Why Artificial Intelligence Will Need a Legal Personality

The development of robotics and artificial intelligence (AI) is an exciting, relentless reality which is slowly making its way out of science fiction movies and into our mundane world.

Furthermore, people and technology are increasingly interacting at an individual, daily level.  The increased occasions of interaction between human and AI systems have great potential not only for economic growth but also for individual empowerment, as explained also in the January 2017 McKinsey Global Institute report, which interestingly finds as almost every occupation has partial automation potential, however it is individual activities rather than entire occupations that will be highly impacted by automation.  Consequently, it concludes that realizing automation’s full potential requires people and technology to work hand in hand.

This interaction however triggers a complex set of legal risks and concern. Ethical issues are raised as well.

The key legal issues to be addressed with some urgency are human physical safety, liability exposure and privacy/data protection.

Ethical concerns cover dignity and autonomy of human beings and include not only the impact of robots on human life, but also, conversely the impact of the ability for a human body to be repaired (such as with bionic limbs and organs), then enhanced, and ultimately created, by robotics and the subtle boundaries that these procedure may push over time.

The current legal frameworks are by definition not wired to address the complex issues raised by AI. The consequence of this is the need to find a balanced regulatory approach to robotics and AI developments that promotes and supports innovation, while at the same time defining boundaries for the protection of individuals and the human community at large.

In this respect, the European Parliament (“EP”) on 31 May 2016 has issued a draft report on civil law rules on robotics. The report outlines the European Parliament’s main framework and vision on the topic of robotics and AI.

While the report is still speculative and philosophical, it is very interesting – especially where it defines AI, and therefore “smart robots” as machines having the following characteristics:

  • The capacity to acquire autonomy through sensors and/or by exchanging data with its environment (inter-connectivity) and the analysis of those data
  • The capacity to learn through experience and interaction
  • The form of the robot’s physical support
  • The capacity to adapt its behaviours and actions to its environment.

The EP’s report also broadly defines six key regulatory themes which are raised by developments in the area of robotics and AI:

  • rules on ethics;
  • rules on liability;
  • connectivity, intellectual property, and flow of data;
  • standardisation, safety and security;
  • education and employment;
  • institutional coordination and oversight.

The report concludes that implications of these technologies are necessarily cross border and it would therefore be a waste of resources and time for each individual country to set out individual rules, recommending a unified EU regulation.

Truly, the implications are cross border and require a collaborative effort, although it is wise to presume that certain countries will be more open minded and flexible than others in defining the limits of AI autonomy, or more restrictive in setting out its boundaries and it might also be inevitable for certain countries to lead the way in regulating AI and robotics.

The policy areas where, according to the EP’s position, action is necessary as a matter of priority include: the automotive sector, healthcare, and drones.

The Liability Issue

The increased autonomy of robots raises first of all questions regarding their legal responsibility. At this time, robots cannot be held liable per se for acts or omissions that cause damage to other parties as they are a machine and therefore liability rests on the owner or, ultimately, producer.

When pointing out the automotive sector as an urgent area needing regulation, the committee was certainly thinking of self-driving cars, which are already being tested in California and driverless cars trial is set for UK motorways in 2019 and government funding has been dedicated to research on autonomous cars. In September 2016, Germany’s transport minister proposed a bill to provide a legal framework for autonomous vehicles which assigns liability on the manufacturer.

However, in a scenario where a robot can take autonomous decisions, ownership / manufacturing traditional liability chain is insufficient to address the complex issue of a robot’s liability (both contractual liability and non-contractual liability), since it would not correctly identify the party which should bear the burden of providing compensation for the damage caused. This civil liability issue is considered “crucial” by the committee.

Data protection, and intellectual property righs

Other key issues in relation to the developments in robotics are the rules on connectivity, and data protection.  While existing laws on privacy, and use of personal data can be applied to robotics in general, practical applications may require further consideration, eg standards for the concepts of “privacy by design” and “privacy by default”, informed consent, and encryption, as well as use of personal data both of humans and of intelligent robots who interact with humans.

Intellectual property rights are also to be considered if one wants to go as far as to accept that there will be at some point a need to protect the “own intellectual creation” of advanced autonomous robots.

Proposals to address these issues have been to assign to the robots an “electronic” personality.

A Proposal

The EP’s report recommends the EU Commission to explore the implications of all possible legal solutions, including that of creating a specific legal status for robots, so that at least the most sophisticated autonomous robots could be established as having the status of electronic persons with specific rights and obligations, including that of indemnifying any damage they may cause, and applying electronic personality to cases where robots make smart autonomous decisions or otherwise interact with third parties independently.

While this is a good idea, it might take time until it is applicable to all robots as for a robot to have the status of an “electronic person” its autonomous capabilities would need to be particularly enhanced.

Imagining a liability regime where liability would need to be proportionate to the actual level of instructions given to the robot and of its autonomy, so that the greater a robot’s learning capability or autonomy is, the lower other parties’ responsibility should be, taking into account which kind of development the robot has had, which kind of instructions or “education”.

