Contract Farming: Italian Regulation and Practice

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1 UNIDROIT Working Group for the preparation of a Legal Guide on Contract Farming Second Meeting Rome, 3 6 June 2013 UNIDROIT 2013 Study 80 A Doc. 1 Add. 10 Original: English February 2013 Contract Farming: Italian Regulation and Practice prepared by Ms Francesca Romana Pelosi (Italy; LLM Fordham University School of Law) during an internship at UNIDROIT, 2 May 29 June 2012.

2 CONTRACT FARMING: ITALIAN REGULATION AND PRACTICE * I. Introduction II. The definition of contract farming according to Italian scholars III. Legislative history a. Law No. 88/1988 b. Decreto legislativo (hereafter D.lgs.) No. 102/2005 c. Decreto legge (hereafter D.L.) No. 1/2012 converted into Law No. 27/2012 IV. Practice The supply chain model of Barilla and other manufacturing companies V. Conclusions I. Introduction The Italian economic system has always known vertical coordination and collective agreements in agribusiness. However, there has never been an adequate legislative answer to the issue regarding a direct regulation of contracts of vertical integration between farmers and manufacturing companies, at least not until recently. Indeed, the Italian legislation has for many years preferred to leave the control of agricultural supply to a public system including private collective agreements, rather than to directly regulate private contracts between agribusiness industries and farmers in order to protect the latter. This paper aims to analyze the Italian legislative history and practice for a better understanding of the relationships between farmers and manufacturing companies in Italy. II. The definition of contract farming Professor Antonio Jannarelli, one of the most authoritative experts on the subject, describes contracts of vertical integration (or contract farming) as complex contracts that differ from the mere production and sale of agricultural products to manufacturing companies. In these contracts the main obligation of supplying agricultural products to manufacturing companies is usually accompanied by an exclusivity clause and additional obligations. Indeed, the buyer usually gives some inputs that the producer must use in the production process in order to conform the product to the buyer's specific needs 1. The buyer intervenes in the production process by making some decisions that normally should belong to the producer (e.g. which seeds, feedstuffs and machines must be used, which soil is more suitable for certain kinds of cultivations, when to plant seeds or harvest crops, etc.). The natural consequence is that in contracts of vertical integration the producer's power of decision is restricted in favor of that of the counterpart, which does not happen in a mere sale of goods contract. As already mentioned, the farmer assumes the production costs imposed by the buyer, especially when the farmer is required to buy seeds or feedstuffs from the buyer itself or from a third party indicated by * By FRANCESCA ROMANA PELOSI, LLM (Fordham University School of Law); this paper is the outcome of a research performed on an internship at UNIDROIT, 2 May June Only the annexes referred to in bold letters are reproduced at the end of this document. 1 A. JANNARELLI, Profili giuridici del sistema agroalimentare tra ascesa e crisi della globalizzazione, Cacucci Editore, Bari, 2011, p. 165; I contratti dall'impresa agricola all'industria di trasformazione. Problemi e prospettive dell'esperienza italiana, in Rivista di diritto alimentare ( Anno II, numero 2, Aprile-Giugno 2008, p.5. 1

3 the buyer. Moreover, it is not rare that contracts of vertical integration contain clauses that give the manufacturing companies the right to send their experts to control and/or direct the production process. 2 III. Legislative History Law No. 88/1988 Law No.88/1988 ("Norme sugli accordi interprofessionali e sui contratti di coltivazione e vendita" - Annex 1) was the first statute to regulate the agreements between national associations of producers and national associations of manufacturing companies and distributors (so called "accordi interprofessionali"). Various bills were presented, but eventually only three were selected and gathered into a comprehensive text (Proposta di legge n. 85/1987: "Norme sugli accordi interprofessianali e sui contratti di coltivazione e vendita di prodotti agricoli" - Annex 2) approved in The objectives to accomplish through such agreements were the following: 1) to regulate the amount of agricultural production in order to meet the demand on both the domestic and foreign markets; 2) to improve the product quality; 3) to establish general conditions for the production and sale of goods; 4) to determine in advance the price of the products. As for the duration, these agreements could cover one year or a longer period. The parties had to establish: a) the kind of product covered by the agreement, and the terms of delivery; b) the minimum price or, in case of agreements stipulated for more than one year, the criteria to determine the price; c) the product amount and quality requirements; d) the regulation concerning the performance of both the agreement and the related contratti di coltivazione e vendita; e) the period within which parties to the agreement had to enter into contratti di coltivazione e vendita; f) the procedures to verify the quality requirements of the product; g) the guarantees for the parties; h) the provisions regarding how to perform the agreement and contratti di coltivazione e vendita; i) the technical and financial assistance necessary to improve the quality of the product; j) the creation of committees to verify the regular performance of the agreement and of contratti di coltivazione e vendita. The agreement had to include penalty clauses covering cases of breach or delay in performance. Art. 8 of Law No. 88/1988 named "contratto di coltivazione e vendita" the contract entered into by the single farmer (or even an association of farmers) and the manufacturing company, in compliance with the agreement concluded at national level. By entering into this kind of contract 2 A. JANNARELLI, Profili giuridici del sistema agroalimentare tra ascesa e crisi della globalizzazione, Cacucci Editore, Bari, 2011, p L. PAOLONI, Gli accordi professionali in agricoltura, CEDAM, Roma, 2000, pp

