Remarks by Ambassador Phillips at the Bocconi University

Milan, April 21, 2016


Buongiorno and good morning, ladies and gentlemen.  Thank you very much to my friend Bocconi President Mario Monti and Rector Andrea Sironi for the invitation to be here.  Particular thanks to Professor Marco Ventoruzzo for opening his class to me, and allowing me this time with his distinguished students.  I am delighted to join you here this morning at one of the best universities in the world.  In finance, economics, business, law, and management, Bocconi graduates are among the very best, and I know you all have great futures ahead of you that I look forward to hearing more about.

I know that for many of you, a big decision will be where you wish to begin your careers and whether you will find the opportunities you seek here in Italy.   I can bet that for many of you, the pull of your marvelous country – your family and friends – is strong.  Italy has nearly everything anyone could dream of, but many of you may have doubts about whether you will find the necessary opportunities here to begin and advance your careers.

Today I want to talk to you about how Italy can take steps to become a more attractive investment destination, meaning more jobs and more growth.  I’m the American Ambassador; one of my jobs is to encourage Italian investment in the United States and to help facilitate American investment in Italy.  The commercial ties between our two countries are a critically important part of our strategic partnership.

Italy has some good news to tell in the last couple of years about the solid results its reforms have brought, the success of mediation, the reduction in the backlog and duration of cases, the proposals to make the courts more specialized and more efficient, and we’ll talk about them in more detail.  I’m not here to lecture you about what the government should do, but to highlight the positive results to date, offer additional suggestions for how Italy can create more jobs and investment, and respond to the concerns that U.S. CEOs have about the business climate in Italy

We have a program called Select USA to highlight the benefits of investing in the United States.  Each year, we invite companies to come to Washington, D.C. visit, to hear about why there are great investment opportunities for their companies in America.  The companies hear from the President, Secretaries of State, Treasury, Commerce, and from governors of numerous states and other government officials about the benefits of investing in the U.S.  They hear about some of the things we have to offer, including an ease of doing business, efficient courts to resolve disputes, flexible labor laws, a well-trained and well-educated work force, over 300 million consumers, and low energy costs.  They hear from governors who are anxious to offer various inducements including free land, job training, and tax inducements to locate in their state.  Italy could offer some of these same advantages to investors, thanks to recent efforts by your vigorous, young PM Renzi to pass the Jobs Act and to champion reforms to civil justice.  This is the sort of 360 degree approach a government, along with all the other stakeholders – businesses, unions, universities, the courts – needs to adopt in order to compete for investment and jobs in today’s global marketplace.

But now put yourselves in the shoes (which you may one day fill) of the CEO of an international business –considering making a big, capital investment overseas.  As we talk today, ask yourselves the question:  how would I, as CEO, justify an investment in Italy to my board of directors?

Let’s start with the pros that Italy has to offer investors:

Italian design and ingenuity are renowned the world over.  The “made in Italy” brand is synonymous with quality around the world.  Italy is the second largest manufacturer in the Eurozone, and its exports have increased almost 23 percent from 2010 to 2015, despite the economic crisis.  Italian workers are well–educated and creative.  I have visited numerous plants including the FIAT-Chrysler plant in Melfi where they are making Jeeps for the American market and Boeing’s amazing facility in southern Italy where they are making the carbon fiber fuselages for their 787.  They all tell me that Italian know-how is first-class.  From Apple to GE to Eli Lilly, the investments of many U.S. companies are poised to grow, because of the success these companies have already experienced here in Italy.

What else?  Well, Italy now appears to have a stable government that is committed to political and economic reform.  For the first time in a generation, an Italian government is not only proposing reforms –but also approving and implementing them.   Make no mistake; U.S. and other foreign investments are taking notice.

Given these positive factors, what could Italy do better, and how could they do it?  Let’s keep in mind a few things as we get started.  Despite Italy having the fourth-largest economy in the European Union, Italy lags behind its peers in attracting foreign direct investment.  Italy ranks 8th among European companies for U.S. FDI, when it should be number 2 or 3.  FDI creates jobs, (jobs for you), expands the overall economy, and is an important element of a healthy economy.  According to the OECD, Italy ranks ahead of only Greece in the EU in the amount of FDI in the country, as a percentage of its gross national product.  There is a lot of room to move up in those rankings.

The fact is that before making an investment, a company needs to look at not only the positive aspects, but also the worst-case scenario.  What if a customer fails to pay and you need to sue to enforce a contract?

