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15 April 2019
In June 2017 Sardinia's regional authority revoked the single authorisation granted to an agricultural limited liability company in October 2010 for the construction and operation of a photovoltaic (PV) plant on the rooftops of certain greenhouses located in the municipality of Bonnanaro, in the province of Sassari, pursuant to Article 12 of Legislative Decree 387/2003. The main reason which led the region to revoke the single authorisation was that the company had allegedly lost both its status as an agricultural company and the availability of the land because it had granted a third party a licence to use the land with the obligation to cultivate it.
The company filed an appeal with the competent regional administrative court within the 60-day statutory period to obtain the annulment of the revocation order. The grounds for the company's appeal are summarised below and are both procedural and substantive.
From a procedural perspective, according to the plaintiff, Sardinia's regional authority should have issued a letter of formal notice, possibly followed by a suspension order. The company argued that the regional authority had violated the proportionality principle by issuing the revocation order directly.
From a substantive perspective, the plaintiff relied on Article 2135 of the Civil Code and Article 1(423) of Law 266/2005. These articles provide that anyone that exercises any of the following activities can be classified as an agricultural entrepreneur:
The production and sale of electrical and thermal energy from agroforest renewable sources up to 2,400,000 kWh per year and PV sources up to 260,000 kWh per year are deemed to be an ancillary activity productive of agrarian income.
By means of Ruling 90 of 4 February 2019, the Regional Administrative Court of Sardinia fully accepted all of the grounds of appeal brought by the plaintiff and annulled the revocation order issued by Sardinia's regional authority.
According to the court, anyone performing ancillary activities to agricultural activities in the sense of Article 2135 of the Civil Code and Article 1(423) of Law 266/2005 can be classified as an agricultural entrepreneur; therefore, the plaintiff could be considered an agricultural entrepreneur even though the only activity that it directly carried out was the production of electricity from renewable energy on agricultural land.
It was irrelevant that the land cultivation activity was performed by a third party that was not the holder of the single authorisation. It was instead significant that the land was cultivated, regardless of whether the cultivation activity was only indirectly carried out by the holder of the single authorisation (as licensor) through a third party (as licensee).
The relevant legislation seeks to encourage the production of energy from renewable energy sources and, when it comes to the authorisation of industrial renewable energy plants on agricultural lands, the competent region (or province, as the case may be) should look to the provision set out by Article 12(7) of Legislative Decree 387/2003, which allows the installation of such plants on land classified as agricultural areas under the applicable local town-planning regulation (to the extent that local agro-food traditions, biodiversity, cultural heritage and rural landscape are safeguarded as well).
However, according to leading case law, the rationale underlying Article 12(7) is not to authorise as a general rule the construction of industrial renewable energy plants on any agricultural land, but to confer on the competent regions (or provinces, if empowered by the regions, as the case may be) powers to assess and, perhaps, authorise renewable power projects on certain agricultural land. According to this reasoning, Article 12(7) is not a general automatic waiver allowing the installation of industrial renewable energy plants on agricultural lands contrary to the relevant municipal town-planning classification, but rather a tool that the competent region (or province) may use to authorise the siting of a plant on agricultural land.
Further, especially when it comes to PV plants built on greenhouses or plants fuelled by biomass and biogas, the agricultural side of the project must be genuine. Certain regions have introduced requirements for a minimum threshold of agricultural production to be met as compared to the production of energy for minimum levels of illumination to be fulfilled under the greenhouses and for an adequate business plan justifying the decision to implement the energy project.
Agricultural activities are not reserved to natural persons only. In fact, overcoming the limitations provided under Article 9 of Law 153/1975, which allowed only natural persons to be recognised as agricultural entrepreneurs, Law 57/2001 and Legislative Decree 228/2001 allow legal persons (eg, partnerships, limited liability companies and cooperatives) to be recognised as agricultural entrepreneurs. Legislative Decree 99/2004 has further specified the definition of an 'agricultural entrepreneur' by introducing the categories of 'agricultural company' and 'professional agricultural entrepreneur', mainly for tax purposes.
Under Legislative Decree 99/2004, an 'agricultural company' is a company which meets the following formal requirements:
By contrast, the status of professional agricultural entrepreneur may be granted only on application to the competent region, which must verify that the applicant is a natural or legal person which exercises, directly or indirectly as shareholder of a company, agricultural activities for at least 50% of its time and that it gains at least 50% of its global income from such activities.
In the case at hand, the court considered an agricultural company in the form of a limited liability company. The most innovative (and surprising) aspect of the ruling was that the production of electricity from renewable energy is sufficient ex se to qualify the plaintiff as an agricultural company "irrespective of the actual and direct exercise of land cultivation". However, in other more prudent passages of the ruling, the court emphasised that the cultivation activity could be carried out "even through a third party, as licensee".
While it is reasonable to conclude that the holder of the single authorisation may exercise cultivation activities through a third party, verification as to whether said holder has the rights to use the land where the plant is installed (plus, especially in the case of biomass or biogas plants, the availability of additional plots of land where cultivation activities may be performed) and that such land is actually cultivated, albeit by a third party, is at the heart of the matter.
Another interesting aspect of the ruling is that no reference was made to the need to qualify as a professional agricultural entrepreneur for tax purposes to construct and operate lawfully a PV greenhouse (and, by analogy, a biomass or biogas plant). This is an important conclusion that confirms that the lack of qualification as a professional agricultural entrepreneur should not jeopardise the right to operate the plant and to receive incentive tariffs on the production of renewable energy.
For further information on this topic please contact Arturo Sferruzza or Ginevra Biadico at Norton Rose Fulbright Studio Legale by telephone (+39 02 8635 941) or email (firstname.lastname@example.org or email@example.com). The Norton Rose Fulbright Studio Legale website can be accessed at www.nortonrosefulbright.com.
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