4 the farmer agreed to: a) produce the commodity covered by the agreement, according to the guidelines and technical criteria laid down in the agreement itself; b) deliver the product according to the quantity and quality set in the agreement. On the other hand, the counterpart agreed to: a) take possession of the product according to the quantity and quality set in the agreement; b) pay the price determined in the agreement. According to art. 11 of Law No. 88/1988, the parties had to submit any dispute concerning the interpretation or performance of the agreement or the underlying contracts to the judgment of an arbitration panel consisting of three members. Each party designated an arbitrator, while the third member of the panel was appointed by mutual agreement between the same parties. If there was no mutual agreement, the third arbitrator was appointed by the Ministry of Agriculture. Finally, it is worth noting that Corte Costituzionale declared the unconstitutionality of Law No. 88/1998, in that part in which it did not provide that the arbitral jurisdiction could be waived unilaterally by either party (Annex 3). 4 Comments on Law No. 88/1988 It was noticed that this law focused mostly on vertical agreements, already known in practice, instead of providing a complete regulation of the single contract entered into by the single farmer and the manufacturing company. Professor Jannarelli emphasized that great consideration was given to associations of producers at national level, but not to local farmers. 5 Moreover, it was observed that Law No. 88/1988 did not directly provide remedies in case the single farmer and manufacturer would breach the obligation to conform their contratto di coltivazione e vendita to the terms set in the national agreement. This task was in fact reserved to the associations to which the parties belonged. Such a system could lead to a different treatment depending on the associations involved. There is no doubt that a uniform regulation would be more effective and equal. A possible remedy would be to automatically disregard the clauses that do not comply with the framework agreement; another solution would be to consider those clauses as void. 6 A comparative analysis of Law No. 188/1988 and Law No. 192/1998 Some scholars have also made a comparative analysis of Law No. 88/1988 and Law No. 192/98 on subcontracting ("Disciplina della subfornitura nelle attività produttive" - Annex 4). According to the legal definition, a subcontractor performs its work using raw materials or semi-finished products provided by the general contractor itself, or it provides goods or services that are to be incorporated or used by the general contractor in its manufacturing process. The two laws mentioned above undoubtedly show some similarities. For instance, art. 2 of Law No. 192/1998 provides that subcontracting agreements must be in writing, otherwise they are void. The same obligation could be implied from art. 10 of Law 88/1988, since it required the filing of contratti di coltivazione e vendita with the Ministry of Agriculture. Even though this article did not expressly provide a remedy in case of oral agreements. 4 (access: 7/06/2012, 11:00 AM). 5 A. JANNARELLI, I contratti dall'impresa agricola all'industria di trasformazione. Problemi e prospettive dell'esperienza italiana, in Rivista di diritto alimentare ( Anno II, numero 2, Aprile-Giugno 2008, p L. PAOLONI, Gli accordi professionali in agricoltura, CEDAM, Roma, 2000, pp

5 Art. 5 of Law No. 88/1988 required associations of producers and associations of manufacturers and distributors to set the price of agricultural products (or the criteria to determine it) in their national agreements. According to art. 2 of Law No. 192/1998, the price of products and/or services covered by the contract must be determined or easily determinable. Moreover, art. 8 of Law No. 88/1988 required the parties to the agreement to establish penalties in case of breach or delay in performance; while art. 3 of law No. 192/1998 provides for penalties if the payment is delayed. Despite these similarities, some scholars believed that Law No. 192/98 could not be applied to regulate those aspects of a contract of vertical integration that were not directly regulated by Law No. 88/1988 or by the national agreements between associations of producers associations of manufacturers and distributors. Professor Michele Tamponi stated that contracts for the supply of raw materials, (e.g. contracts for the supply of agricultural products) could not be comprised in the definition of subcontracting. He pointed out the tendency of Italian legislators to keep agricultural activities separate from non-agricultural ones, as confirmed by d.p.r. 24 May 1988 No. 224 regulating the responsibility for the damages caused by defective goods. Indeed, articles 2 and 3 of this statute exclude agricultural commodities from the definition of "product", which refers mainly to manufactured products. Tamponi also noted that while subcontractors perform their work using raw materials or semi-finished goods provided by general contractors, famers do not perform an activity that belongs to manufacturing companies, but provide the latter with raw materials directly produced in their fields. 7 According to Prof. Jannarelli, art. 9 of Law No. 192/1998 (which prohibits enterprises from abusing a client's or supplier's position of economic dependence) could nonetheless apply to contracts of vertical integration covered by Law No. 88/1988, since the legislator did not refer specifically to subcontracting relationships. 8 D.lgs. No. 102/2005 Law No. 88/1988 was replaced by D.lgs. No. 102/ (Regolazioni dei mercati agroalimentari, a norma dell'articolo 1, comma 2, lettera e), della legge 7 marzo 2003, n Annex 5), regulating framework agreements between organizations of producers and organizations of manufacturers/distributors, and contracts (so called "contratti tipo") entered into by farmers and manufacturers/distributors in compliance with the framework agreements. Art. 1 of D.lgs. No. 102/2005 contains a series of definitions: a) "agricultural products" are those products listed in Annex I of the Treaty establishing the European Community, as amended by Regulation (CE) No. 692/2003, and other products classified as "agricultural" by EU Law; b) "producers" are the agricultural entrepreneurs ex art of the Civil Code; c) "producers' organizations" are those organizations that, according to art. 2, proceed to the marketing of goods produced by their own members. d) "manufacturers' or distributors' organizations": those organizations which receive a mandate to represent manufacturers or distributors; e) "intesa di filiera" is the agreement entered into by the national representatives of producers, manufacturers and distributors to enhance the supply chain system; 7 M. TAMPONI, Contratti di subfornitura e contratti agro-industriali: due leggi a confronto, in La nuova Giur. civile comm., 1996, II, 36 ss e in Scritti in Onore di Emilio Romagnoli, Agricoltura e Diritto, Milano, 2004, vol. II, 1303 ss. 8 A. JANNARELLI, I contratti dall'impresa agricola all'industria di trasformazione. Problemi e prospettive dell'esperienza italiana, in Rivista di diritto alimentare ( Anno II, numero 2, Aprile-Giugno 2008, p In November 2011 a bill was presented to modify D.lgs. 102/2005. Since then, however, no other action has been taken: (access: 8/06/2012, 10 AM). 4

