Snam is involved in civil, administrative and criminal cases and legal actions related to its normal business activities. According to the information currently available and considering the existing risks, Snam believes that these proceedings and actions will not have material adverse effects on its consolidated financial statements. The following is a summary of the most significant cases; unless indicated otherwise, no allocation has been made for the litigation described below because the company believes it improbable that these proceedings will have an unfavourable outcome or because the amount of the allocation cannot be reliably estimated.
Criminal cases
Italgas S.p.A. – Judiciary investigations into gas metering
In May 2007 Italgas received notice of a local search and seizure proceeding within the framework of Case No. 11183/06 RGNR brought by the public prosecutor of the Milan district court. The document was also served upon the Chairman of the company. The charge alleged unlawful conduct starting in 2003 relating to the use of gas metering equipment, the payment of excise duties, the billing of customers and relations with the supervisory authority.
Among other things, the charges relate to offences established in Legislative Decree No. 231 of 8 June 2001, which provides for administrative liability of a company for crimes committed by its employees in the interest or to the advantage of the company itself.
In December 2010 a notice of conclusion of preliminary investigations was received relating only to the specific matter of using Venturi-type metering equipment installed in various Milan municipalities, at the connection stations between the national natural gas transportation networks and the local natural gas distribution networks. It should be noted that the public prosecutor of Milan presented (under the scope of case No. 11183/06) a Request for Dismissal.
At the same time it was learnt that the Milan public prosecutor transferred the jurisdiction of the prosecution relating to the metering systems installed in the province of Monza (alleged violation pursuant to Article 472 of the Italian Criminal Code) to the Monza public prosecutor. Lastly, the Judge for the preliminary investigations at the Court of Monza extended the term for the preliminary investigations (criminal case No. 14477/10 RGNR).
The company is cooperating with the appropriate authorities in this investigation.
Snam Rete Gas S.p.A. – Judiciary investigations into gas metering
The public prosecutor at the Milan district court has commenced a criminal case on the issue of gas metering and the legitimacy and reliability of what are referred to as the Venturi meters. This has involved several companies in the gas sector.
Snam Rete Gas and some of its managers are also involved in the case and the Mazara del Vallo metering system has been placed under precautionary seizure; the company is under investigation pursuant to Articles 24 and 25- ter of Legislative Decree No. 231/2001.
In November 2009, notice of conclusion of preliminary investigations was received, within the context of the aforementioned broader criminal case relating to the gas metering system, concerning a matter pertaining particularly to tax issues deemed of a criminal nature.
Some managers and department heads (including some no longer employed by the company) are under investigation with regard to various matters.
The period under investigation is a time span that, in total, covers the years from 2003 to 2007, relating primarily to annual natural gas consumption reports and to assessment and/or payment of excise duties on natural gas, as well as to possible obstruction of supervisory duties.
On 31 May 2011 the public prosecutor at the Milan district court put forward a request for dismissal pursuant to Article 425 of the Italian Code of Criminal Procedure in relation to indictment No. 6 of the request to trial.
The act refers specifically to disputed offences under Articles 472 and 110 of the Italian Criminal Code with regard to certain Snam managers and subject of the Request for Dismissal relating to the CEO.
On 5 October 2011 the public prosecutor of Milan presented a further request to the judge at the preliminary hearing not to proceed, with regard to the CEO, with reference to the disputed violation of the provisions in Article 2638, paragraph 2 of the Italian Civil Code, restricted to the failed notification of the AEEG (Electricity and Gas Authority) as per Resolution 137/02, Article 7, paragraph 4, letter b.
At the outcome of the preliminary hearing held on 24 January 2012, the preliminary hearing judge (G.U.P.) did not find the existence of facts to support the case and acquitted all the Snam S.p.A. and Snam Rete Gas S.p.A. (or former Snam Rete Gas S.p.A.) employees/managers with regard to all counts which were the subject of this dispute.
The assistant public prosecutor has filed for an appeal before the Court of Cassation at the Milan district court. The appeal relates to only some of the acquitted defendants.
Civil and administrative litigation
Snam Rete Gas S.p.A. – Dispute concerning Impresa Unione S.p.A., in liquidation
By sentence numbers 20153/11 and 20154/11 handed down on 3 October 2011, the Supreme Court of Cassation, ruling on two appeals submitted in 2006 by Impresa Unione S.p.A., in liquidation, concerning the execution of works relating to the project to upgrade the “Algerian” pipeline, against Eni S.p.A. and Snam Rete Gas S.p.A. (RG numbers 18592/06 RG and 18593/06), upheld the first grounds for these appeals and declared inadmissible the previous appeal submitted by Snam Rete Gas.