However, it would not be always easy to discern skills resulting from ‘education’ given to a robot from skills depending strictly on its self-learning abilities.  This implies that when trying to identify responsibility, there would be huge grey areas.

A middle-level solution is needed for those situations where a robot is capable of autonomous learning and decisions but apt only to specific uses and not yet sophisticated to the point of being endowed with the status of electronic person, such as might be an autonomous car.

I believe instead that one possible solution to this could be provide each AI a legal personality akin to that currently afforded to corporations.

The benefit of this would be:

– registration/incorporation of the robot

– a head of responsibility, with specific rules and an entity to be considered in terms of liability and insurance

– ability to enter into contracts with each other and with humans with specific responsibilities arising out of the breach of such contracts.

One downside of this is that this type of legal status still requires an owner (a “shareholder”) with limited liability, and this means that the ultimate responsibility, although limited, would not necessarily be placed on the manufacturer, but on the owner, thereby returning to the position of an insufficient protection. However, for example in the case of autonomous cars, the owner of the car could be considered as the holder of the legal entity, with limited liability, having an obligation to ensure the vehicle.

Clearly, the topic still needs to be explored and possible solutions will evolve with time as practical problems arise and AI develops, but I believe that at this time this might be the best solution to put forward to address current concerns related to AI as we know them and understand them.  Ultimately, perhaps, it will be AI itself to propose a solution.

 cropped-foto-stefania-sito-web-3.jpg© Stefania Lucchetti 2017.  For further information Contact the Author

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Gli incentivi alle startup e PMI italiane e lo startup hub di KWM Italy

KWM Italy team

[Foto: Partner Stefania Lucchetti (centro), associate Pietro Boccaccini (destra) e Alessandro Morleo (sinistra)]

KWM Italy Startup Hub

Data l’importanza sempre maggiore che le “start-up innovative” e le “PMI innovative” rivestono all’interno del tessuto economico italiano, King & Wood Mallesons Italy (KWM Italy) ha lanciato un nuovo portfolio di assistenza legale denominato KWM Italy Startup Hub.

Questo servizio legale è diretto a solide “start-up innovative” e “PMI innovative” che stanno avviando le proprie attività o che intendono strutturare meglio attività già avviate al fine di un’ulteriore crescita.

Lo Startup Hub è composto da un team specializzato in diritto commerciale, diritto societario e diritto informatico rappresentato dal partner KWM Italy Stefania Lucchetti, che ha oltre due decenni di esperienza nell’assistere aziende tecnologiche e in particolare start-up, dall’associato KWM Italy Pietro Boccaccini e dal praticante KWM Italy Alessandro Morleo.

“Italy’s Startup Act” – L’avvio di start-up e PMI

L’Italia è all’avanguardia nella regolamentazione delle start-up e delle PMI. E’ stato predisposto un ampio quadro normativo a favore di questo tipo di società, senza imporre restrizioni settoriali o legate all’età, come accade di consueto in altre legislazioni nazionali. I nuovi strumenti e le agevolazioni coprono l’intero ciclo di vita dell’impresa innovativa: dalla sua costituzione alle fasi di crescita, sviluppo e maturità.

Il primo atto legislativo su questo tipo di società è rappresentato dal decreto legge 179/2012 (il cosiddetto “Decreto Crescita 2.0”) che può essere opportunamente definito “Italy’s Startup Act”. Il Decreto ha introdotto nell’ordinamento italiano la definizione di nuova impresa innovativa ad alto valore tecnologico, i.e. la “start-up innovativa”.

La policy sulle “start-up innovative” è stata rafforzata negli ultimi anni da diversi interventi legislativi: provvedimenti quali il decreto legge 76/2013 (il cosiddetto “Decreto sul lavoro”) che amplia il bacino di start-up idonee alle misure agevolate, il decreto legge 3/2015 (il cosiddetto “Investment Compact”) che introduce le “PMI innovative” e la legge di bilancio per il 2017 (legge 232/2016), che introduce incentivi e agevolazioni fiscali per questi tipi di società.

Dalla loro introduzione nell’ordinamento italiano e grazie alla costante attenzione del legislatore con numerose e pervasive azioni regolatorie, “start-up innovative” e “PMI innovative” sono cresciute significativamente e oggi non sono più considerate una nicchia di realtà poiché esprimono oltre 2 miliardi di euro di fatturato totale e offrono circa 50 mila posti di lavoro.

“Start-Up innovativa

Da un punto di vista commerciale, una start-up è l’inizio di una qualsiasi iniziativa imprenditoriale finalizzata allo sviluppo di un nuovo business. Secondo la legge italiana (vale a dire il decreto legge 179/2012), per “start-up innovative” si intendono le società di capitali, comprese le cooperative, le cui azioni o quote rappresentative del capitale sociale non sono quotate su un mercato regolamentato né su un sistema di negoziazione multilaterale. Queste imprese devono inoltre soddisfare requisiti imposti dalla legge, e.g. essere di nuova costituzione o essere operative da meno di 5 anni, avere un fatturato annuo inferiore a 5 milioni di Euro, avere come oggetto sociale esclusivo o prevalente lo sviluppo, la produzione e la commercializzazione di beni o servizi innovativi di alto valore tecnologico, ecc.

