Italy introduced a bill in 1988 that encouraged agricultural enterprise in less developed areas of the country by introducing a number of tax reliefs for companies. These tax reliefs allowed firms to cut by half the amount of health benefit contributions they had to pay for their employees. The Istituto Nazionale della Previdenza Sociale (INPS), Italy’s disbursement authority, subsequently issued an interpretation of the law that these benefits were to be applied alternatively, not cumulatively.

Legal challenges and a retroactive law

Four Italian firms, making use of the tax reliefs, filed legal challenges against INPS’s interpretation of the law, arguing that the benefits should be able to be applied cumulatively. They sought a refund for the amount they would receive under this interpretation of the law. The first-instance and appellate courts in Italy sided with the companies.

In November 2003, following the lower courts' decisions but before all appeal options had been exhausted, Italy passed Law no. 326, which clarified that the concessions could not be applied cumulatively. With the passage of the law, INPS appealed to the Italian Court of Cassation, which then overturned the previous rulings, citing Law no. 326. The 2007 ruling by the Court of Cassation held that the legislature is able to enact laws that apply retroactively, so long as the retroactivity was reasonable and justified.

A violation of the right to a fair trial

The companies took their case to the European Court of Human Rights, accusing Italy of violating Article 6 § 1 of the Convention on Human Rights (the right to a fair trial) by introducing retroactive legislation during the course of a lawsuit that was then used to determine the outcome of the case. The firms also argued that the revised bill deprived them of their property by retroactively terminating their claims to money withheld by INPS.

In their judgment on the case Azienda Agricola Silverfunghi S.A.S. et. al. v. Italy, issued July 24, 2014, the Court acknowledged a violation of Article 6. Even assuming the new law was necessary to clarify existing legal uncertainties, the circumstances of the case, especially the public interest associated with its implementation, were not more important than the danger of retroactive legislation. The ECtHR found no compelling public interest excuse for its retroactive application.

"Wide margin of appreciation"

In assessing the companies’ claim of a violation of property rights, the ECtHR determined that it is necessary for all tax laws to maintain a just balance between the fiscal interests of the state and the protection of individual rights. The Court said that states should be given a "wide margin of appreciation" in determining fiscal policy and setting the balance between their social and economic policies. Because of this, Italy’s determination that the tax law must be applied alternatively was legal, as it was aimed at decreasing public spending, which is a burden of the taxpayers.

This judgment demonstrates the Court’s hesitancy in extending to corporations the rights enjoyed by individuals under the Convention. The Court’s decision that the firms’ property rights were not violated was made under the margin of appreciation principle, wherein the Court acknowledges that the Convention will be interpreted differently in different member states. It should also be noted that this case marks a continuation in the trend of the ECtHR to spread the Convention’s protection of public levies.