6 f) "contratto quadro" is the framework agreement entered into by producers' organizations and manufacturers'/distributors' organizations; this agreement contains general provisions governing the underlying contracts; g) "contratti-tipo" are model contracts (contratti di coltivazione, allevamento e fornitura) that regulate the relationships between producers and manufacturers or distributors. According to art. 2 of D.lgs. No. 102/2005, producers' organizations must have, as their main purpose, the marketing of goods produced by their own members. In particular, they aim to: a) organize the production so to meet the demand, both in terms of quality and quantity; b) directly market their members' products; c) participate in the management of market crises; d) reduce production costs and achieve price stability e) promote farming practices and production techniques that do not damage the environment, in order to improve product quality and food hygiene, protect the quality of water, soil and landscape, promote biodiversity and facilitate traceability procedures, accordingly to the obligations imposed by Regulation (CE) No. 178/2002; f) ensure transparency in the relationships with their members, especially when determining the price of the products; g) implement initiatives relating to logistic; h) adopt innovative technologies; i) facilitate the access to new markets through the opening of branches or offices. Such organizations must take one of the following corporate forms: a) società per azioni (s.p.a.), for the marketing of agricultural products; company shares must be subscribed by agricultural entrepreneurs; b) cooperative agricole e loro consorzi; c) società consortili ex art ter of the Civil Code. Producers' organizations must provide in their bylaws: a) the obligation for their members: 1) to apply the rules dictated by the organization on production, marketing and environmental protection; 2) to become members of one organization only; 3) to allow the organization to sell 75% of their production; 4) to remain members of the organization for at least three years and, in case of withdrawal, to give a six-month notice. b) The bylaws must also comprise: 1) provisions enabling the members to exercise a democratic control over the organization and to avoid any abuse of power or influence of one or more producers over the management of the organization's activities. 2) penalties for the breach of the obligations set in the bylaws, such as the non-payment of financial contributions and the breach of the rules established by the organization; 3) accounting rules. 5

7 To be legally recognized producers' organizations must meet the requirements established by the Ministry of Agriculture (Decreto No. 85/TRAV dated 12 February Annex 6). Producers' organizations may establish a common organization with the following tasks: a) to enter into framework agreements ("contratti quadro") with organizations of manufacturers/distributors; b) to manage market crises; c) to provide funds for the implementation of agricultural programs; d) to coordinate the activities of producers' organizations; e) to promote and develop services to improve the product quality; f) to carry out actions for the support of their members' business activities. Common organizations shall: a) be made up of producers' organizations which market a minimum production volume corresponding to 60 millions; b) have an independent and qualified staff, and adequate facilities; c) have their own bylaws. The Ministry of Agriculture monitors common organizations through acquisition of data concerning their activities and through annual inspections. Moreover, the Ministry shall, after giving notice, withdraw recognition in the following cases: a) loss of one or more of the requirements provided for recognition; b) serious breaches of laws and regulations; c) failure to provide the Ministry with the data concerning the activities of the common organization; d) serious irregularities in the management of the common organization, such to prevent the achievement of its goals. Art. 7 of D.lgs. No. 102/2005 provides that the producers' organizations and their associations create an operational fund with their members' contributions for the implementation of programs aimed at enhancing agricultural production. Art. 8 of D.lgs. No. 102/2005 contains provisions for the management of market crises. In particular, if the market shows generalized and structural imbalances that may have an impact on the product price or the income received by the farmers, producers' organizations may decide not to market their members' products for the period they deem necessary. These organizations pay their members an indemnity, which is equal to the loss of income they experience, using the resources of the operational fund mentioned in art. 7. According to art. 9, the main purpose of an agreement ("intesa di filiera") entered into by the national representatives of producers, manufacturers and distributors is to enhance the supply chain system. However, these agreements may not restrict competition. Art. 10 of D.lgs. provides that for the purposes of art. 33 of the Treaty establishing the European Community, and within the limits laid down in art. 2, paragraph 1, of Regulation (EEC) No. 26/1962, producers' organizations may sign framework agreements with the following objectives: a) to develop business opportunities on the domestic and foreign market, and to organize the production so as to meet the demand both in terms of quality and quantity; 6

8 b) to ensure security of supply; c) to improve the quality of the products; d) to reduce price fluctuations; e) to provide the criteria necessary to adjust the production accordingly to the evolution of the market. According to art. 11 of D.lgs. 102/2005, a framework agreement must define the product, the activities and the geographical area to which it is applicable. Such agreement must also establish the duration and conditions for its renewal, and contain provisions regarding: - causes of force majeure which justify non-compliance with some or all of the obligations assumed by the parties to the agreement; - the identification of an arbitral panel to which submit the resolution of disputes concerning the interpretation or the performance of the obligations set in the framework agreement; - penalties for any breach of the obligations set out in the agreement. The parties to a framework agreement must also determine the model contract regulating the production and supply of the commodities covered by said agreement. To better understand the structure of a framework agreement and model contracts, please read the attached documents (Annexes 7-8). Art. 11 of D.lgs. 102/2005 also provides for the filing of framework agreements and contratti-tipo with the Ministry of Agriculture. With regard to contratti di coltivazione, allevamento e fornitura, art. 12 provides that either party may terminate the contract giving one year notice, but only after the parties have performed their obligations for a whole year. In case of total or partial sale of the business, the transferor must specify in the deed the he has signed a contratto di coltivazione, allevamento e fornitura. The transferee must agree to comply with the terms of said contract. If these provisions are breached, the non-breaching party is entitled to file a lawsuit for damages. The transferor and transferee are jointly liable. The claims of agricultural entrepreneurs against manufacturing companies/distributors are given priority over those of other creditors according to art bis, comma 1, n. 4) of the Civil Code. According to art. 13 of D.lgs. No. 102/2005, manufacturers/distributors must apply all of the terms of the framework agreement even to contratti di coltivazione, allevamento e fornitura negotiated with farmers that are not members of the producers' organizations signing the agreement. On the other hand, farmers that do not belong to producers' organizations signing framework agreements may pretend, when they negotiate contratti di coltivazioni e fornitura concerning products covered by a framework agreement, the application of the clauses of said agreement. The infringement of these obligations is considered a serious breach for the purposes of artt and 1455 of the Civil Code. Consequently, the producers' organizations (or their associations) which signed the framework agreement, or the single farmers that asked for the application of said agreement, are entitled to file a lawsuit for damages. State subsidies are reserved, on the basis of the preference criterion established by art. 14, comma 1, of D.lgs. No. 102/2005, to those farmers who sign contratti di coltivazione, allevamento e fornitura in compliance with the framework agreement. For these purposes, public authorities take the necessary steps to promote and enhance the signature of the contracts referred above. 7