PMI innovativa

Come suddetto, il decreto legge 3/2015 (il cosiddetto “Investment Compact”) ha introdotto un nuovo tipo di società, i.e. le “PMI innovative”, e ha esteso loro la maggior parte delle agevolazioni previste per le “start-up innovative”. Le “PMI innovative” sono imprese con meno di 250 dipendenti e con un fatturato annuo che non supera i 43 milioni di Euro; inoltre, devono soddisfare altri requisiti, come la costituzione come società di capitale anche in forma cooperativa, le azioni della società non possono essere quotate in un mercato regolamentato, l’ultimo bilancio deve essere certificato da un revisore contabile o da una società di revisione registrati nel registro dei revisori dei conti ecc.

Le “PMI innovative” operano nel campo della tecnologia dell’innovazione, indipendentemente dalla data di costituzione, dall’oggetto sociale e dal livello di maturazione. Il raggiungimento dello status di “PMI innovativa” può rappresentare una naturale prosecuzione del percorso di crescita e rafforzamento di una “start-up innovativa”.

Agevolazioni previste dall’“Italy’s Startup Act”

Le principali agevolazioni accordate alle “start-up innovative” e alle “PMI innovative” dalla normativa italiana sono le seguenti:

  • Costituzione digitale e gratuita: Le “start-up innovative” possono scegliere di redigere l’atto costitutivo (e le sue successive modifiche) per mezzo di un modello standard Il documento può essere firmato utilizzando una firma digitale: i.e. l’intera procedura può essere eseguita online attraverso una piattaforma dedicata e, come ulteriore vantaggio, il suo utilizzo è gratuito. Da notare comunque che tale procedura rimane volontaria: è sempre possibile costituire un S.r.l. per atto notarile, registrandola successivamente nella sezione speciale del Registro;
  • Taglio alle spese: Le “start-up innovative” e le “PMI innovative” sono esonerate dal pagamento dell’imposta di bollo dovuta alla registrazione nella sezione speciale del Registro delle Imprese. Inoltre, le “start-up innovative” sono esentate dal pagamento della quota annuale solitamente dovuta alle Camere di Commercio;
  • Gestione societaria flessibile: Le “start-up innovative” e le “PMI innovative” costituite in forma di S.r.l., sono dotate di alcune particolarità che implicano cambiamenti radicali nella struttura finanziaria della S.r.l. (g. creare categorie di quote con diritti specifici, offrire al pubblico quote di capitale, ecc.) che rendono tali società più simili ad una S.p.A.;
  • Copertura delle perdite: In caso di perdite, mentre le società ordinarie devono ridurre il capitale entro l’esercizio successivo, le “PMI innovative” e le “start-up innovative” possono farlo due esercizi finanziari dopo aver subito le perdite;
  • Disciplina giuslavoristica su misura nelle “start-up innovative“: In generale, le “start-up innovative” sono sottoposte alle disposizioni sui contratti a tempo determinato come stabilite nel “Jobs Act” (decreto legge 81/2015). Pertanto, le “start-up innovative” possono assumere personale con contratto a tempo determinato per un massimo di 36 mesi. Tuttavia, in deroga alle disposizioni del Jobs Act, le “start-up innovative” possono assumere personale con contratti a tempo determinato di qualsiasi durata, anche molto breve, che può essere rinnovato più volte. Dopo i 36 mesi, il contratto può essere rinnovato una sola volta, per un massimo di 12 mesi, per una durata complessiva dunque di 48 mesi. Trascorso questo periodo di 4 anni, il contratto a tempo determinato viene automaticamente convertito in un contratto a tempo indeterminato.  Gli stipendi dovuti ai lavoratori impiegati in “start-up innovative” possono avere una componente variabile legata ad obiettivi e a parametri di produzione in base ad accordi fra le parti (come la produttività del dipendente o la redditività della società ecc.), incluse le “stock option” e i programmi “work-for-equity” (i ricavi derivanti da questi strumenti finanziari – che possono essere utilizzati per pagare anche i lavoratori nelle “PMI innovative” – sono deducibili dalle tasse sia a fini fiscali che contributivi e sono soggetti solo a tassazione sulle plusvalenze);
  • Incentivi fiscali per investire nelle “start-up innovative”: (per le “PMI innovative”, tali incentivi entreranno in vigore dopo l’attuazione di apposito decreto interministeriale, in conformità con la normativa UE in materia di aiuti di Stato): Questa agevolazione prevede per le persone fisiche una detrazione IRPEF pari a 30 % dell’importo investito, fino ad un importo massimo di € 1 milione; per le persone giuridiche il beneficio consiste in una deduzione dall’imponibile IRAP pari al 30% dell’importo investito, fino ad un massimo di € 1,8 milioni. Tali sovvenzioni si applicano sia in caso di investimenti diretti in “start-up innovative” sia in caso di investimenti indiretti tramite altre società, come gli OICR, che investono prevalentemente in “start-up innovative”. Queste misure sono condizionate al mantenimento della partecipazione nella “start-up innovativa” per un minimo di 3 anni;
  • Equity crowdfunding: Le “start-up innovative”, le “PMI innovative” e anche gli OICR e altre società che investono prevalentemente in “start-up innovative” e “PMI innovative” possono raccogliere capitali attraverso portali online Inoltre, la legge di bilancio del 2017 ha avviato il processo per estendere l’applicabilità di questo strumento a tutte le PMI italiane;
  • Accesso diretto, semplificato e gratuito per “start-up innovative” e “PMI innovative” al Fondo di garanzia per Piccole e Medie Imprese: Un fondo statale che facilita l’accesso al credito tramite garanzie sui prestiti bancari. La garanzia copre fino all’80% dei prestiti bancari concessi alle “start-up innovative” e alle “PMI innovative”, fino ad un massimo di 2,5 milioni di Euro, ed è fornito attraverso una procedura semplificata;
  • Fail Fast: Le “start-up innovative” sono esentate dalla procedura standard di fallimento, concordato preventivo e liquidazione coatta amministrativa in caso di una crisi di sovraindebitamento. Di conseguenza, i tempi di liquidazione giudiziale vengono ridotti e gli oneri amministrativi e la stigmatizzazione sociale diminuiscono drasticamente;
  • Conversione in “PMI innovative”: Le “start-up innovative” di successo, diventate aziende “mature” con una notevole esperienza e valore di produzione, le cui attività sono ancora caratterizzate da una componente significativa di innovazione tecnologica, possono transitare nello status di “PMI innovative”. Inoltre, l’Investment Compact ha esteso molte delle agevolazioni conferite alle “start-up innovative” ad una più ampia gamma di società caratterizzate da una spiccata propensione all’innovazione.