This brings me to my theme for today.  Would you feel comfortable turning to the Italian judicial system in the event that problems like these arise?  A fundamental purpose of government is to create a judicial system that produces efficient, fair, and predictable results when resolving business disputes.  Does Italy have this?  Many potential investors have told me that, simply put, the answer to that question is “no,” and that is the number one reason why they decide against investing in Italy.  They perceive that the risks of not being able to resolve ordinary business problems efficiently and effectively outweigh the benefits of doing business in Italy.

Luckily, your government has recognized this problem.  Prime Minister Renzi has supported a series of important judicial reforms, and Minister of Justice Andrea Orlando has made civil justice reform a top priority.  Their approach has been pragmatic and has focused on the right issues, and it is already starting to show meaningful results.  Having been a lawyer in the United States for over 40 years, I’d like to share with you some of what has worked in the U.S. in the hope of encouraging these already positive steps.

Courts and Civil Litigation/ Structural Issues with Italian Courts:

First, let me focus on the obvious.  Italy’s civil court system is just too slow.  That’s the perception of American investors, and I dare say it’s also the perception of the Italian people, and international institutions.  According to the World Bank’s 2016 report, Italy ranks 111th in the world for the ease of enforcing a contract.  It takes, on average, over three years to get a lower court decision on a simple contract matter.  This is simply too long to expect companies to wait for justice.  The Economist had a chart a few months ago.  See for yourself.

I know that in the last three years, Italy has shaved a couple of months off the average time to conclude a case, a trend I hope continues.

As the old saying goes, “time is money,” and we can’t expect companies to leave thousands, if not millions of dollars tied up in litigation while a case works its way through the system.  In the United States, about 90 percent of cases that are filed settle before trial, because we encourage mediation or working with a judge to settle a case even after its filed.  The parties negotiate and then sign an agreement, and that’s it – no appeals, no waiting to enforce a judgment.  They can go back to focusing on their business.

The need for efficient settlement and alternative dispute resolution in Italy is obvious, and fortunately the government has taken notice.  The current proposed reforms include mandatory assisted negotiation for all disputes under 50,000 euros and making arbitration awards enforceable as if they were judicial judgments.  These are great ideas and I encourage my legal colleagues here in Italy to adapt to these new methods as quickly as possible, for the good of their clients and the Italian economy as a whole.  Because let’s be honest:  we know that attorneys everywhere might have a tendency to drag out proceedings to bill as much money as possible to the client.  But at the end of the day, reputation is everything for a lawyer, and being known as a lawyer who successfully reaches quick and fair resolutions will attract even more clients.

Another issue that we confronted in the U.S. is about court management.  Judges and lawyers are not natural managers; they went to law school, not necessarily to Bocconi.  Some managerial decisions, such as court organization, can be made at a higher level.  The Ministry of Justice has already started by consolidating and eliminating redundant courts, reducing the number of courts in Italy from 1,398 to 650.  The government has also wisely focused on the development of specialized courts, such as business courts.  Such courts are common in the U.S.  But the Italian business courts do not yet have the authority to hear contract disputes.  I hope this changes with the new set of civil justice reforms, now awaiting Senate approval, because it would give potential investors peace of mind to know that contractual disputes, , would be heard by expert judges in an efficient and timely manner.

Courts in Italy also need to move into the digital age.  Here, again, Italy is making progress.  From March 2015 to February of this year, digital court filings in civil cases rose by 244%, a truly impressive figure.  In fact, we think this is such a fundamental issue that we recently hosted several Italian magistrates and attorneys for a visit to the United States to study our system of online court management and filing.

We recognize that some of these changes may be met with resistance.  Judges and lawyers everywhere tend to be traditionalist and resistant to new technology.  I recently read about a judge in Taranto, who was hearing a contract dispute case worth about €200,000, which was filed in 2014.  At a recent hearing, he sent the parties away, without a decision, and told them to come back to court in three years, he was just too busy.  Three years, until 2019!   No one is disputing that Italian judges are some of the hardest-working judges in the world, but it’s not about working hard – it’s about working smart, using technology, for example, and even making some more old-fashioned but very effective changes, such as instituting page limits on briefs submitted by lawyers and enabling judges to write shorter and more summary opinions.  We have such rules in the United States, even in the Supreme Court, and I hope Italy does adopt changes to ease the time required to prepare and read these attorney filings and opinions.  The government has taken very important steps, which we hope judges and lawyers here will accept and appreciate.

