Abrogative referendums of 12 and 13 June 2011

Following the referenda carried out on 12 and 13 June 2011, article 23-bis of Law Decree 112/2008, converted to Law 133/2008 as amended and supplemented by article 15, paragraph 1 of Law Decree 135/2009, converted to Law 166/2009, regarding economically significant local public services, as well as article 154, paragraph 1 of Legislative Decree 152/2006 (Environmental Code), the part which referred to "the adequacy of the return on invested capital" amongst the criteria for determining the water tariff, was repealed. Furthermore, the approved referendum petitions require the abolition of Italian Presidential Decree 168 of 7 December 2010, including the regulation implementing the provisions of article 23-bis, while leaving the current temporary provisions of article 170 of Legislative Decree 152/2006 (not subject to referendum) unchanged, which involve the application of the Standardised Method pursuant to Ministerial Decree of 1 August 1996 until the adoption of a new tariff method.

In general the effects of the abrogative referenda, which in accordance with Law 352/1970 are declared by the President of the Italian Republic by his own decree of 20 July 2011, do not result in any restoration of the standards repealed by the regulatory provisions successfully passed by the referendum (rulings of the Constitutional Court 24/2011, 31/2000 and 40/1997) and effective ex nunc according to the provisions of article 75 of the Constitution.

Given the aforementioned circumstances, it must be considered that the lack of a transitional regime for prior concessions awarded pursuant to article 23-bis, also removed the series of reasons for their termination, with particular reference to in-house management, management assigned directly to mixed companies in which selection by tender did not consider both the quality of the partner and the attribution of operating tasks, as well as direct assignments as of 1 October 2003 to listed companies or their subsidiaries.

The interim effect of the phenomena described above was the removal from Italian law of the limits on in-house rights which led to a stricter governance than EU rulings on such issues, to leave room for the regulations and principles consolidated at European level (EU Treaty and Court of Justice case law).

Lastly, it must be noted that in the assessment of the effects of the abrogative referenda, the amendment to relevant regulations as a result of Law Decree 70/2011, converted with amendments to Law no. 106 of 12 July 2011, must be taken into consideration. This established the National agency for water regulation and supervision, redefining responsibilities and methods for determining integrated water service tariffs. In fact, based on the aforementioned regulation, the Agency - the functions of which as explained below were transferred to the AEEG in the interim - has to define the cost components to determine the water tariff and prepare the resulting tariff method, also taking into consideration "in compliance with the principles set forth by EC regulations, the financial cost of the service supply and the related environmental and resource costs, in order to fully realise the principle of cost recovery and the principle ‘who pollutes pays'". Under Italian Law 214/2011 the Agency was disbanded and the regulatory and control duties over water services were transferred to the AEEG (see below).