Foreign investors hindered by Italy’s sluggish legal system

With its congested courts and lengthy appeals, Italy’s justice system is known as one of the slowest and least efficient in Europe. But, can Mario Draghi, prime minister, achieve what has eluded his predecessors in the past two decades by speeding up trials to make the system more efficient?

Since Draghi took office, upgrading the justice system has been a critical part of his government’s ambitious multiyear programme of national reform, supported by more than €200bn in grants and loans from the EU.

For years, the system has been blamed for hindering investment and growth in an economy that has barely increased its GDP in real terms since the turn of the century.

For example, Italian courts are still a long way behind their peers in Europe in terms of the time taken to resolve commercial and civil disputes.

According to the European Commission, the average Italian civil law case takes more than 500 days to resolve in the first instance, versus an average of about 200 days in Germany, 300 in Spain and 450 in Greece.

In Italy, cases often go into a lengthy appeal process and have an uncertain duration as well as outcome.

“The justice system needs to regain credibility, make the service of justice more effective and efficient, and provide more incisiveness and answers to the demands of the country,” said Marta Cartabia, Italy’s justice minister, earlier this month at Made in Italy — a digital summit on the country’s future.

Cartabia, a former president of Italy’s constitutional court, was appointed by Draghi in February as part of the commitments Italy made to Brussels in order to receive grants and loans for its recovery spending.

Interventions will be made on “personnel, offices and digitisation for a common goal: to strengthen the efficiency of the machine,” Cartabia said.

She also stressed that Italy’s National Recovery and Resilience Plan (PNRR) would be well served by the goal of reducing by a quarter the time that criminal cases take to be heard within the next five years, and to reduce civil casework times by 40 per cent.

This represents an opportunity for “a great change, for a common purpose that involves seizing the inefficiencies and cutting dead times in the processes,” she said.

At the end of September, the Italian Senate gave the green light to the criminal trial reform, part of a broader set of reforms of the country’s justice system expected to be approved over the next few months.

If the reform were to prove effective, it would certainly have an immediate effect on foreign direct investment

This newly approved reform introduces a cap of two years on appeal trials and a cap of one year for proceedings before Italy’s court of cassation, the highest appeals court in the land.

If these time limits are not respected, the proceeding is automatically annulled, unless the judge decides to extend it for special crimes such as mafia-type association, terrorism, sexual violence, and criminal association for the purpose of drug trafficking.

“The very long duration of trials is a very serious problem for the country’s system, followed closely by the uncertainty of court rulings,” says Francesco Di Ciommo, professor of law at LUISS University in Rome.

“This has so far represented a great uncertainty both for citizens and, above all, for businesses, which need certain timeframes to organise production, investments and obtain the best possible economic result,” he says.

“Through this reform, the government is sending a very clear message: the system, as it is, is not sustainable in the long run. There is a strong determination to improve.”

Cartabia has stressed on several occasions that one simple way to speed up Italy’s courts would be to recruit more judges — a process that the Draghi government has already begun. Another step would be to introduce the Italian equivalent of legal clerks into courts across the country. They would be tasked with assisting judges during cases.

Remarkably, many judges in Italy work alone, meaning they must read every document pertaining to a case without help.

According to Cartabia, the introduction of clerks would help reduce the caseload of individual judges and give valuable experience to a new generation of lawyers and judges who would witness the justice system close up from a young age.

The reform is long overdue, but its success is regarded as crucial for Italy’s economic future.

“This is among the most important reforms to unlock the country’s economy,” says Andrea Giuricin, a professor of economics at the University of Milano Bicocca.

“For all international investors, wiping up uncertainty would be a dream. Lengthy trials in Italy have always been a huge question mark for them,” he says.

“If the reform were to prove effective, it would certainly have an immediate impact on foreign direct investment, which has always been discouraged by the country’s Byzantine bureaucracy. This could finally be the right time to change things.”