I will add one more point here on the legal system.  The appellate court process is too long and uncertain.  It is a drag on companies that want to resolve litigation and move on to the business of doing business.  As I said earlier, in the U.S., more than 90% of civil cases of settle, which automatically eliminates 90% of potential appeals.  For those who do wish to appeal, they can only appeal on certain specific grounds, such as errors of law.  It’s like a pyramid, from the trial court to the Supreme Court, where both the number of cases and the issues at hand get smaller and narrower as you go up.  Appellate court judges cannot reevaluate the facts presented at trial and second-guess the jury or the trial judge.

From what I understand about Italian law, parties here can appeal on much broader grounds, so almost everyone has an incentive to appeal, not just to the Court of Appeals, but all the way to the Court of Cassation.  This creates a climate of uncertainty that is fatal to attracting investment.  One way to change this climate would be to narrow the scope of appeal and allowing upper courts to issue very short and summary orders dismissing frivolous appeals.  Our Supreme Court, by the way, only issues about 80 decisions a year, out of 8,000 requests – one percent!  Almost no one needs to wait for a Supreme Court decision because they take so few cases!

The United States has confronted many of these same difficult issues and found solutions that have worked.  Years ago, our courts also suffered from backlogs and delays, and we worked hard to find the answers.  I’m glad we can share ideas with you, and hear from you about what is working here as well.

Even before opening a business, getting the permits to open up and start operating is a key step.  Italy’s bureaucracy can be a large impediment to getting a new business open.

Italy would be a more attractive destination for foreign investors if the burdens of bureaucracy were eased, especially in the permit process.  According to the World Bank, Italy ranks 46th in the world for the ease of starting a new business.  To start a business in Italy an entrepreneur pays a stamp duty (Marca di bollo) at the local post office.  He or she must execute a deed and company bylaws in front of a public notary, and five different fees must be paid (stamp fee, registration fee, membership fee, registration with chamber of commerce fee and government fee to authenticate accounting books).  This would take at least a week (5.5 business days per World Bank Group’s Doing Business Guide) or 510 minutes compared to 18 minutes in Estonia.  A one-stop shop for all necessary permits would shorten the time needed.  I’m aware that some regions, like Tuscany, have tried this to good effect.  Take a look and see how it’s working, adjust it as needed, and keep it going, nation-wide.

I should add that I am very enthusiastic about the decrees Minister Madia is preparing to implement the Public Administration reform bill approved last year.  I haven’t seen the decrees, but I have heard from many experts that the laws will do a great deal to streamline bureaucracy and improve the business climate in Italy.  I look forward to learning more.  Certainly the Title V changes to the Constitutional reform will also help by rationalizing state-region oversight.  This is critically important, especially for large infrastructure projects; the type that can spur growth and investment.

Unpredictable tax prosecutions and other criminal matters

U.S. investors have expressed concerns about what they perceive to be unpredictable and unfair tax prosecutions.  We agree that tax evasion is a problem in Italy, as it is in the U.S., and needs to be reduced to ensure the more equitable and efficient collection of government revenues.  But we have seen examples of U.S. companies being criminally charged with tax evasion for practices that are considered to be consistent with generally accepted accounting principles elsewhere in Europe and the world.

A large, international technology company which operates in Italy saw Italian prosecutors investigate its top European executives and threaten them with jail sentences for the way the company accounted for revenue among its various international operations.  Every company with operations like this has to go through this same process and this U.S. Company was conducting its business in accordance with internationally generally accepted accounting principles.

Beyond taxes, U.S. investors are also concerned about having to face criminal prosecution for cases that would give rise only to civil litigation in the United States.

For example, in 2014, a local magistrate in Puglia initiated a criminal action against five executives from Standard and Poor’s for their rating decisions on Italian debt.  In the U.S., such a case would be brought as a criminal prosecution only with evidence of specific, fraudulent intent.  Moreover, it is highly unlikely that such a case would be brought outside the major financial centers of the U.S., where prosecutors have both jurisdiction and expertise in securities fraud prosecutions.  Needless to say, it is startling that these executives may be restricted from international travel based on arrest warrants issued in a small city with no direct connection to Standard and Poor’s.

Similarly, in 2012, a local prosecutor took steps to close a coal power plant.  Rather than making a case against the company, or seeking an injunction, he charged top officials with criminal violations of environmental abuse and of causing an environmental disaster.  In the meantime, the court seized the power plant, switched off its generators, and caused the loss of six hundred staff.  Among the accused was the company president; after three years of investigations, the case was still grinding on.