Risulta oppurtuno notare che mentre per le “start-up innovative” il legislatore ha stabilito di limitare le agevolazioni ad un massimo di 5 anni dalla data di costituzione della società, per le “PMI innovative”, purché siano soddisfatti i requisiti legali, gli strumenti di sostegno non sono soggetti ad un limite temporale

Ulteriori agevolazioni

Oltre agli strumenti facenti parte del pacchetto normativo originale (“Decreto Crescita 2.0”), il Ministero dello Sviluppo Economico si è impegnato in ulteriori misure per sostenere l’ecosistema dell’innovazione. Tra queste iniziative, meritano di essere menzionate: Smart&Start Italia (uno schema di finanziamento agevolato per “start-up innovative” con sede in Italia), Italia Startup Visa (una nuova procedura accelerata per l’emissione di visti di lavoro autonomo per cittadini non-UE che intendono istituire una “start up innovativa” in Italia) e Italia Startup Hub (una procedura accelerata che estende il programma Visa Startup Italia a cittadini non-UE già in possesso di regolare permesso di soggiorno che intendono soggiornare in Italia oltre la data di scadenza per avviare una “start-up innovativa”).

Infine, due importanti misure applicabili a tutte le imprese italiane sono di particolare interesse per le “start-up innovative” e le “PMI innovative”:

  • Credito d’imposta per la Ricerca e lo Sviluppo: Dal periodo di imposta 2017 fino al 2020, il credito è pari al 50% dei costi annuali incrementali per le attività di R&S, sia intra muros che per le spese extra muros. Il credito d’imposta è riconosciuto fino ad un massimo annuale di € 20 milioni per ciascun periodo di imposta. La base della misura è calcolata rispetto alla media dei costi sostenuti nei 3 periodi fiscali precedenti a quello in corso al 31 dicembre 2016, purché in ciascuno dei periodi fiscali i costi per R&S siano stati pari o superiori a € 30.000;
  • Patent Box: Consiste in sgravi fiscali sui redditi derivanti dall’uso della proprietà intellettuale. Il Patent Box concede alle società un’opzione per escludere dall’imposizione il 50% dei redditi derivanti dallo sfruttamento commerciale di beni immateriali (opere dell’ingegno, brevetti, marchi d’impresa, marchi commerciali).


Dopo l’introduzione delle “start-up innovative” e delle “PMI innovative” all’interno del panorama giuridico italiano, in largo anticipo sui tempi rispetto ad altri Paesi europei, tali realtà hanno dimostrato di essere una leva strategica per lo sviluppo dell’economia del Paese.

Infatti, l’alto tasso di innovazione insito nel DNA di queste nuove forme societarie, può giocare un ruolo fondamentale per rilanciare la crescita e l’occupazione, soprattutto giovanile, dell’Italia.

KWM Italy vuole dunque fornire il proprio contributo in questo entusiasmante settore con l’obiettivo di aiutare le strat-up e le PMI a sviluppare efficacemente o meglio strutturare le loro idee e il loro business.


Artificial Intelligence and Legal Personality

[“In a scenario where an algorithm can take autonomous decision, then who should be responsible for these decisions?” Milan-based corporate lawyer Stefania Lucchetti said]. My interview in Politico’s article on the introduction of a concept of legal personality for artificial intelligence. This conversation has come of age, and while we do not yet have all answers it is very important to start asking the right questions.