The Court of Cassation thereby overturned, without adjournment, Milan Appeal Court sentence numbers 1032/05 and 1033/05, thus making absolute the sentences of the court of first instance which ordered Snam S.p.A. (subsequently incorporated into Eni S.p.A.) to pay L14.8 billion and L16.4 billion respectively, plus costs, to Impresa Unione.
Following the judgment by the Court of Cassation, Snam Rete Gas S.p.A. made a payment of €19.6 million within the limits of the amounts allocated to the provision for risks and charges at the time of the transfer, suitably adjusted.
Snam Rete Gas S.p.A. – Recovery of amounts for improper withdrawals of gas
Eni S.p.A. has involved Snam Rete Gas S.p.A. in civil proceedings against end customers for the recovery of amounts for improper withdrawals of gas by said end customers, asserting that they did not behave in compliance with the role attributed to them by the Network Code.
Eni S.p.A. also challenged Resolution 268/05 of the Electricity and Gas Authority, which introduced into the provisions of the Snam Rete Gas Network Code the mandatory presence of a representative of the end customer in order to be able to carry out the so-called “dumping” of pipes at the redelivery points under safe conditions. With a ruling on 1 December 2011, the Lombardy Regional Administrative Court upheld the appeal and annulled the part of said Resolution that imposed the above-mentioned obligation. In accordance with the procedure for amending the Network Code, Snam Rete Gas has drafted the resulting changes to the Code. These must be submitted to the Electricity and Gas Authority for approval.
Snam Rete Gas believes that it has always acted correctly and in full compliance with the terms of the transportation agreement, the Network Code, related application procedures and, in general, the legal and technical rules of conduct. Having consulted an independent legal expert, who claims that the compensation claim is unlikely to be upheld, Snam Rete Gas remains convinced that any criticism of its conduct is unfounded.
Competition Authority
Italgas S.p.A. – Investigation of the gas distribution sector in Italy
The Competition Authority, in its session of 13 October 2010, started an investigation to determine whether Italgas had abused its dominant position, obstructing the Municipalities of Rome and Todi in preparing their calls for tenders for the contracting of gas distribution services.
The decision was taken in light of indications sent to the regulator by two local entities accusing the company, as gas distribution service concessionaire, of having delayed or refused to give the necessary information to the authorities to prepare calls for tenders for contracting the service.
Italgas contested the Competition Authority’s charges, justifying its behaviour, both with regard to the delay or the refusal to send certain data and information, and with reference to the existence of a plan to shut out its competitors.
Through measures taken on 14 December 2011, the Competition Authority imposed a penalty on Italgas of approximately €5 million, for having conducted supposedly abusive practices in the context of tenders for the allocation of the gas distribution services held by the Municipality of Rome and the Municipality of Todi.
Within the time limits prescribed by law, the Company will pay the penalty and will appeal to the administrative courts against the Competition Authority’s penalty.
Electricity and Gas Authority
Snam Rete Gas S.p.A. – Investigation into violations on the subject of natural gas metering with regard to Snam Rete Gas S.p.A and request for information
Through Resolution VIS 97/11, notified on 15 November 2011, the Electricity and Gas Authority, following a report from a natural gas distribution company, started proceedings to look into whether there were any violations with regard to natural gas metering, relating to alleged irregularities in gas metering with reference to 45 systems owned by the distributor.
On 14 December 2011, Snam Rete Gas sent the required documents to the Authority. The time limit for the investigation is 180 days from the notification date.
Snam Rete Gas S.p.A. - Investigation into violation of the regulation on availability of natural gas higher heating value measurements
As a result of the formal investigation initiated by Resolution VIS 85/09, the Electricity and Gas Authority, by Resolution VIS 12/11, issued a fine of €580,000 against Snam Rete Gas for violating the rules imposed on gas transportation companies with respect to the proper measurement and use of natural gas higher heating values (hereinafter HHV). That parameter is needed to determine the actual energy provided to operators on the market or individual sellers.
Specifically, the Authority saw fit to penalise temporary interruption, in limited cases, of the mechanical and chemical reading of the HHV, even though Snam had replaced readings with manual samplings. The Authority also found that the violation did not involve any billing infraction and, when determining the amount of the fine, it took into consideration the corrective actions taken by Snam in order to improve the measurement service and to avoid similar negative reflections on its operations in the future.
