Contracts of dispatchment and Creditor self-protection

Relevant references to identify the legislation or ruling being discussed: Legislative Decree no. 79/1999, Articles 1460-1461 Italian Civil Code (ItCC), Deliberation no. 398/2021/R/EEL

What happened?

The claimant company (“Claimant”) operates in the electricity distribution and transportation sector as a “wholesale customer” pursuant to the art. 2, paragraph 4 of Legislative Decree no. 79/1999. On May 29, 2018, the Claimant was admitted to a composition with creditors (concordato preventivo) with business continuity, pursuant to art. 186-bis of the Royal Decree no. 267/1942 (i.e. Bankruptcy Law). On September 28, 2021, ARERA amended the chapter 4 and Annexes A.22, A.31, A.26, A.40, and A.69 of Terna's Gird Transmission, Dispatchment, Development, and Security Code (“Grid Code”) by means of Resolution no. 398/2021/R/EEL (“ARERA Resolution”). The amendments introduced – inter alia - specific requirements to be met during all validity periods of contracts concluded with Terna S.p.A. concerning the dispatchment service (“Contracts of Dispatchment”). These amendments applied not only to Contracts of Dispatchment entered into from the effective date of this regulatory intervention, but also to Contracts of Dispatchment concluded previously, due to the presence of the automatic reception clause of the amendments introduced to the Grid Code.

With reference to the main rules of the present case, on one hand, the chapter 4, point 4.3.1.2, as amended by ARERA Resolution, states, among the requirements for the conclusion of a Contract of Dispatchment: “(iv) not being in a state of bankruptcy, compulsory liquidation, composition with creditors (including with continuity) and not being in a state of business crisis or insolvency that is precursory to the declaration of one of the aforementioned conditions”. It also specifies that the listed requirements must also be met by controlling companies, subsidiaries, and sister companies. Furthermore, it is provided that “in the event of non-compliance with all requirements listed, the Contract of Dispatchment is terminated by Terna (...)”. On other hand, the articles 1460 and 1461 ItCC set forth the permitted cases of creditor self-protection (autotutela creditoria).

In light of the aforesaid, the Claimant challenged ARERA Resolution and the Grid Code, requesting the annulment of all amendments introduced by ARERA Resolution to chapter 4, point 4.3.1.2, and the related annex A.26, article 14. In particular, the Claimant has argued – inter alia - the non-compliance of ARERA Resolution and the Grid Code with (a) the principle set forth in article 95, paragraph 1 of the Italian Corporate Crisis Code (Codice della Crisi d’Impresa); and (b) the violation of EU Directive no. 2019/1023. Instead, Terna and ARERA have argued – inter alia - that the modifications introduced by ARERA Resolution would introduce a legitimate instrument of creditor self-protection, in addition to those laid down in articles 1460-1461 ItCC.

In its ruling no. 2019/2022 (“Ruling”) the Regional Administrative Tribunal of Lombardy (“TAR”) assumes that the entering into of a Contract of Dispatchment is a necessary condition for the subsequent conclusion of the contracts for the energy transportation service between the distribution companies and the users of the transportation service, as the Claimant. Having said that, the TAR concludes that number (iv) of Chapter 4, point 4.3.1.2 of the Grid Code is unlawful because it is impossible to reconcile the necessary continuity of business operations, inherent to the composition with creditors (concordato preventivo) (article 4 of EU Directive no. 2019/1023), with the termination or impossibility to conclude the Contracts of Dispatchment. Moreover, the TAR qualifies the modifications introduced by ARERA Resolution as unlawful instruments of creditor self-protection (autotutela creditoria) in favor of Terna, holding that:

• the creditor is contractually protected by the guarantee represented by all assets of the debtors and not by self-protection measures considered illegitimate, except for those provided by the articles 1460 and 1461 ItCC;
• current situations of default by a weak contracting party towards the monopolist (Terna) justify both the automatic termination of the contract and the refusal by the monopolist to enter into a new contract; but
• a situation of composition with creditors with business continuity is not comparable to a situation of current default towards Terna.

Why is it important?

The ruling of the TAR is relevant for two main reasons:

• (i) In relation to the possible incompatibility of the composition with creditors with the amendments introduced by ARERA Resolution, the Ruling protects market operators similar to the Claimant in this period of strong economic uncertainty, avoiding the exclusion from the market of potentially recoverable companies burdened by economic difficulties and unfavorable and unlawful provisions.
• (ii) In relation to the creditor self-protection (autotutela creditoria), the ruling provides a rigorous legal reasoning that could be applied in other judicial proceedings concerning the other amendments introduced by ARERA Resolution on the Grid Code. An example is the ongoing proceeding before the TAR regarding the power of Terna to terminate the Contracts of Dispatchment or refuse to enter into new ones with companies whose director is “in common with companies in default of payment obligations towards Terna or with companies that have been parties to a contract of dispatchment with Terna terminated for non-compliance” (chapter 4, point 4.3.1.2, letter (iii) of the Grid Code). The supervision order (ordinanza cautelare) of the TAR (no. 2178/2021) considered this modification potentially harmful.

As can be noted on the basis of the aforementioned Preliminary Order (No. 2178/2021), the TAR Lombardy Ruling has broader implications than those pertaining to the individual case examined offering a legal framework that could influence future proceedings regarding other amendments introduced by the ARERA Resolution. In this sense, the Judgment provides the basis for further intervening proceedings aimed at protecting market players such as the Applicant in a beyond uncertain economic environment.