Read the article at: https://www.politico.eu/article/europe-divided-over-robot-ai-artificial-intelligence-personhood/

Data Protection as a Corporate Governance Issue



Today we held a round table and seminar at our King & Wood Mallesons office dedicated to data protection during which we discussed the implications of the GDPR from a practical point of view both from the legal side and the technical side.  Aside from the obvious duty to be compliant, my view is that an appropriate data protection structure and responsibility line is not just an IT issue or a legal issue but a it is a corporate governance issue, as it entails serious risk management considerations both from a financial perspective as well as a reputational perspective and therefore each company needs to deploy sufficient investments to ensure adequate compliance.

Boards need to make an essential philosophical switch in accepting that this is a key enterprise risk which needs to be addressed at a board level with adequate resources.

Lack of a proper action can entail heavy sanctions for the company in accordance with the GDPR, with ensuing board responsibilities towards the company (for example in Italy under Art. 2392 of the Italian Civil Code for lack of appropriate action to protect the company).

Stefania Lucchetti as speaker at Forbes Live event on Fintech

On 1st March 2018 Stefania Lucchetti was a speaker at a Forbes Italia ForbesLive event during the Quant International Workshop (quantitative & asset management) in Venice, Italy. The focus of Stefania’s panel was on the future of financial services in the age of Fintech. The topics addressed during the presentation included the legal issues related to blockchain, Artificial Intelligence, digital payments, ICOs and cryptocurrencies.

Stefania Lucchetti introduced her speech by explaining that artificial intelligence, blockchain, cryptocurrencies, ICOs, and big data are referred to as disruptive because they change not just how a product or service is delivered, but the essence of what a product or service is – so much that new regulations need to be created to address them.

Press coverage at:


Venezia forbes 1

foto Stefania forbes italia

Forbes event

Due Diligence: Welcome AI, but Keep the Human Element

The legal market is welcoming (and fearing) the introduction of Artificial Intelligence (AI) in due diligence processes.

AI will liberate junior lawyers from the often tedious (and necessarily error prone) work of cataloguing contract information, and at the same time will take work away from law firms and lawyers.

We are of the idea however that while the cataloguing work (summarizing data about contracts and financial transactions) can well be left to AI, the interpretation of such data needs a human element.

What is the purpose of a due diligence? Prior to entering into a long term relationship, such as an equity or commercial joint venture relationship, it is important for a company to determine that the potential business partner shares its ethical standards and is prepared to follow business practices consistent with its company’s.

The due diligence is not only intended to catalogue data, it has a specific objective: and that is to evaluate potential risk areas and to screen a potential contractual partner, its business relationships and practices, its government relationships as well as its reputation.

At the heart of the due diligence is the attempt to gain a thorough understanding of the structure, background, characteristics, practices and also motivations of the contractual partner.

A company seeking a long term contractual relationship must emerge from the due diligence process satisfied that it wants to do business with the partner on an intensive and long-term basis.

The following key areas are (among others) always of concern in joint ventures and should be a specific focus of due diligence:

  • corporate governance and controllership, including keeping accurate books and records;
  • business contracts and business practices;
  • potential for improper payments, or corrupt business practices;
  • regulatory compliance, including historic compliance with core licensing needs;
  • employment matters;
  • existing or potential litigation;
  • tax compliance; and
  • environmental matters, such as a history of land contamination or pollution.

While a software can catalogue all relevant information for quick and easy access, interpretation can and must be left to an experienced professional.

The phase of desktop review and analysis is essential to depict a preliminary profile of the partner, identify the main areas of risk and potential concern, and define the need and the subsequent perimeter of in-depth examinations.

However, also this apparently more objective and depersonalized phase of work, needs a human element to be planned and executed in the most effective way. Even very accurate and comprehensive corporate information does not tell us how our partner is perceived, its track record, the origins of its business, its network of contacts, its political exposure etc. To this regard, a key component of the desktop phase is represented by a critical analysis of the information that comes from outside what can be considered the perimeter of a standard due diligence process, i.e. from outside the target company. For example, it is important to:

  • Reconstruct the target’s public and media profile, if any, and ascertain if any red flags have been reported, if there have been allegations of wrongdoing or non-transparent behavior, and if the target has never responded to these reports or released any denial. This analysis must include social media open to public, electronic media, national and local press outlets.
  • Look at the target’s track record and try to answer questions such as: what is the origin of the business? Did the company develop in a regular and constant way or was there a sudden growth? Does the company have a long-lasting and deeply rooted presence in a local territory? Are there any previous issues, such as a bankruptcy or frequent and inexplicable changes in the business scope or in the geographic area of activity?
  • Identify and reconstruct the profile of the key individuals involved in the ownership and managerial structure of the target company: their corporate profile beyond the target company, their professional background and career, their media profile, etc. can help a lot in placing the target company in a broader and clearer context and in understanding its modus operandi.
  • Enlarge the scope to map the target’s network of business partners and influential contacts and identify potential areas of risk and concern by answering to questions such as: Is there a strong and potentially risky relationship with the public sector or the political establishment? What is the reputation of our partner’s partners?