In conjunction with payment of the fine, subject to an appeal, Snam has urged the competent court to review the measure in protection of its corporate interests.
A date is yet to be set for a merit hearing before the Lombardy Regional Administrative Court.
Italgas S.p.A. - Investigation into breaches with regard to information flows relating to gas metering data
With Resolution VIS 73/11 published on 18 July 2011 and notified to Italgas on 16 September 2011, the Italian Electricity and Gas Authority commenced proceedings against three distribution companies, including Italgas, to investigate an alleged breach of provisions on information flows caused by attempts to collect metering data in the sellers’ favour, impose the relevant fines and adopt the necessary prescriptive actions.
The time limit for the investigation is 180 days from the notification date.
Italgas S.p.A. – Investigation into gas distribution service quality violations
On 18 September 2009, the Electricity and Gas Authority, by Resolution VIS 92/09, started a formal investigation for the issuance of an administrative fine for violations of gas distribution service quality.
With respect to these proceedings, it is necessary to note that: (i) they derived from a report by the Electricity and Gas Authority on absolution of the obligation, imposed on distributors which operate cast-iron pipe networks with fittings of hemp and lead (not yet reconditioned), to replace, recondition or decommission them by 31 December 2008, to a minimum extent of 30%; and (ii) this investigation had the purpose of determining whether there was violation of Article 2, paragraph 1 and Article 11, paragraph 7 of the Authority’s consolidated act of measures on the quality of gas distribution, metering and sale services (Resolution 168/2004) and of issuing an administrative fine under Article 2, paragraph 20, letter c) of Law No. 481/95.
The investigation found that Italgas had complied with its replacement obligation across Italy, but that the company was responsible for failing to comply with said obligation in relation only to the distribution network in Venice. An administrative fine of €51,000 was handed down.
Italgas believes it was justified in not complying with the obligation in relation to the Venice network. It has made provision for payment of the fine subject to an appeal, which was submitted promptly to the Lombardy Regional Administrative Court. A date is yet to be set for the merit hearing.
Tax dispute
GNL Italia S.p.A. – Local property tax (ICI)
Following the change in classification and the reassessment of real estate income performed by the La Spezia territorial agency, with reference to the Panigaglia property complex, the Municipality of Porto Venere has challenged higher ICI sums owing for the years 2001 to 2009.
The relevant assessments, also relating to fines for each year – for which provision has been made in the amount of the higher tax figures disputed – and interest, are the subject of as many disputes pending before the Tax Commissions of first or second instance, in accordance with fiscal periods.
In order to avoid prolonging these disputes and an uncertain outcome for both parties, an agreement was signed on 25 January 2012 for the definition of the disputes pending, preceded by an irrevocable offer to settle the dispute formalised by the company on 30 December 2011 and by the authorisation resolution of the Municipal Council of 12 January 2012, which provides for:
- recognition by GNL Italia S.p.A. of the correctness of the conduct of the territorial agency with regard to the classification of the property complex at the centre of the dispute in category D and the fairness of the revenue determined by said agency;
- GNL Italia S.p.A. dropping its actions against the territorial agency and the Municipality of Porto Venere;
- the Municipality of Porto Venere cancelling the tax assessments relating to 2001-2004 and adjusting the assessments relating to the subsequent years;
- the company paying the outstanding balance of tax payables plus interest for 2005, 2006 and 2007, and a fine solely for 2005;
- the voiding of any outstanding ICI payable from GNL Italia S.p.A. to the Municipality of Porto Venere for the years 2007, 2008, 2009, 2010 and 2011, in consideration of payments already made by the company, following notification of tax injunctions for 2007, 2008 and 2009 and payments made relating to 2010 and 2011.
Based on the contents of the irrevocable offer formulated for the Municipality of Porto Venere, the company, at 31 December 2011, used the risk provision already made on the balance sheet.
Environmental regulations
The risks related to the impact of the activities of Snam on the environment, on health and on safety are described in the “Operational risk” section of the Directors’ Report. In particular, with respect to environmental risk, while Snam believes that it operates in substantial compliance with the laws and regulations and considering the adjustments to environmental regulations and actions already taken, it cannot be ruled out that Snam may incur costs or liabilities, which could even be significant.
It is difficult to foresee the repercussions of any environmental damage, partially due to new laws or regulations that may be introduced for environmental protection, the impact of any new technologies for environmental clean-ups, possible litigation and difficulty in determining the possible consequences, also with respect to other parties’ liability and any possible insurance compensation.