9 Even the Regions may grant subsidies according to the preference criterion ex art. 14 of D.lgs. No. 102/2005. Comments on D.lgs. 102/2005 It has been noticed that this statute differs from Law No. 88/1988 only with respect to the terminology used to name contracts of vertical integration. More precisely, Law No. 88/1988 used the expression "contratti di coltivazione e vendita", while D.lgs. 102/2005 refers to "contratti di coltivazione, allevamento e fornitura". Substantially, D.lgs. No.102/2005 leaves the regulation of said contracts to the framework agreements entered into by organizations of producers and organizations of manufacturers/ distributors. 10 Art. 62 ("Disciplina delle relazioni in materia di cessione di prodotti agricoli ed agroalimentari") of D.L. No. 1/2012 converted into Law No. 27/2012 Recently, the Italian Government has introduced additional provisions with regard to contracts for the sale of agricultural products. These provisions aim to increase the transparency and efficiency of supply chains, eliminate inappropriate behaviors, provide a more effective protection for those who work within a supply chain, and improve financial reporting. 11 According to art. 62 of D.L. No. 1/2012 (Decreto liberalizzazioni - Annex 9), converted into Law No. 27/2012 (Annex 10), contracts for the sale of agricultural products, with the only exception of those entered into with final consumers, must be in writing and must contain clauses specifying the amount and the characteristics of the product, the price, and the terms of delivery and payment. If a contract does not contain these elements, it is void (art. 62, comma 1). Moreover, these contracts must be written so as to satisfy the principles of transparency, fairness and proportionality. Art. 62, comma 2, prohibits a series of unfair trade practices, such as, for example, the use of general conditions of sale that are unduly burdensome. The original text of art. 62 ( see Annex 9), comma 3, of D.L. No. 1/2012 also provided that in case of perishable goods, payment had to be made within 30 days of the date of delivery or of the date of invoice. However, in case of non-perishable goods, payment had to be made within 60 days. This provision has been changed so that the amended text of art. 62 (see Annex 10), comma 3, establishes that in both cases the terms of payment start running from the last day of the month in which the invoice is received. Interests on arrears shall accrue from the day following the expiration of the term of payment. Such interests are increased by 2% with respect to the statutory interest rate, which is 2.5% for the year The law (art. 62, commi 5-7) establishes penalties for the violation of the obligations mentioned above. In particular: a) failure to comply with the obligations (lack of a written contract, violation of the principles of transparency, fairness and proportionality 12 ) ex art. 61, comma 1, is punished with an administrative fine (from 516 to euros), which must be commensurate with the value of the goods sold; 10 A. JANNARELLI, Profili giuridici del sistema agroalimentare tra ascesa e crisi della globalizzazione, Cacucci Editore, Bari, 2011, p. 191; I contratti dall'impresa agricola all'industria di trasformazione. Problemi e prospettive dell'esperienza italiana, in Rivista di diritto alimentare ( Anno II, numero 2, Aprile-Giugno 2008, p (access: 12/06/2012, 10 AM). 12 Id. 8

10 b) the implementation of practices prohibited by art. 62, comma 2, is punished with an administrative fine (between 516 and euros), which must be proportionate to the benefits received by the breaching party; c) failure to comply with the terms of payment established by art. 62, comma 3, is punished with an administrative fine (between 500 and euros), which must be calculated in relation the amount of turnover, the frequency and the extent of the delay. The Italian Competition Authority (Autorità Garante della Concorrenza e del Mercato) 13 enforces these provisions and imposes the fines mentioned above. The non-breaching party is always entitled to file a lawsuit for damages. Lawsuits may be even brought by consumers' associations, which are members of the CNU (Consiglio Nazionale dei Consumatori ed Utenti), and by associations of entrepreneurs represented in the CNL (Consiglio Nazionale dell'economia e del Lavoro) or otherwise represented at national level. The same associations are also entitled to ask an injunction ex artt. 669-bis ss. of the Civil Code prohibiting the behaviors that violate the provisions of art. 62. Finally, art. 62, comma 11, provides that commi 3 and 4 of art. 4 of D.lgs. No.231/2002 and the Decree of 13 May 2003 issued by Ministero delle Attività Produttive 14 are repealed. The provisions contained in art. 62 will enter into force after seven months from the publication of Law No. 27/2012 in the Official Gazette of the Italian Republic. Within three months of the date of publication, the Ministry of Agriculture must issue a decree which specifies how to apply art. 62. IV. Practice The growing shortage in renewable resources is linked to environmental damage, climate change and the excessive exploitation of resources due to an increase in demand and their unequal distribution. Every possible solution has to include a more efficient use of agricultural resources and investment aimed at maximizing accessibility to them. The sustainability of the supply chain is a fundamental priority on which companies in the food sector must take action. This is the only way to ensure the survival of the company in the market place. More specifically, long-term sustainability largely depends on the ability to procure raw materials using methods that do not compromise their future availability despite shortages and increasing evidence of the existence of oligopolies in relation to supplies. This implies that companies in the food industry need to create an independent, integrated system that links and qualifies partners in the supply chain The Italian Competition Authority (Autorità Garante della Concorrenza e del Mercato), better known as the Antitrust Authority, was established in Italy in It is an independent body, meaning that all its decisions are based on the law and it is impossible for the Government or for any political parties to interfere. Having as aim the citizens welfare, the Authority enforces those rules which prohibit anticompetitive agreements among undertakings, abuse of dominant position as well as any possible mergers which may create or strengthen dominant positions detrimental to competition. As of 2007, the Antitrust has been in charge of protecting consumers from any unfair commercial practices among undertakings, as well as from all misleading advertising. In order to guarantee fair market competition, it also intervenes against all comparative advertising which may bring discredit on competitors products or cause confusion among consumers. As of 2004, the Italian Competition Authority has also been in charge of enforcing laws against conflicts of interest for Holders of Public Office: (access: 12/06/2012, 11 AM). 14 Now it is called "Ministero dello Sviluppo Economico" (Ministry of Economic Development): darea1=1665&idarea2=1667&idarea3=0&idarea4=0&andor=and&sectionid=0&andorcat=and&partebassatype=0 &idareacalendario1=0&mvedit=1&showmenu=1&showcat=1&showarchivenewsbotton=0&idmenu=2297&cattitl e1=contents (access: 12/06/2012, 10:30 AM) (access: 13/06/2012, 10 AM). 9