Cases like these are red flags for investors.  If ordinary corporate decisions have consequences like these, and make it impossible for executives to travel for fear of being arrested overseas, why would an investor chose to bring their money here?


At the end of the cycle for some business is bankruptcy.  In America, about half of new businesses fail in the first five years.  It’s an unfortunate thing, but there should be an efficient way to wrap things up for the business and its creditors alike.  What I hear as I talk to businesses is the need for Italy to simplify its bankruptcy system.  I have heard it can take on average as much as two years for a simple bankruptcy and up to nine years to wrap up a bad bank here.  This is too long.  Such a delay contributes to the inability of Italian banks to clean up their balance sheets, stifling the availability of credit for other borrowers.  Either through liquidating their assets or making a new arrangement with their creditors, U.S. companies can complete their bankruptcy proceedings in a reasonable amount of time.  I know Italy has passed some bankruptcy reforms, including those that make it easier to restructure loans; I hope they can be implemented in full as quickly as possible.

Ok, let me wrap up with six specific points that I think would have tremendous benefits to Italy as it tries to become more attractive as a place to invest.

Six -point plan for growing investment in Italy

One:  Reduce civil case duration/ backlog:

The consensus across the political spectrum of Italian government for reaffirming and continuing the important work of civil justice reform is showing results.  The backlog of civil cases fell in Italy by nearly a million and a half cases 2010 through 2015.  In fact, the EU just last week released its Judicial Scorecard for 2016.  Italy ranks first for its “clearance rate” (the ratio of closed cased to newly filed cases) for “litigious civil and commercial cases” and for administrative cases.  This shows the commitment to reduce the backlog of cases and I hope this good work continues.

In the United States, 30-40 years ago, there were many delays in our federal courts.  Through best practices, better management techniques, and technology improvement, things have greatly improved.

Here, managerial reforms for civil courts are a good first step and have proven results in courts that have taken his message seriously.  This was a matter of applying good management to the courts.  Justice Barbuto did so in Turin, and then PM Renzi brought him to Rome to use these techniques across the country.

As I mentioned earlier, I’d do what it takes to reduce verbosity.  Shorter papers by both judges and attorneys would have a great impact on how much work judges could get done and how quickly they could issue judgments and opinions, without compromising fairness.  I know the proposed new reforms attempt to address this problem; I look forward to seeing how it is implemented.

As I said earlier, I also hope you can continue to dedicate the resources to digitalizing your court system.  I also hope that you will find the resources to hire skilled staff to support the work of judges and prosecutors to assist judges with drafting and digitizing court records.  In the offices where this has been tried, the backlog has been reduced 15 percent!  As you can see, it can make a tremendous difference on how efficiently the courts function.

Two:  Expand the use of Alternative Dispute Resolution:

As a result of things like pre-suit mediation and agreed-upon divorce settlements, ten percent fewer cases were filed in 2015 than 2013.  I hope this trend continues, as it will bring benefits for everyone.

ADR in the United States works as a type of private judicial system, available to all at a reasonable cost, and as a way to save time and money compared to proceeding in court.  It is quick, certain, and cheap.  The parties agree on an arbitrator or mediator, typically a well-respected retired judge or attorney.  The parties have more control over the issues, agree to the rules of procedure, set up their own schedule, and agree how to resolve disputes in the lead-up to the mediation or arbitration.  The parties come away from the experience feeling more involved in the process and more satisfied with the outcomes.

ADR has been effective in Italy, and there is room for improvement.  The same EU Judicial Scorecard ranked Italy fifth from the bottom of the 26 EU Member States rated in the category of “promotion of and incentives for using alternative dispute resolution methods.”  When the parties take it seriously, cases settle almost half the time.  Last year alone, 61,135 civil cases were settled by mediation and kept out of the Italian courts.  But, just over half the parties are trying mediation before filing suit, so this is one place where Italy could improve.

This process cuts the time to get a decision by as much as 80-90 percent and saves everyone a great deal in legal fees.  I once had a very complex case that had going on for four years and where the parties had spent millions of dollars in fees, and was probably half-way to being ready for trial.  The presiding judge sent all the parties to talk to another judge, to see if we could settle the case.  We did.  The settlement judge worked with all of us, and we had an agreement within two hours.

