Italy: Delegation Of Functions And 231 Models: Crucial Instruments For Port-Related Companies Also For Environmental Purposes

Last Updated: 12 June 2018
Article by Luca Cavagnaro and Francesco Laureti

In the last issue of our newsletter, we emphasised the importance of adopting an organisational model in accordance with Italian Legislative Decree 231/2001 to prevent serious liability being incurred – by both employers and businesses –  in respect of health and workplace safety.

Similar instruments can also be adopted to prevent any risk associated with infringement of environmental laws.

Moving on to the first topic of delegation of functions, unlike in the sector of health and workplace safety, there is no provision in our legal system expressly regulating the granting of an ad hoc delegation of powers in respect of environmental issues.

One cannot on the other hand expect that the directors of a company may have such broad competencies as to be able to effectively deal with complex and specialist issues such as waste or wastewater management, pollution prevention or the management of remediation procedures.

Case law has often taken action to fill the legislative vacuum, acknowledging on several occasions that the institution of delegation of functions (and the relevant risk management "model") can also be extended to sectors other than health and workplace safety such as, namely, the environmental sector.

Precisely in such area – whose proper management is now increasingly deemed strategic to the proper functioning of a business – delegation of functions has become increasingly important.

For instance, the Italian Supreme Court clearly stated that "once the conditions for delegation of functions in respect environmental issues are proven, the criminal liability of the representative is not in question"1.

Therefore, delegation of functions is now as a matter of fact permitted also in the environmental sector, similar to what provided for by Italian Legislative Decree 81/2008 concerning health and workplace safety, with the consequent possibility to transfer the relevant powers and responsibilities.

In the absence of specific rules, however, the requirements for delegation of functions in respect of environmental issues must be inferred from case law.

More specifically, the Italian Supreme Court had the opportunity to focus on the four key requirements for validity of delegation of functions2.

According to the Italian Supreme Court, delegation must, first and foremost, be specific and expressed, with any discretionary power on the part of the principal being excluded.

More specifically, the principal must refrain from interfering with the representative's activity, which is the case when, for example, the principal as a matter of fact continues to exercise a management power in respect of functions transferred to the representative. Any failure by the principal to do so may trigger inefficacy of the delegation.

Second, the representative must be capable and duly skilled to carry out the task assigned to him.

Indeed, according to the Italian Supreme Court, delegation of functions can be conferred "only if delegation [...] is made in favour of reliable persons, who are able to carry out the tasks concerned". In any event, the representative must have skills in accordance with the delegated functions and expertise in the area of delegation. Any delegation in breach of such requirements may trigger culpa in eligendoon the part of the principal, which involves ineffectiveness of the delegation.

Third, besides functions, the relevant decision-making and spending powers must be delegated as well.

It is indeed evident that, in the absence of the required powers, the representative would be prevented from carrying out the respective functions.

Four, the existence of a delegation must appear from a written instrument bearing certain date (e.g., a public deed or a private deed authenticated by a Notary public).

Among the requirements for validity of delegation, there has been a debate among Italian legal commentators as to whether the granting of a delegation should be justified having regard to the size of the company.

In this regard, in the past, the prevailing view was that delegation of functions should only apply to medium-to-large enterprises.

However, in 20153, the Italian Supreme Court stated that "in order to attach criminal relevance to the institution of delegation of functions, [...] the transfer of delegated functions is no longer justified having regard to the size of a company or, at least, to its organisational needs". In the light of such ruling, some legal commentators therefore came to the conclusion that the size of a company is not particularly relevant to the validity of delegation.

The Italian Supreme Court4, however, shortly after retraced its steps, stating that "transfer of delegated functions must be justified having regard to the size of the company or, at least, to its organisational needs".

It is therefore abundantly clear how this issue is still debated in case law.

In the event that delegation of functions is validly and effectively implemented, the representative must therefore exercise the relevant powers, being liable for any breach of applicable law.

An appropriate system of powers in respect of environmental issues is also a basic pillar for developing an organisational model capable of preventing the commission of environmental crimes under Article 25-undecies of Italian Legislative Decree 231/2001.

Such provision indeed identifies several types of environmental crimes as a predicate offense of administrative liability of entities, including, for instance, unauthorised waste management (Article 256 of Italian Legislative Decree 152/2006, so called "Testo Unico Ambientale"), environmental pollution (Article 452-bis of the Criminal Code) or environmental disaster (Article 452-quater of the Criminal Code).

As concerns sanctions, the company on behalf or for the benefit of which violation has been committed can be sanctioned by pecuniary sanctions that may exceed Euro 1,000,000 depending on the violation of environmental law concerned. Italian Legislative Decree 231/2001 provides also for injunctive measures, including suspension or revocation of the authorisations, licenses and concessions needed to carry out the activity, temporary ban on contracting with the Public Administration and the prohibition, for a certain period of time, to advertise goods or services.

For instance, in case of water pollution in ports, the applicable sanctions may entail revocation of the public authorisations required to carry out port operations: it is clear that, in such case, the injunctive sanction can have an impact far greater than heavy pecuniary sanctions.

However, companies will be exempt from such liability if they prove that their organisation is suitable to prevent and combat crimes.

Such burden of proof can be satisfied if, before the crime was committed, the company adopted suitable organisation and management models.

The importance, in the environmental sector, of the simultaneous adoption of a system of delegation of functions and an organisational model under Legislative Decree 231/2001 is also confirmed by the Italian Supreme Court, which stated that: "lack of delegation according to the terms set out above is a fact that in itself proves lack of a correct organisational model to prevent the commission of crimes by top management".5

This once again demonstrates that organisational models should be fully integrated into the organisational context of the company and connected with the development of a system of delegations and powers.

  Footnotes

1 Italian Supreme Court No. 46237/2013.

2 Italian Supreme Court No. 9132/2017.

3 Italian Supreme Court No. 27862/2015

4 Italian Supreme Court No. 31364/2017.

5 Italian Supreme Court No. 9132/2017.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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