11 The production of cereals in Emilia Romagna The cereal industry in Emilia-Romagna has so far been an organized sector. Recently, such sector has achieved good results in production planning and market placement through cultivation agreements and protocols signed by producers associations, seed selectors and milling industries, in relation to high quality durum wheat production. Producers associations have the task to maximize production planning, to co-ordinate trading as well as to promote the implementation of production standards and traceability paths. The regulation adopted by the local Government of Emilia-Romagna (L.R. 24/2000 "Disciplina delle organizzazioni di produttori e delle organizzazioni interprofessionali per i prodotti agroalimentari" 16 - Annex 11; Delibera di Giunta n. 339/2011 "Disposizioni applicative della L.R. 24/2000" - Annex 12) led to the foundation of many producers' organizations (OP). In particular: - Esperia (established by Consorzio Agrario of Bologna and Modena, and Coop. Terremerse of Ravenna); - OP Grandi Colture ( founded by cooperatives which operate mainly in Ferrara and Bologna); - Cereali Romagna (which includes Consorzio Agrario of Cesena-Forlì and Rimini); - Coop. Padenna (which is expression of Consorzio Agrario of Ravenna); - Progeo. 17 Moreover, it is worth mentioning that the local government of Emilia-Romagna has also approved a "voluntary code of good practice" (Annex 13), which manufacturing companies and distributors in the agricultural sector may adopt. This code provides that: - by adhering to the code of good practice, distributors must give priority to products that exceed the quality requirements set by law, are non-genetically modified organisms and respect animal health and welfare; - distributors do not only comply with the environmental legislation, but also sign supply contracts with manufacturing companies and farmers that comply with the same rules; - distributors and their suppliers must negotiate contracts that expressly establish the sale price and or the criteria according to which such price must be determined. - distributors must comply with the terms of payment set in the contract or provided by law. 18 The Barilla "integrated supply chain" model Many different types of workers contribute to the production of pasta (seed producers, farmers, stockiest, millers, pasta makers, etc.), and each one provides a specific and essential contribution towards a quality manufacturing process. To improve the quality of its products, Barilla operates by integrating itself with the various stages of the manufacturing process. 16 The Region promotes the development of an organizational system in the agricultural sector, by dictating provisions on Producers' organizations and agreements between producers' organizations and manufacturers' organizations, according to specific EU Regulations and art. 12 of D.lgs. No. 173/1998; the Region also grants subsidies in compliance with the EU legislation concerning State aids in the agricultural sector: "Art. 1 Finalità: 1. Con la presente legge la Regione promuove il consolidamento del sistema organizzativo relativo ai prodotti agroalimentari di cui all'allegato 1 del Trattato CE, dettando la disciplina relativa alle Organizzazioni di Produttori,non regolamentate da specifiche Organizzazioni Comuni di Mercato e alle Organizzazioni Interprofessionali,conformemente ai regolamenti comunitari specifici e all'art. 12 del D.lgs. 30 aprile 1998, n Ai fini di cui al comma 1 la Regione concede contributi nel rispetto della presente legge conformemente alla normativa comunitaria vigente in materia di aiuti di Stato nel settore agricolo" (access: 13/06/2012, 11 AM). 10

12 In other words, from sowing to harvesting, Barilla is constantly checking that the parameters agreed with the farmers are correctly applied. Even the "design" stage of the raw material - in this case durum wheat - is closely followed by Barilla in collaboration with highly specialized bodies 19. The selection of seeds starts with the choice of the parent lines to be crossbred based on specific supply chain objectives that will make the sale of the new variety possible. Barilla recently entered into agreements with the "Società Produttori Sementi Bologna" (Society of Seed Producers of Bologna) for the selection of new varieties that must satisfy the requirements of the farming community as well as the food industry. The developed seeds are multiplied and sold to agricultural producers as part of a cultivation arrangements with Barilla. In the Barilla supply chain model, it is Società Italiana Sementi (SIS), a farmers' cooperative based in Bologna, which sells the multiplied seeds to the farmers selected by Barilla. The manufacturing company usually makes arrangements with producers' organizations and cooperatives for the supply of raw materials. The suppliers enter into contracts with the single farmers who, in turn, are also members of the same organizations and cooperatives. In particular, Barilla has entered into three agreements: the first one, promoted by the Emilia Romagna Region, with producers' organizations and cooperatives for the production of high quality durum wheat in Emilia Romagna, the second one with the SIGRAD Consortium (Società Interprofessionale Grano Duro) concerning the production of durum wheat in the Central and Southern part of Italy (Marche, Tuscany and Puglia) and finally the agreement with the Interprovincial Association of Fruit and Vegetable Producers (AINPO) for the supply of tomatoes in the provinces of Parma and Piacenza. These framework agreements contain the provisions governing the single contracts stipulated by Barilla and its suppliers. For instance, the agreement for the production of durum wheat in Emilia Romagna provides three mechanisms according to which it is possible to set the price, with a flexibility that meets the need of farmers to maximize profits, reduce the negative effects of volatility in prices and pursue cultivation of wheat of high quality. The first mechanism sets the price according to the quotes of the Bologna Commodities Exchange, with the addition of awards (up to 32 euros/ton) for the quality of the product and the commitments adopted in compliance with the product specification. The second mechanism allows producers to sell part of their products at a price previously agreed to guarantee an adequate profit margin, or to limit volatility in prices by choosing to refer to a range of oscillations (CAP&FLOOR); the third mechanism is based on the futures prices for soft wheat of the Paris Commodities Exchange, with the addition of an award linked to the difference between the price of durum wheat and that of soft wheat provided by the Bologna Commodities Exchange. 20 Suppliers are usually asked to sign a document, Quality Specifications for the Supply of Raw Material, which sets out the provenance of the goods concerned, their health and safety characteristics, and their chemical, physical and organoleptic properties. For some raw materials, Barilla has introduced paperwork (e.g., Regulations for the cultivation and storage of wheat ) that obliges suppliers to comply with clear rules during the production process. In the case of durum wheat, suppliers are required to meet very strict standards relating to the use of fertilizers and storage processes, as well as quality requirements for the cereal itself. Suppliers are selected on the basis of clear requirements, not only of a commercial and legal kind, but relating above all to the health and safety characteristics of their products. The checklist used is the one used for BRC (British Retail Consortium) and/or IFS (International Food Standard) certification. The BRC (British Retail Consortium) - Global Standard for Food Safety and IFS (International Food Standard) 19 (access: 13/06/2012, 4 PM) (access: 13/06/2012, 4:30 PM). 11

