Introduction
The Group became involved in the solid urban waste disposal projects in the Province of Naples and other provinces in Campania (the “SUW Campania Projects”) at the end of the 1990s through its subsidiaries FIBE and FIBE Campania.
The main phases of the SUW Campania projects were as follows:
- the "Contractual" phase which started in the 2000-2001 period with the signing, by the two project companies FIBE and FIBE Campania, of the service contracts for the disposal of urban waste in the provinces of Campania and ended on December 15, 2005 with the cancellation "by power of law" of these contracts pursuant to Decree Law No. 245/2005 (converted into Law No. 21 of January 27, 2006);
- the "Transitional" phase which started upon conclusion of the Contractual phase and lasted until the enactment of Decree Law No. 90 of May 23, 2008 and Decree Law No. 107 of June 17, 2008, both converted into Law no. 123 of July 14, 2008. The latter measure officially marked, among other things, the Group’s exit from the waste disposal business, by transferring the title to the RDF facilities to the Provincial Administrations;
- and the "post-transitional" phase which, launched at the end of the "Transition "phase and to date is still underway, is defined more concisely as the "Current" phase.
On the reporting date of this financial report, the financial position of the Group regarding the SUW Campania Projects was concentrated mainly in the components of working capital, consisting of the net receivables due to FIBE in connection with the Contractual and Transitional phases amounting to €106 million at December 31, 2014.
At the same time, the major problems that, since 1999-2000, have characterized the Companies’ activities within the service contracts and that have been discussed in detail and reviewed in all of the financial reports published by the Group starting from that period, have evolved and became more complex over the years, giving rise to a large range of disputes, some of which major and in part still ongoing. Albeit having observed positive developments in the last few years, the general situation in terms of pending litigation is still particularly complex. A brief overview is provided below, especially in relation to the existing risk positions.
Since FIBE Campania S.p.A. was incorporated into FIBE S.p.A. in 2009, in the rest of this chapter, unless otherwise stated, reference is made exclusively to FIBE S.p.A., even with regard to positions and events that affected the company dissolved through the merger.
Administrative litigation
Recovery of the amounts owed to FIBE by local administrations for waste disposal fees up to the date of termination of the contracts
The Special Commissioner appointed by the Regional Administrative Court to recover the receivables owed to the former assignees of the waste disposal service carried out until December 15, 2005, in November 2014 filed its final report.
Given the outcome of the investigations carried out and all the accounting records produced in the proceedings, the latter determined that against the entire amount of receivables due to Fibe for fees for services provided up to December 15, 2005, amounting to €138,288,117, the administration has already directly collected, without transferring it to Fibe, the amount of €46,363,800, that the amount as yet to be recovered and paid to Fibe amounts to €74,317,550 and that directly collected by Fibe by way of fees amounts to €17,606,767.
With order no. 2517/2015, the Regional Administrative Court of Lazio confirmed that the obligation to recover receivables due to Fibe for the administration and, on its behalf, the Commissioner appointed in its place, still stands and deemed that:
- the Commissioner’s request, who asked the Court to clarify whether he/she could proceed to materially pay the sums already collected by public authorities as fees as a substitute, also believing that such execution order was already included in the appointment ruling, was inadmissible;
- that it was unable to rule on the issues raised by the public authorities, which challenged the calculation criteria and the results of the investigation by the Commissioner, believing that they related to technical matters that fell outside the scope of the judge’s cognitive powers, as well as in no position to rule on the possibility of offsetting the debt with additional presumed receivables toward Fibe about which, incidentally, the Regional Administrative Court of Lazio had already
- ruled with order no. 8889/2014, establishing the non-countervailability of such claims as they were subject to other pending proceedings.
On February 26, 2015, the Special Commissioner resigned for serious health reasons.
Request that FIBE take back ownership of certain areas and storage sites by the parties appointed by the Government Commissioner to handle technical and operating activities
Starting from 2008 FIBE had to deal with a series of actions by the entities delegated ex lege with the technical-operational management of provisional and final storage areas transferred by FIBE to these entities in August 2008. These actions, aimed at forcing FIBE to retake possession of some sites, were based on the assumptions that such areas were not functional to service provision. The Regional Administrative Court of Lazio and the Council of State, following the appeals by FIBE, confirmed the operability of the assets in question. The civil proceedings before the Court of Naples initiated by S.A.P.NA. S.p.A., a local company set up by the Naples provincial authorities, are part of this situation. S.A.P.NA. S.p.A challenged its takeover of title to certain temporary and definitive areas and stocking sites in roughly 40 proceedings. It also requested to be reimbursed and held harmless by FIBE S.p.A. and/or the government commissioner from the operating costs incurred in the meantime and yet to be incurred, including possible site reclamation. FIBE appeared in each of those cases, some of which have been closed by a ruling of lack of jurisdiction of the Ordinary Court in favor of the Administrative court and have therefore been reopened before the Regional Administrative Court by SAPNA, while others are still in progress before the Court.