Then? Once this critical and analytical phase of desktop study has been performed?  A human needs to go on the ground and meet people. Only human sources can provide insight and add value to assess the actual reputation, integrity and market standing of the target.

AI and standardized procedures provide a very valuable support, especially because they help perform the most mundane and time-consuming part of the due diligence process, which is gathering, processing and indexing the information. But when it comes to analyzing, combining,  cross-checking, understanding and supplementing this information, AI cannot substitute the awareness and the experience of professional figures who know where to look, what to look for, who to look at and how to look beyond.

foto stefania sito web 3 Stefania Lucchetti and Francesca Castelli Francesca Castelli

© 2017. For further information Contact the Authors

Articles may be shared and/or reproduced only in their entirety and with full credit/citation.  This post is for information only and is it is not to be considered legal advice.

AI and Legal Personality – on algorithm produced art

A great piece on Scientific American (see Is Art Created by AI Really Art) on the philosophical implications as well as the economic ones of AI  produced art jokingly raises a provocative question at the end of the article “When an AI-composed song wins the Grammy, who gets the trophy”? This is actually a complex legal issue which over time will need to be addressed. As I already wrote in previous posts, the issue of legal personality for AI, in particular that with deep learning functions, will need to be considered.  This will of course impact primarily (and more urgently) liability issues but at some point more creative expressions will need to be considered as well.

© 2018. For further information Contact the Author

Articles may be shared and/or reproduced only in their entirety and with full credit/citation.  Opinions in this post are personal to the author.


Possibilità per l’equity crowdfunding in Italia

English Version

L’equity based crowdfunding è generalmente inteso come un sistema che consente la raccolta di capitale finanziario, di solito attraverso Internet, offrendo in cambio partecipazioni nella società finanziata, generalmente una startup o una piccola media impresa.

In Italia, fin dal 2012, esiste una normativa organica ad hoc (D.L. n. 179 del 18 ottobre 2012, c.d. “Decreto Crescita 2”) per la regolamentazione del fenomeno dell’equity crowdfunding. La normativa, inizialmente, consentiva il ricorso al finanziamento tramite crowdfunding solo alle imprese con la qualifica di start up innovative. Successivi interventi normativi hanno consentito l’accesso al crowdfunding anche alle imprese sociali ma, soprattutto, a tutte le PMI (non solo a quelle innovative). Hanno introdotto anche la possibilità per gli organismi di investimento collettivo del risparmio (OICR) e per le società che investono prevalentemente in start-up/PMI innovative di collocare online i propri capitali tramite i portali di equity crowdfunding.

La normativa, pur presentando alcuni elementi di rigidità, è stata oggetto di notevole evoluzione per adattarsi alle richieste del relativo mercato.

È interessante notare che la raccolta di capitale finanziario attraverso internet ha moltissime analogie con gli Initial Coin Offerings (ICO). Gli ICO hanno avuto negli scorsi mesi, a livello globale, un successo mediatico clamoroso pur incontrando diverse sfortune dal punto di vista regolamentare. Infatti in alcune giurisdizioni questa forma di raccolta di capitali è stata addirittura vietata (per esempio in Cina e Corea del Sud).

L’Initial Coin Offering (ICO) è una forma di raccolta fondi tramite la quale un soggetto colloca sul mercato una sua criptovaluta futura (coin o token) in cambio di una criptovaluta già circolante (come il Bitcoin) per finanziare il proprio progetto, proposto al pubblico solitamente in un white paper. Chi acquista la criptovaluta confida che il business sottostante abbia successo e che la moneta si apprezzi al fine di conseguire un profitto al momento della vendita di tale moneta sul mercato. Gli ICO nel tempo si sono divisi anche a seconda del fatto che il finanziamento porti in cambio un equity token (con partecipazione alla società emittente) o un utility token (moneta con funzioni secondarie che solitamente consente di ottenere dei vantaggi sulla stessa piattaforma finanziata).

Considerato l’analogo obiettivo di ICO e equity crowfunding – entrambi sistemi di raccolta di capitale di rischio per start up e piccole imprese al di fuori dei mercati regolamentati – e data la totale mancanza in Italia, alla data attuale, di una disciplina volta a regolare le ICO, ci siamo chiesti se la legge italiana sul crowfunding, qui di seguito brevemente descritta, potrebbe essere uno strumento potenzialmente utile per fornire un quadro normativo entro il quale ricondurre gli ICO.

Normativa italiana sul crowdfunding

Portali di equity crowdfunding

Il “portale” è la piattaforma online che ha come finalità esclusiva la facilitazione della raccolta di capitali di rischio da parte degli offerenti. Il portale si concretizza in un sito web che assolve al ruolo di mediatore tra la società emittente e il finanziatore. L’offerta al pubblico degli strumenti finanziari può essere effettuata esclusivamente attraverso uno o più portali registrati e regolamentati.

Il gestore del portale assicura che, per ciascuna campagna di raccolta, l’importo necessario al perfezionamento degli ordini sia disponibile nel conto vincolato destinato all’offerente acceso presso le banche e le imprese di investimento a cui sono trasmessi gli ordini.