I’m planning to bring over an ADR professional later this year to explain to Italian lawyers and judges, and law students, how and why the system works so well.  Let’s see what we can learn from each other to get more cases settled before they are filed using the existing tools Italy already has, and work on developing some new ways to encourage parties to settle even after the case has been filed, and to help add positive momentum to the changing culture about using ADR to settle cases.

Three:  Stop endless appeals

In the United States, courts of appeals generally examine only errors of law made by the judge in court of first instance, rather than providing a de novo review of the facts.  This reduces the incentive for parties to pursue frivolous appeals, enabling the parties to reach a final decision and allowing them to move on with their business.  We applaud the Minister of Justice’s efforts to reform the appellate process in Italy by proposing limits to the scope of appellate review to only those matters actually in dispute (both law and fact) as part of a new package of reforms to civil justice that is making its way through the Parliament.  This is a step in the right direction.  I commend the government for its efforts so far and once again, here I hope the reforms are approved quickly by the Senate and swiftly implemented.

Four:  Expanded Commercial Courts / Special Investment Courts

Italy established 22 commercial courts in 2013 to hear specialized business disputes.  They disposed of 70 percent of their cases within a year, with an average case duration of 263 days, and even more quickly here in Milan, I am told.  This is, of course, much faster than the average for civil cases in regular courts in Italy.  Italy’s most important business paper, Il Sole 24 Ore wrote about these courts and the important role they play in attracting foreign investment.  I agree.  These commercial courts could be used to even greater advantage with a couple of simple changes.  First, they do not hear the most common type of dispute between business partners:  the ordinary contract case.  As I understand, the new package of civil justice reforms includes a provision to expand their reach – this would be a very good step and one I hope to see implemented.  Second, let’s make them the first stop for foreign investors to have their disputes heard.  They are much faster, exactly the type of message Italy should send to foreign investors.  If CEOs understand that there is a good court system to resolve commercial disputes, it will give them more confidence they are making the right choice when investing here.

Specialized judges can be a great benefit to everybody in the court system.  I encourage Italy to consider also having specialized bankruptcy judges to produce quick and consistent results, ones that are fair and transparent to creditors and debtors alike.

Five:  Tax reform measure and putting a stop to unpredictable tax prosecutions

Italy could work with its European partners to devise a European tax scheme for international companies that is fair to companies, fair to European governments and citizens, transparent, and reasonably easy to understand.  If Italy were part of such a system, and companies no longer perceived the risk of arbitrary and capricious enforcement of tax laws, it would be a great way to help attract more business, and to help business to grow.

Italian judges should also be more pragmatic and take into effect the consequences of their rulings.  It is worth recalling what Giovanni Legnini, deputy chairman of the Superior Council of Magistracy, said last summer:  “Magistrates cannot abstain from considering economic consequences of their decisions.  Grasping and foreseeing the impact of judicial decisions on economy and society can no longer be a taboo.”

The point is that legal process ultimately is only a means to an end, not an end in itself.  When cases go on for years and years with no definitive resolution, leaving businesses and families in limbo; or when prosecutors fail to take into account economic and real-world consequences of their actions; or when lawyers write briefs that run into the hundreds or thousands of pages, knowing no one will ever actually read them, the legal process becomes an end in itself and therefore an exercise in futility, or worse – an obstacle to growth.

Six:  Public Administration Reform: 

As was once said, “if you are going to sin, sin against God, not the bureaucracy.  God will forgive you, but the bureaucracy won’t.”  More seriously, ethics and bureaucracy are two sides of the same coin.  To effectuate more transparency, and efficiency, Italy needs to reform and streamline its bureaucracy.  This isn’t about cutting government – though that might be part of it – but inculcating a bureaucracy ready to partner with industry to grow investment – to help get to yes.  Let’s aim to make the impossible possible, and not the possible impossible.  To that end, I look forward to the decree laws on public administration reform.  I have no doubt the government is moving in the right direction.


The Renzi government is moving Italy in the right direction, and it is time to continue to push forward.  I have no doubt that Italy has the capacity to make many changes that would make it a more attractive destination for foreign investment.  I hope Italy leverages its natural strengths and combines them with the new energy that the government’s past and future changes can give them.  As you prepare to take your well-earned places in commerce all around the world, I hope you will carry with you this positive message and take the opportunity to make Italy an even better place to do business.  Remember, creating an environment that attracts new business benefits everyone through economic growth and new jobs.  And, don’t be afraid to celebrate and publicize Italy’s successes, its reforms, its strengths, and all the things it is doing to make it a truly great destination for investments!  Thanks so much for having me here today.