com/the-formation-of-contracts-under-italian-civil-law/
Zambrano, V. (2011). Italy. Am. UJ Gender Soc. Pol'y & L., 19, 225.
Zimmermann, R. (2014). Limitation of Liability for Damages in European Contract
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