Administrative procedures for the recording and recognition of the costs for activities carried out and the work ordered by the Administration during the transitional management period
As early as 2009 FIBE filed a complaint with the Regional Administrative Court of Lazio regarding the slowness by the Administration in completing the administrative procedures for the recording and recognition of the costs incurred by the former service contractors for activities carried out pursuant to law and the work ordered by the Administration and performed by the companies during the transitional management period.
Via the various applications to the Regional Administrative Court, FIBE in particular proposed an initiative for the issue of the necessary declaration and satisfaction orders against the local public authorities, also on an admonitory basis. The admonitory motion was denied, as the Regional Administrative Court did not find that there was a justification for issuing a payment injunction. The merits hearing is yet to be held.
The "La Sapienza" University of Rome, as technical consultant appointed by the Regional Administrative Court, made a survey of the amounts indicated by FIBE in its appeal and the underlying documentation, finding substantial correspondence. In addition, the auditor left the Regional Administrative Court to decide the judicial validity of the documents submitted by FIBE, which provide evidence of the work carried out and, lastly, did not render an opinion (because it had not been requested) regarding the amounts reported but not subject to review by the Commissioner’s entities in charge at the time. To review these entries, the Regional Administrative Court will need to raise new specific questions. The appeal remains pending, while awaiting a hearing date to be set.
Delivery of waste to the Acerra waste-to-energy plant
Despite the belief that the obligation to dispose of all the bales produced and stored in Campania (regardless of the solution chosen by the PA concerning which waste to be disposed of first and which subsequently), lies solely with the Administration, with appeal notified on May 18, 2009, RG 4189/09, OPCM no. 3748/09 was appealed against before the Regional Administrative Court of Lazio which established that the delivery of waste to the Acerra waste-to-energy plant of only waste produced and stored after the date of termination of the service contracts (after December 15, 2005) and establishment of the related hearing date is pending.
Payment of the RDF plants
The Regional Administrative Court of Lazio issued ruling No. 3886 on May 5, 2011, on FIBE’s appeal (RG No. 9942/2009) for the local public authorities’ non-payment of FIBE’s non-amortized costs at December 15, 2005, for the Campania RDF plants. It upheld FIBE’s appeal and ordered the local public authorities to pay FIBE €204,742,665.00 plus legal and default interest from December 15, 2005, until settlement.
The Administration proposed several initiatives to avoid payment of the amount due until, with the decision of July 24, 2013, the Enforcement Judge of the Court of Rome awarded FIBE the amount of 240,547,560.96 euros to cover the receivables claimed for the principal amount and statutory interest and suspended the enforcement procedure for the additional amount of interest requested.
Both Parties initiated proceedings and, at the hearing of January 19, 2015 the judge gave the Parties the customary deadlines for submitting their closing statements and relevant counter-arguments.
Still on the subject of payment of the costs not depreciated at December 15, 2005, for the Campania RDF plants measures are being taken to recover the VAT paid on the principal amount collected of €204,742,665.00 ordered to be paid by the judge. The enforcing judge that the company relied on to successfully settle its claim, after concluding that there were some doubts on whether or not the amount recognized was subject to VAT, suspended the enforcement procedure. This ruling was confirmed by the Court en banc session, with its ruling on September 23, 2014. For the recovery of VAT a separate legal action was therefore initiated which on January 28, 2015 led to obtaining an injunction to the Office of the Prime Minister, opposed by the Office of the Prime Minister on March 13, 2015.
Environmental disputes
During the various stages of the SUW Campania projects, the Group had to deal with a large number of administrative measures regarding reclamation and the implementation of safety measures at some of the landfills, storage areas and RDF facilities. The unsuccessfully resolved proceedings are on hold pending the merit hearings. For the proceedings regarding the characterization and emergency safety measures at the Pontericcio site, the RDF facilities in Giugliano, the temporary and permanent storage area at Cava Giuliani, the Regional Administrative Court of Lazio, with rulings 5831 and 6033 of 2012, rejected the appeals filed by Fibe. These decisions, moreover based on contamination found at a site different from those covered by the ruling, was appealed against to the Council of State and the date of the merit hearing is pending. Meanwhile, Fibe is continuing with the characterization operations for the above sites, but this does not constitute any admission of liability whatsoever.
Civil litigation
By a summons served in May 2005, the Government Commissioner filed an action requesting compensation from FIBE, FIBE Campania and FISIA Italimpianti for alleged damages of about €43 million. In the course of the proceedings, the Government Commissioner increased its damage claims to over €700 million, plus a further to claim for damages to its image quantified at €1 billion.
