Agriculture Decree: Significant Amendments During Conversion

The Decree-Law of May 15, 2024, No. 63 (the “Agriculture Decree”) came into force on May 16, 2024, and includes urgent provisions for agricultural, fishing and aquaculture businesses, as well as enterprises of national strategic interest. The decree has been converted into law through Law No. 101 of July 12, 2024, which also introduced amendments to certain provisions of the original decree. Notably, the conversion law introduced Article 5, paragraph 2-bis, which establishes a minimum duration for concession contracts for surface rights, including preliminary agreements. These contracts may not take effect for less than six years and, after this period, will be renewed for an additional six years.

>> READ OUR LATEST NEWS AND STAY UP TO DATE

Scope of the New Provision

The So-Called “Eligible Areas” Pursuant to Article 20, Paragraph 1, Letter a) of Legislative Decree No. 199 of November 8, 2021

The new Article 5, paragraph 2-bis of the Agriculture Decree will not apply to all concession contracts for surface rights, but only to those relating to the so-called “eligible areas” under Article 20, paragraph 1, letter a) of Legislative Decree No. 199 of November 8, 2021.

Eligible areas are those that, due to their specific characteristics (for instance, recently reclaimed land or sites where installations of the same type of energy source are already present and where only non-substantial modifications are being made), qualify for an accelerated and simplified process for the construction and operation of renewable energy installations. The identification of these areas has been entrusted to the regional authorities, which have until December 30, 2024, to complete this task. Contracts relating to installations built on areas other than these eligible areas will not be subject to the provision in question and the relevant contracts may have a duration freely established by the parties.

The Content of the New Provision

Given the subjective scope, we attempt below to provide an initial interpretation of this provision, which, however, is not straightforward.

Article 5, paragraph 2-bis of the Agriculture Decree introduces a minimum duration of six years for concession contracts (including preliminary agreements) for surface rights falling within the so-called eligible areas and intended for the installation of renewable energy facilities. Contracts cannot have a duration of less than six years. The provision further clarifies that, if the parties agree to a six-year duration (or if the duration is automatically converted to six years), the contract will automatically renew for an additional period of six years upon expiration (resulting in a 6+6-year term).

Upon the second expiration, unless otherwise agreed by the parties, the parties are free to decide whether to renew the contract for another six-year term or to decline renewal. The second renewal may also occur tacitly if no communication indicating a decision to decline renewal is transmitted to the other party.

Consequences for Existing and Future Contracts

Following the introduction of the new provision, for future concession contracts for surface rights that will be agreed upon between companies and landowners within eligible areas:

• If the parties agree on a duration of less than six years or fail to specify a term, the duration of the contract will automatically be deemed to be six years, with an automatic renewal for another six years.
• If the parties agree on a duration exceeding six years, the longer agreed term will prevail.

What happens, instead, to contracts currently in effect?

The provision clarifies that the six-year minimum term, subject to automatic renewal, will apply to all contracts that have not yet expired (i.e., currently in effect between the parties), except for the right to withdraw, which must be exercised within sixty days from the date of entry into force of the conversion law of this decree (a deadline that has now passed).

Thus, for contracts currently in effect:

• If a term of less than six years was agreed upon, or if no term was agreed, the duration will automatically be converted to six years, with automatic renewal for an additional six years.
• If a term exceeding six years was agreed upon, that longer term will remain in force.

Potential Inapplicability to Preliminary Agreements

The provision in question raises several concerns in imposing a minimum six-year duration on preliminary agreements, which, in practice, typically have a much shorter term.

While the literal text of the law seems clear in applying the minimum term even to preliminary agreements, there is a regulatory conflict that makes the provision potentially inapplicable to such contracts. Specifically, this relates to Article 2645-bis, paragraph 3, of the Italian Civil Code, which governs the duration of the registration of preliminary agreements.

The registration of a preliminary agreement can last for a maximum of three years and, under Italian law, cannot be extended beyond this term. This means that preliminary agreements involving the creation of surface rights on eligible areas would necessarily lack the protection of registration beyond the third year.

This normative inconsistency could lead to the conclusion that the new paragraph 2-bis of Article 5 does not apply to preliminary agreements.

Moreover, from a practical standpoint, a preliminary contract ceases to serve its function once the definitive contract is executed. Therefore, if the definitive contract is concluded before the six-year term elapses, the preliminary agreement may be deemed to be automatically terminated, as its purpose would no longer exist.