13 are the most common international instruments used by food industry operators to check the quality of their suppliers and thus ensure consumer safety. Quality requirements are reviewed regularly, and suppliers are assessed on each delivery, using a Vendor Rating mechanism. When making deliveries, suppliers are required to produce a Declaration of Conformity that states that the product fully conforms with the specified requirements, in particular with respect to health and hygiene, supported by analytical certificates. Moreover, since 2006, Barilla has been asking its suppliers to provide self-certification regarding environmental, ethical and social issues 21. In conclusion, according the integrated supply chain model mentioned above, a potential supplier is identified by checking the basic prerequisites. Specialized Barilla personnel visit the factory, farm or production site, carry out an audit, and draw up a checklist of safety and quality requirements. Upon the approval of the production site, the supplier is officially registered and required to sign the Quality Specifications for the Supply of Raw Material. Then the supplier is asked to make a first trial delivery. If the registered site is approved for supplying goods, deliveries may begin and Vendor Rating assessments are carried out. Barilla periodically checks on the supplier to confirm the arrangements with the supplier itself. 22 De Cecco All manufacturing companies that produce pasta organize their integrated supply chains according to the same model. Like Barilla, De Cecco S.p.A., another leading company in the market, has entered into agreements with farmers' organizations for the supply of raw material. Like Barilla, De Cecco S.p.A. has made arrangements with SIS (Società Italiana Sementi) for the selection of new varieties of seeds. 23 However, De Cecco purchases wheat not only from Italian suppliers. Indeed, some years ago, the Italian manufacturing company entered into a partnership agreement with Kamut International Ldt., incorporated in the State of Montana (U.S.A.). This agreement contained an exclusivity clause which allowed De Cecco to be the only company in Italy to produce and sell pasta made using the high quality wheat supplied by Kamut. 24 De Cecco has adopted to the SA8000 standard 25 (Annex 15) and has formalized the document of its own Policy for Social Responsibility. The Italian manufacturing company requires that all its suppliers comply with the Principles of Social Responsibility, especially the rules concerning lack of discrimination, child labor, working conditions. Heinz-Plasmon Plasmon is the leading brand of Infant/Nutrition products in Italy, owned by Heinz. 26 After identifying the geographical areas that meet its requirements, the manufacturer enters into contracts with local suppliers. These contracts contain a clause of exclusivity and provisions concerning the transfer of know-how to the famers with the assistance of veterinarians and agronomists sent 21 (access: 13/06/2012, 5:30 PM). 22 Id access: 13/06/2012, 6 PM) (access: 14/06/2012, 9 AM). 25 SA8000 is a global social accountability standard for decent working conditions, developed and overseen by Social Accountability International (SAI). 26 The H.J. Heinz Company, commonly known as Heinz, is a multinational corporation with headquarters in Pittsburgh (Pennsylvania): 0,1254,41_ART_2991,00.html; (access: 14/06/2012, 9:30 AM). 12

14 directly by the manufacturing company. 27 Arrangements are also made with various mills: Molino Grassi, Molino Lario, Molino Seragni and Molino Spigadoro. The manufacturer sets specific procedures for production, harvesting and storage of cereals. To ensure high quality production farmers are selected on the basis of structural and professional requirements. Structural requirements, since the land to be used for cultivation must be kept from pollution and have particular characteristics. Professional requirements, as farmers must be willing to adopt farming techniques with low environmental impact and only use technical means indicated by the manufacturing company. As for the sale price, farmers are recognized additional awards in case all the quality requirements are met. 28 Molini Spigadoro S.p.A. Molini Spigadoro S.p.A. is nowadays a reference point in its field when it comes the production of special types of superior quality flour. In 1992 the company obtained the certification of its Quality System according to ISO Molini Spigadoro controls every stage of the production process. Indeed, the company deals with the following activities: supplier accreditation; selection of land for growing soft wheat; choice of the agronomic criteria for growing wheat functional to obtaining a 100% wholesome product; the manner in which the grain is stored; analysis of the raw material upon its entering the mill. 30 In their arrangements with Molini Spigadoro, the suppliers agree to follow the instructions and recommendations of the experts sent by Molini Spigadoro and Heinz (Plasmon), as it appears in the attached documents (Annex 15-16). Conclusions In light of the legislation and practice analyzed above, it can be affirmed that the regulation of contracts of vertical integration is still left mainly to the agreements between producers' organizations and manufacturers' organizations. The structure of producers' organizations, the requirements for their legal recognition, and the agreements entered into with manufacturing companies are regulated by D.lgs. 102/2005, which is still in force, and by laws enacted at regional level. With regard to contracts for the sale of agricultural products, Art. 62 of D.L. No. 1/2012 converted into Law No. 27/2012 has introduced few provisions, the most important of which is the one concerning the terms of payment. It is necessary to wait for the decree of the Ministry of Agriculture to see how this system will work in practice. The debate is still open among those who operate in the sector of agricultural production and distribution. It is worth noting that there are still many aspects of these contracts which are not covered by the legislation: such as the transfer of know-how from the manufacturing company to the farmers, cases of force majeure, etc. In their collective agreements the organizations of farmers and manufacturers AM) (access:14/06/2012, 10 AM). (access: 14/06/2012, 10:30 (access: 14/06/2012, 11AM). (12/06/2012). 13