The Companies joined the proceedings and, in addition to disputing the claims made by the Government Commissioner, filed a counterclaim requesting compensation for damage and sundry charges determined in the initial filing at more than €650 million, plus a further to claim for damages to their image of €1.5 billion. More specifically, the respondent Companies complained about the significant delay (compared with the schedule of the 2000 and 2001 contracts) in issuing the permits required to build the waste-to-energy facilities and the resulting delay in the construction of such facilities. These delays led both to a lengthening of the temporary storage period of the so-called "eco-bales" produced and an increase in the volume of stored "eco-bales," which resulted in the need to find bigger storage areas: circumstances that caused the contractors FIBE and FIBE Campania to incur greater costs.
In the same proceeding, the banks that issued FIBE and FIBE Campania’s performance bonds to the Government Commissioner also moved for the Commissioner’s claim to be denied and, in any case, asked to be held harmless by Impregilo from the commissioner’s claims. Salini Impregilo (then Impregilo) joined the proceedings contesting the request of the guarantor banks.
The public prosecutor appealed against the ruling of April 11, 2011, which found that jurisdiction rested with the administrative court and not with the ordinary court. The case was postponed to February 2, 2017.
On August 1, 2012, the Ministry of Justice and the Cassa Ammende summarized before the Court of Milan the ruling concerning the enforcement of guarantees, totaling €13,000,000.00, issued by a number of major banks to guarantee implementation of the requirements imposed by the Public Prosecutor of Naples, in the seizure procedure of the RDF plants.
With decision no. 6907/14 the Court of Milan denied the requests made by Cassa Ammende and by the Ministry of Justice against the banks, UniCredit and ABC International Bank PLC, accordingly declaring the claims for recourse filed by the banks against IMPREGILO and Fibe and the latter against the Office of the Prime Minister absorbed.
This decision was appealed against by the Ministry of Justice and the Cassa Ammende before the Court of Appeal of Milan and the related proceedings were postponed to December 13, 2016 for clarification of the conclusions.
There were also a number of cases recently initiated by public administrations in various capacities interested in challenging the work of FIBE in relation to complex receivables/payables relationships pertaining to the "Contractual" period and to the same
issues subject to claims by FIBE in the administrative courts and on which the activity of the Special Commissioner is still ongoing. Accordingly and comforted by the advice of counsel that supports it in this complex context, the Group believes that FIBE’s fully compliant conduct during the "contractual" period can reasonably be confirmed and that the risk of a negative outcome of these proceedings is merely possible, bearing in mind both the counterclaims and, in any case, the admissibility in the specific case of legal compensation.
Lastly, pending proceedings include a lawsuit in opposition to a payment injunction issued by FS Logistica (formerly Ecolog) against the Office of the Prime Minister for the payment of consideration owed for assignments it received from 2001 to 2008 by the then Government Commissioner for shipment of waste outside Italy. The claim, made through a summary procedure, was lodged against the Office of the Prime Minister which turned to FIBE as guarantor. FIBE, on the one hand, objected pointing out that this request for guarantee was the same as the one already subject of lawsuit filed by the Office of the Prime Minister/Government Commissioner before the Court of Naples and concluded with Decision No. 4253/11, as mentioned above, in which the Court found that it lacked jurisdiction, and, on the other hand and with regard to the counterclaims lodged by the Office of the Prime Minister, noted both the inadmissibility of the counterclaims due to the totally different titles compared with the original claim of FS Logistica and the fact that these counterclaims had already been put forth by the Office of the Prime Minister in numerous other proceedings that are still pending. The judge allowed a court ordered technical expert’s report only with regard to the claims of FS Logistica toward the Office of the Prime Minister and subject of the injunction. The hearing is set for March 20, 2015.
Criminal litigation
In September 2006, the Public Prosecutor of the Court of Naples served Impregilo S.p.A., Impregilo International Infrastructures N.V., FIBE S.p.A., FIBE Campania S.p.A., FISIA Italimpianti S.p.A. and Gestione Napoli in liquidation with a "Notice of the completion of the preliminary investigation about the administrative liability of legal entities" related to the alleged administrative violation pursuant to Article 24 of Legislative Decree No. 231/2001, within the framework of criminal proceedings against some former Directors and employees of the above-mentioned companies, who were being investigated for the crimes subject of Article 640, Sections 1 and 2, No. 1, of the Italian Criminal Code in connection with the contracts for management of the urban solid waste disposal cycle in the Campania region. Following the preliminary hearing of February 29, 2008, the Preliminary Hearing Judge at the Court of Naples granted the motions for indictment made by the Public Prosecutor.