Secondary trading

La sottoscrizione e la successiva alienazione di quote rappresentative del capitale della società emittente può essere effettuata per il tramite di intermediari abilitati alla prestazione di servizi di investimento che effettuano la sottoscrizione delle quote in nome proprio e per conto dei sottoscrittori o degli acquirenti che abbiano aderito all’offerta tramite portale.

Disciplina societaria

Le operazioni di crowdfunding vengono effettuate mediante pubblicazione di specifiche offerte sul sito del portale, la “vetrina online” attraverso la quale l’emittente offre agli investitori “strumenti di capitale di rischio”, i.e. azioni o quote fornite di diritti particolari.

Il finanziamento avviene a fronte dell’assegnazione agli investitori di quote o azioni fornite di diritti particolari che rendano “desiderabile” l’investimento. La prassi è quella di approvare un aumento di capitale con l’esclusione del diritto di opzione per i soci esistenti.

Cross border crowdfunding

La normativa italiana sul crowdfunding si applica solo alle società residenti in Italia o in uno degli Stati membri dell’Unione europea o in Stati aderenti all’Accordo sullo spazio economico europeo, purché abbiano una sede produttiva o una filiale in Italia.

La Commissione Europea ha intenzione di presentare, entro i primi mesi del 2018, una proposta per regolamentare il crowdfunding. A tal fine è stata aperta una consultazione pubblica che verte principalmente su due temi:

  1. il cross-border crowdfunding, che consiste nello svolgimento di attività di crowdfunding al di fuori dei confini della propria nazione di appartenenza, senza chiedere una specifica autorizzazione in ciascun paese europeo; e
  2. la realizzazione di un efficace quadro comune in materia di gestione del rischio per gli investimenti nelle campagne di crowdfunding.

La normativa italiana sull’equity crowdfunding, in ogni caso, non limita l’accesso ai portali italiani a società straniere. Il requisito del possesso di un codice fiscale italiano, precedentemente previsto per la registrazione su un portale di equity crowdfunding, a seguito di un recentissimo intervento normativo è venuto meno per i soggetti non residenti in Italia, rendendo quindi più agevole l’accesso a tali operatori al mercato italiano.


La normativa italiana sul crowdfunding potrebbe essere una piattaforma utile per creare delle forme di ICO regolamentate. Il vero nodo della questione è quello della gestione delle criptovalute, inclusa la possibilità di creare conti vincolati nei quali vengono tracciati gli scambi di criptovaluta collegandosi alla piattaforma blockchain. Questo avrebbe il beneficio aggiuntivo di facilitare il dialogo tra le banche e le piattaforme blockchain aiutando la realtà italiana ad un passaggio accelerato nell’offerta Fintech. Le problematiche fiscali e regolatorie legate allo scambio di criptovalute devono chiaramente essere valutate.

cropped-foto-stefania-sito-web-3.jpg Stefania Lucchetti  foto pietroPietro Boccaccini and foto Alessandro Alessandro Morleo

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Possibilities for equity crowdfunding in Italy

You may also read this publication on the King & Wood Mallesons website

Equity based crowdfunding, generally speaking, is a system that enables investors to fund a company, generally a start-up or a small to medium sized enterprise, in return for equity, usually through the internet.

A comprehensive piece of legislation was approved in Italy in 2012 (D.L. no. 179 of 18 October 2012, so-called “Decreto Crescita 2”) aimed at regulating the equity crowdfunding phenomenon. This law, at first, allowed access to crowdfunding only to companies qualified as innovative start-ups. Subsequent regulatory interventions allowed crowdfunding access also to social enterprises but, above all, to all SMEs (not just the innovative SMEs). They also introduced the possibility to undertake collective investment (i.e. Italian OICR), and for companies investing mainly in innovative start-ups/SMEs to place their capital online through the equity crowdfunding portals.

Although this legislation still presents some elements of rigidity, it has evolved significantly in order to adapt to market requests.

It’s interesting to note that the collection of financial capital through the internet presents many similarities with Initial Coin Offerings (ICO). ICOs have had resounding worldwide media success in the last few months, even though they encountered some regulatory misfortunes. In fact, in some jurisdictions this kind of capital raising has been prohibited (for example in China and South Korea).

An Initial Coin Offering (ICO) is a type of crowdfunding through which an entity places on the market a future cryptocurrency (coin or token) in return for a cryptocurrency already existing (such as Bitcoin) to finance its project, usually described to the public in a white paper. Those who adhere to the ICO and purchase a cryptocurrency bank on the hope that the underlying business will be successful and that the cryptocurrency will appreciate, in order to obtain a profit when the currency is later sold on the market. In ICOs the funding could also be exchanged for an equity token (holding an interest in the issuing company) or a utility token (currency with secondary functions that usually allows benefits to be obtained on the platform financed).

Given the analogous purpose of ICO and equity crowdfunding – both being systems for collecting risk capital for start-ups and small businesses outside regulated markets – and given the total lack in Italy, as of today, of specific regulation dedicated to ICOs, we considered whether the Italian crowdfunding law, briefly described below, could be a potentially useful tool to provide a regulatory framework also for ICOs.

