Tommaso Mancini of Bacciardi and Partners takes part in Negotiating Effective Contracts & Dealing with Disputes

QUESTION ONE – Which techniques are typically used by international counterparties in your experience to overcome challenges in the negotiation process?

Negotiation is often a complex process. It becomes even more difficult when it involves international counterparties, as different cultures result in different approaches and behaviours.

For this reason, it is extremely important to come to the negotiation table well prepared from a business/legal point of view, as well as a human perspective. Skilled negotiators always try to establish a relationship based on mutual respect, confidence and trust, before they start discussing the details of the case.

Quite often, they also embrace the so-called ‘win-win strategy’, striving to find a solution which allows either of the parties to gain something. Arguments and dead points are always around the corner, but various techniques can be used to overcome them.

For instance, the parties could try to unpack the issue on the negotiation table in order to evaluate each smaller matter separately. Likewise, they could add new elements to the negotiation table in order to compensate the party who has made greater concessions. If the parties are not able to come to an agreeable result, they should try to think out of the box and find alternative solutions.

Finally, if the challenge becomes too big to go ahead with the negotiation, the best thing to do is to relax the tempo or even adjourn the meeting. This allows the parties to take their time, further review their positions and reflect on the alternative solutions. They should come back to the negotiation table with a new proactive and constructive approach, ready to reach a satisfactory solution.

QUESTION TWO – Is there anything special or peculiar about commercial contract law in your country that General Counsel should be aware of?

The Italian legal system encompasses a variety of ‘international mandatory rules’ aimed at protecting certain categories (e.g. consumers, commercial agents, employees) or certain public interests (e.g. competition, fair commercial practices).

Such mandatory rules apply irrespective of the law chosen by the parties to govern their contractual relations. For example, foreign companies wishing to sell their products or services to Italian consumers – who are always considered the weaker contractual party – must be aware of the mandatory provisions of the Italian Consumer Code. This includes such provisions as those on product warranty and those on consumers’ right of withdrawal in case of distance sales and contracts negotiated away from business premises (e.g. e-commerce). Likewise, companies wishing to appoint an Italian commercial agent must be aware that the latter is entitled to claim a goodwill indemnity upon termination of the relationship.

Foreign principals must also enrol their Italian agents on the social security fund managed by ENASARCO (Ente Nazionale di ASsistenza per gli Agenti e i Rappresentanti di Commercio), and make periodical payments to the fund.

The whole amount paid to the ENASARCO fund will be part of a goodwill indemnity to be paid to the commercial agent when the relationship comes to an end.

QUESTION THREE – What recent legislative developments in your jurisdiction affect commonly drawn up contracts such as articles of incorporation, shareholder agreements or executive remuneration? Can you provide any relevant case law to illustrate this?

In Italy, the contracting parties may enter into a shareholders’ agreement (SHA), either for an indefinite period or for a fixed-term period of time.

In the first case, each shareholder is granted the right to withdraw from the SHA at any time, by simply providing sufficient and reasonable prior notice to allow the remaining shareholders to reorganise their internal dealings. In the second case, Italian laws provide for a mandatory maximum initial term of validity of the SHA which, in no event, can exceed five years of duration.

In this regard, a recent Italian Court decision (Corte d’Appello di Brescia, Sent. 1568/2018) has confirmed that the parties to a fixed-term SHA can enter into it for a maximum initial five-year term of duration. It also stated that the parties cannot agree on tacit and automatic renewal of the SHA, upon expiry of the said maximum initial five-year term.

Considering the mandatory maximum five-year term of duration, the parties must, prior to its expiry date, either meet and negotiate in good faith an express renewal of the same SHA for a second term of duration, or negotiate in good faith and enter into a new and additional SHA, having a maximum initial term of duration which shall not exceed five years.

Another relevant recent trend concerns the way the shareholders to a company construe the articles of association governing their relationship as shareholders.

In particular, shareholders have started to exploit the powers provided for by article 2468 of the Civil Code and by DL 179/2012. Pursuant to this, shareholders of limited liability companies may either be granted with special or particular rights or be assigned with ‘special categories of shares’.

The aforesaid powers are normally used in order to transfer into the articles of association certain provisions of the SHA pertaining to, by way of example, the voting rights or the decision-making procedures that shareholders follow to take relevant decisions for the development or termination of the business.

The inclusion of such rights and provisions within the articles of association, allows the shareholders to ensure that any future internal resolution taken in violation of the special or particular rights granted to the shareholders, or assigned to them by the special categories of shares, be regarded as null and void. This way, the shareholders may achieve higher legal protection as opposed to the same provisions being agreed upon and included solely in the SHA. In fact, violation of those provisions within the SHA would simply trigger a breach of contract and claim for damages compensation.

TOP TIPS FOR: Successful negotiations

Prepare yourself: do your homework and come to the negotiation table well prepared, with regard to both the transaction and the parties involved.

Establish mutual trust: mutual trust and honesty are fundamental aspects of a negotiation. Would you ever enter into an agreement with someone you cannot rely on?

Identify your best alternative solutions: you have to realise whether your interests are reachable with alternative solutions. Only if you have feasible alternatives can you successfully influence the negotiation.

Don’t take it personally and stay focused on the topic: if your nature drags you to move the challenge from the content of the transaction to a personal clash, keep calm and try to analyse the problem with a critical eye. This is particularly important when negotiating with
Italian people!

Contributing Advisors