15 include clauses to regulate these aspects. However, where no provision is made, the general rules of the Civil Code governing contracts will apply. BIBLIOGRAPHY A. JANNARELLI, Profili giuridici del sistema agroalimentare tra ascesa e crisi della globalizzazione, Cacucci Editore, Bari, 2011 L. PAOLONI, Gli accordi professionali in agricoltura, CEDAM, Roma, 2000 M. TAMPONI, Contratti di subfornitura e contratti agro-industriali: due leggi a confronto, in La nuova Giur. civile comm., 1996, II, ed in Scritti in Onore di Emilio Romagnoli, Agricoltura e Diritto, Milano, 2004, vol. II. INTERNET SOURCES Normattiva: Camera dei deputati: Mipaaf: Agreste: AgroNotizie: Il portale della Regione Emilia-Romagna. Agricoltura Alimentazione, Sviluppo Rurale, Economia Ittica, Attività faunistico-venatorie: Barilla: Europass: Terremerse: Molini Spigadoro: 14

16 CONTRATTO QUADRO Ai sensi degli articoli 10 e 11 del Decreto legislativo 27 Maggio 2005 n. 102, per prodotto da utilizzare ai sensi dell articolo 2 quater della Legge 11 marzo 2006 n. 81. TRA - COLDIRETTI, con sede in Roma, via XXIV Maggio 43, Organizzazione di imprese agricole, in persona del legale rapp.te Presidente Paolo BEDONI; - CONFAGRICOLTURA, con sede in Roma, Corso Vittorio Emanuele II 101, Organizzazione di imprese agricole, in persona del legale rapp.te Presidente Federico VECCHIONI; - CONFEDERAZIONE ITALIANA DEGLI AGRICOLTORI, con sede in Roma, Via Mariano Fortuny 20, Organizzazione di imprese agricole, in persona del legale rapp.te Presidente Giuseppe POLITI, di seguito denominata per brevità C.I.A. - COPAGRI, con sede in Roma, Via Calabria 32, Organizzazione di imprese agricole, in persona del legale rapp.te Presidente Giovan Battista Aiuto. - UNIONE SEMINATIVI, con sede in Roma, Lungotevere Michelangelo 9, Unione nazionale di organizzazioni di produttori, in persona del legale rapp.te, Presidente Giorgio Morini; E - ASSITOL e ASSOBIODIESEL, con sede in Roma, Piazza Campitelli 3, Organizzazioni di imprese di trasformazione, distribuzione e commercializzazione di prodotti agricoli e di prodotti per l agricoltura, nella persona dei rispettivi Presidenti e del legale rapp.te Presidente Leonardo COLAVITA. - PREMESSO a. che gli articoli 10 e 11 del Decreto legislativo 27 maggio 2005 n. 102 prevedono che i soggetti economici costituiti da Organizzazioni di produttori e Organizzazioni di imprese di trasformazione, distribuzione e commercializzazione possano sottoscrivere contratti quadro relativi ad uno o più prodotti agricoli aventi per oggetto la produzione, la 1

17 trasformazione, la commercializzazione, la distribuzione dei prodotti stessi, nonchè i criteri e le condizioni generali che le parti si impegnano a rispettare; b. che la Direttiva 2003/30/CE del Parlamento Europeo e del Consiglio dell 8 maggio 2003 stabilisce che gli Stati Membri provvedano affinché una percentuale minima di biocarburanti o di altri carburanti rinnovabili nei trasporti sia immessa sui loro mercati e a tal fine stabiliscono obiettivi indicativi nazionali; c. che la legge 81 dell 11 marzo 2006, ai commi 2 e 4 dell art. 2 quater, detta disposizioni per la produzione di biocarburanti di origine agricola, oggetto di un contratto quadro o di una intesa di filiera; d. che i commi 421 e 422 della legge 266/2005, prevedono che 40 mila tonnellate del contingente di biodiesel esentato da accisa sono da ottenere attraverso contratti di coltivazione realizzati nell ambito di contratti quadro o intese di filiera; e. che il decreto del Ministro delle politiche agricole alimentari e forestali n. 674/TRA V del 30/11/06, in attuazione dell articolo 10, comma 2 del Decreto legislativo 102/05, definisce, con riferimento alla filiera agroenergetica, le modalità di stipula dei contratti quadro in mancanza di intesa di filiera; f. che COLDIRETTI, CONFAGRICOLTURA, C.I.A e COPAGRI sono Organizzazioni professionali di produttori agricoli, con rappresentatività su tutto il territorio nazionale; g. che l Unione Seminativi è riconosciuta quale Unione nazionale di associazioni di produttori agricoli, con rappresentatività su tutto il territorio nazionale deputata alla negoziazione del prodotto. h. che ASSOBIODIESEL, ASSITOL e ASSOCOSTIERI sono Organizzazioni di imprese di trasformazione, distribuzione e commercializzazione, con rappresentatività su tutto il territorio nazionale; i. che le parti si impegnano a valutare la possibilità di stipulare altri contratti-quadro relativi a colture oleaginose, non comprese nel presente contratto; j. che, con riferimento alla coltura della soia, le Parti si impegnano al suo inserimento nel presente Contratto, a completamento delle verifiche di compatibilità con gli accordi internazionali e la normativa comunitaria; k. che il presente contratto-quadro, successivamente alla stipula, potrà essere sottoscritto anche da altri soggetti, in possesso dei requisiti previsti dal Decreto legislativo 102/05 e successivi provvedimenti di attuazione; 2