The Court excluded the possibility of allowing parties to seek damages from the public entities involved pursuant to Legislative Decree No. 231/2001 and, consequently, declared that all filings to seek damages from the companies were inadmissible.
As part of these proceedings, the Judge for the Preliminary Investigation ordered, in his ruling on June 26, 2007, the precautionary seizure of the profit from the alleged crime, estimated to amount to about €750 million.
The precautionary proceedings continued for five years and finally ended in May 2012, without any action taken against the Group. On November 4, 2013, the Court of Naples handed down a decision finding all defendants not guilty on all charges. In March 2014, the Naples Public Prosecutor appealed the decision; the date of the related hearing before the court of Appeal of Naples is pending.
***
In 2008, as part of a new investigation by the Court of Naples into waste disposal and related activities in the region carried out after the termination of the contracts by force of law (on December 15, 2005), the Preliminary Investigations Judge, upon a request by the Public Prosecutor issued preventive measures against some managers and employees of FIBE, FIBE Campania and FISIA Italimpianti and managers in the Commissioner’s office. As part of this investigation, which in the record is described both as a continuation of an earlier investigation and as separate proceedings based on new charges, the former contractors and FISIA Italimpianti are again charged with the administrative liability attributable to legal entities pursuant to Legislative Decree No. 231/01.
The preliminary hearing was completed on January 29, 2009 with the indictment of all defendants, while at the hearing held on March 21, 2013, the Preliminary Hearing Judge indicted all defendants and legal entities involved pursuant to Legislative Decree No. 231/2001 for all of the charges in the proceedings before the Court of Rome scheduled for July 16, 2013.
The Court of Rome has acquired the above ruling of acquittal of the defendants issued by the Court of Naples on November 4, 2013, and the trial has been postponed to March 19, 2015 for the beginning of the investigation hearing.
The Group companies involved in the new proceedings firmly believe that their actions were lawful, because their activities were not only expressly mandated by Law No. 21/2006 but were also carried out "merely at the behest" of the Delegated Commissioner.
***
On December 23, 2011, FIBE S.p.A., in its capacity as the legal entity involved pursuant to Legislative Decree No. 231/01, was served with a notice of completion of the preliminary investigations related to another investigation by the Naples Public Prosecutor. The charges are based on a violation of Article 24 of Legislative Decree No. 231/01, concerning commission of the crime pursuant to Article 640, Sections 1 and 2, of the Italian Criminal Code, committed jointly and with the prior agreement of the defendants (individuals) and other parties to be identified, in connection with the management of an urban wastewater purification service based on treatment facilities.
Specifically, certain individuals from the Commissioner’s Officer and FIBE S.p.A. allegedly actively encouraged and induced other competitors to implement stratagems and tricks to hide and conceal the very poor management of the above-mentioned wastewater treatment facilities.
FIBE S.p.A. is a defendant because it allegedly submitted expense reports that, among the other items related to the disposal of USW, included the cost of transporting leachate, while failing to mention the fact that the leachate was transported to facilities without the requisite proper permit and lacked the technical qualifications and residual treatment capacity.
The Preliminary Hearing Judge at the Court of Naples, in the hearing on May 19, 2014, ruled that it lacked jurisdiction, ordering transmission of the documents to the Public Prosecutor of Rome.
We are awaiting the Rome Public Prosecutor’s decision on prosecution.
As it relates to events challenged in the period after the contracts were terminated, when the companies’ activities were not solely specifically covered by Law 21/2006 but also carried out on behalf of the commissioner, the Company is fully convinced that it acted in accordance with the law.
Assessment by the Board of Directors regarding the status of the SUW Campania Projects at December 31, 2014
The general situation of the Salini Impregilo Group with respect to the SUW Campania projects at December 31, 2014 still continues to be extremely complex and uncertain (as can be seen from the complexity of the above information).
The rulings by the administrative courts regarding the claims put forth for the costs of the RDF facilities that had not been amortized when the service contracts were cancelled (December 15, 2005), as discussed earlier in this Report, are positive and extremely important factors, because they support the Group’s arguments regarding the correctness of its conduct and the resulting assessments made to date.
Taking also into account the recent rulings handed down by the administrative judges regarding the previously mentioned environmental issues (which are still pending with regard to merit) and for which the Directors, with the support of the counsel assisting FIBE in the various disputes, deem the risk of an unfavorable outcome to be in the realm of mere possibility, at this time, an accurate timing for the end of the various pending proceedings cannot be reasonably determined.
In view of the complexity and development of the different disputes described in detail in the preceding paragraphs, the possibility that future events, unforeseeable at this point, could occur requiring changes to the assessments made thus far cannot be excluded.