18 l. che l articolo 11, comma 6 del Decreto legislativo 27 maggio 2005 n. 102 prevede che il Ministero per le politiche agricole alimentari e forestali e le Regioni interessate, al fine di fornire informazioni ai soggetti interessati, pubblicano sul proprio sito i contratti quadro ed il contratto tipo; il Ministero, le Regioni e le Parti possono concordare, successivamente alla stipula del presente Contratto, iniziative finalizzate alla divulgazione del Contratto quadro; m. che l articolo 14 del Decreto legislativo 27 maggio 2005 n. 102 prevede che la stipula di singoli contratti di coltivazione, conformi ai contratti quadro, costituisce criterio di preferenza, secondo le modalità stabilite in ciascun bando di partecipazione, per attribuire contributi statali per l innovazione e la ristrutturazione delle imprese agricole, agroalimentari e di commercializzazione e vendita dei prodotti agricoli; n. che la legge 81 dell 11 marzo 2006, al comma 6 dell articolo 2 quater prevede che la sottoscrizione di un contratto di coltivazione e di fornitura costituisce titolo preferenziale: nei bandi pubblici per i finanziamenti delle iniziative e dei progetti nel settore della promozione delle energie rinnovabili e dell impiego dei biocarburanti; nei contratti di fornitura dei biocarburanti per il trasporto ed il riscaldamento pubblici; o. che la Circolare dell Agenzia per le Erogazioni in Agricoltura- AGEA- prot del 12 giugno 2006, disciplina le condizioni di ammissibilità al regime di aiuto per le colture energetiche stabilito ai sensi del Reg. (CE) 1782/2003, con allegato il Modello BE, contratto di fornitura della materia prima ottenuta dalla produzione di colture utilizzate per la fabbricazione di prodotti energetici che costituisce il modello di contratto-tipo di coltivazione da adottare nella stipulazione dei singoli contratti di coltivazione p. che la Circolare dell Agenzia per le Erogazioni in Agricoltura- AGEA- prot del 12 giugno 2006, disciplina le modalità relative all uso di superfici ritirate dalla produzione allo scopo di ottenere materie prime, ai sensi del Reg. (CE) 1782/2003, con allegato il Modello BN, contratto di fornitura della materia prima ottenuta su terreni ritirati dalla produzione utilizzate per la fabbricazione di prodotti non destinati in via principale all alimentazione umana e/o animale che costituisce il modello di contrattotipo di coltivazione da adottare nella stipula dei singoli contratti di coltivazione; q. che il DPEF indica che lo sviluppo delle agroenergie sarà ottenuto rafforzando le potenzialità della L. 81/2006 ; 3

19 TUTTO QUANTO SOPRA PREMESSO E RITENUTO SI CONVIENE E SI STIPULA QUANTO SEGUE Articolo 1 Premesse ed allegati Le premesse e tutti gli allegati costituiscono parte integrante e sostanziale del presente contratto. Articolo 2 Definizioni Ai fini del presente contratto quadro, quali definizioni di specificazione o aggiuntive rispetto a quelle di cui al capo primo articolo 1 del Decreto legislativo. 27 maggio 2005 n. 102, si intendono: a. prodotto o prodotti : il seme di colza, girasole, girasole alto oleico, brassica con destinazione ad uso energetico ai sensi dell art. 2 della Legge 11 marzo 2006 n. 81, commi 2 e 4, previo idoneo processo industriale di trasformazione, comunque prodotti (ottenuti da terreni eleggibili a uso energetico o set-aside); b. Contratto: il presente contratto quadro; c. tutte le Parti: congiuntamente le Parti del presente Contratto; d. Campagna: si intende l anno di presentazione della domanda PAC; e. Contratto-tipo di coltivazione: si intendono i modelli di contratti di fornitura della materia prima ottenuta dalla produzione di colture utilizzate per la fabbricazione di prodotti energetici e di prodotti, di cui al punto a. del presente articolo, utilizzati per la fabbricazione di prodotto non food, allegati alle Circolari AGEA prot e del 12 giugno Articolo 3 Finalità Con il presente Contratto tutte le Parti intendono sviluppare sinergie nel processo di programmazione e sviluppo della diffusione della coltivazione e produzione dei prodotti, in particolare ed in prima istanza il seme di colza, in funzione degli obiettivi di sviluppo delle colture ad uso energetico previsti dall articolo 2 quater, commi 2 e 4, della legge 11 marzo 2006 n. 81 e successive leggi. 4

20 Vengono individuati, pertanto, i seguenti obiettivi primari: A. Orientamento dell offerta alla domanda. Tenuto conto del recente sviluppo del mercato nazionale delle colture ad uso energetico e della necessità di iniziare sul territorio nazionale la conversione di terreni a tali colture o di quanto già prodotto alla predetta destinazione, tenuto conto della prevedibile maggior ampiezza della domanda rispetto all offerta, tutte le Parti ritengono prioritario perseguire la maggior estensione possibile delle coltivazioni, privilegiando le colture a maggior resa in termini di olio estraibile, in primo luogo il seme di colza e di girasole, e conseguente valorizzazione del prodotto per la parte agricola, in vista di una graduale maggior armonizzazione dell offerta nazionale rispetto alla domanda determinata dagli obblighi previsti dall articolo 2 quater, secondo comma, della legge 11 marzo 2006 n. 81 e successive leggi. Per l orientamento dell offerta nazionale alla domanda nel mercato interno, le Parti si impegnano quindi a promuovere presso i propri associati, anche attraverso una redistribuzione dei relativi vantaggi economici, la programmazione degli investimenti colturali dedicati ai prodotti, in particolare per la campagna a seme di colza e di girasole, al fine del raggiungimento degli obiettivi di cui al precedente comma 2. Nell ambito dell obiettivo di maggior sviluppo possibile delle coltivazioni, tutte le Parti hanno formulato i seguenti obiettivi, in relazione alle previsioni iniziali in un comparto di nuovo sviluppo: - per campagna di semina (Domanda PAC 2007), circa ettari, considerando tutti i semi oleosi oggetto del presente contratto. A titolo indicativo, ai fini di una preliminare determinazione dei quantitativi di biodiesel corrispondenti agli obblighi del presente Contratto, per il primo anno, si considera un rapporto di conversione pari ad 1 ettaro di superficie coltivata/ 1 tonn. di biodiesel prodotto, salvo procedere, a consuntivo, ad eventuale conguaglio. - per campagna , circa ettari, considerando tutti i semi oleosi oggetto del presente contratto; 5