Italian crowdfunding legislation

Equity crowdfunding portals

The “portal” is the online platform which has as its exclusive purpose the facilitation of the collection of risk capital by the investors. The portal is a website with the role of a mediator between the issuing company and the investor. The offer of the financial instruments to the public can be carried out exclusively through one or more registered and regulated portals.

The portal’s manager ensures that, for each raising campaign, the amount necessary for completing the order is available in the account dedicated to the investor opened in the banks and in the investment firms to which the orders are communicated.

Secondary trading

The subscription and the subsequent disposal of shares representing the capital of the issuing company may be carried out through intermediaries authorized to provide investment services purchasing the shares in their own name and on behalf of investors or buyers who adhered to the raising campaign through the portal.

Corporate characteristics

Crowdfunding campaigns are carried out publishing specific offers on website portals, the “online shop window”, through which the issuing company offers a “risk capital instrument” to investors, i.e. quotas or shares having specific rights.

The investment takes place against the investor’s assignment of quotas or shares with special rights that make the investment “desirable”. The practice is to approve a capital increase excluding the option right for existing shareholders.

Cross border crowdfunding

Italian law regulating crowdfunding applies exclusively to companies with registered office in Italy or in a European Union country or in a country party to the Agreement on the European Economic Area, as long as they have a production site or a branch in Italy.

The European Commission has expressed its intention to submit a proposal concerning EU framework on crowd and peer to peer finance during the first months of 2018. To this end, a public consultation was launched focusing mainly on two themes:

  1. cross-border crowdfunding, which consists of carrying out crowdfunding activities outside the country’s borders, without requesting specific authorization in each European country; and
  2. implementation of an effective common risk management framework to mitigate the risks relating to investments in crowdfunding campaigns.

The Italian legislation on equity crowdfunding, in any event, does not prevent foreign companies from accessing the Italian portals. The condition of having an Italian fiscal code, previously required for the registration on an equity crowdfunding portal, further to a very recent regulatory intervention, is no longer required for foreign residents, therefore making easier for these operators the access the Italian market.


Italian crowdfunding legislation could be a useful platform and starting point to think about ICO regulation. The key issue is the regulation and management of cryptocurrencies, including the possibility of creating restricted accounts in which the transfers of cryptocurrencies are tracked via the blockchain platform. This would have the added benefit of facilitating the dialogue between the banking industry and blockchain technology helping Italian operators accelerate their Fintech presence. Tax and regulatory issues related to cryptocurrencies of course need to be assessed.

cropped-foto-stefania-sito-web-3.jpgStefania Lucchetti , foto pietroPietro Boccaccini and foto AlessandroAlessandro Morleo

© 2018. For further information Contact the Authors

Articles may be shared and/or reproduced only in their entirety and with full credit/citation.  This post is for information only and is it is not to be considered legal advice.

Versione in lingua italiana

And the Regulators Arrived: from SEC’s Ruling to the PBOC’s Ban of Initial Coin Offerings

Over the past months, the cryptocurrency market has remained in the spotlight not only for the fluctuations in the major coins’ interest rates (Bitcoin, Ethereum), but also for the emergence and consolidation of a new way of raising capital in the digital token world: Initial Coin Offerings (ICOs).

The reason leading to the launch of an ICO is simple: the need to raise initial or additional funds to start or continue the development of a blockchain-based technology. This funding method consists in issuing a certain amount of digital tokens in what seems increasingly to be a sort of Initial Public Offering: tokens are sold in an auction to investors in exchange for ethers or bitcoins or other cryptocurrencies, or rarely for fiat money as dollars or pounds.

The first example dates back in 2013, with the pioneering Mastercoin’s ICO collected over $7 million, followed by the more famous Ethereum’s in 2014. A significant surge has been observed during this year. In 2017, there has been over 90 ICOs with an overall funds collection of $1.25 billion. For the first time ever, in June the amount of funds raised through ICOs overtook the total early stage Venture Capital funding for companies of the same type. And so also in July.

Regulatory Vacuum

Launching an ICO is a very convenient method to raise funds since it does not require any kind of disclosure obligations or regulatory compliance, and it allows to avoid most of the costs linked to more traditional funding methods such as venture capital. Up to July of this year, promoters of ICOs have been able to operate in the absence of clear and strict regulatory provisions regarding investor protection or market fairness and integrity: for instance, there are no rules establishing which type of investors can put money into an ICO, and thus so fare anyone has been able to participate.

It is also often not very clear what investors gain from participating in an ICO as the investment in most cases does not lead to the acquisition of shares in a company. In the majority of cases, these tokens are directly connected to the project, and are considered necessary to facilitate access to the network and the use of services it promises to offer once fully implemented. Their use can range from buying storage space on a new hosting and e-mail management platform based on blockchain, to ordering products on the company online store.

Although the apparently modest or absent level of usage outside the closed environment of the issuing company, digital tokens often turn into new currencies, which are then traded for cryptocurrencies or fiat money in online platforms, thus giving rise to a secondary market in the full sense of the term. The more the underlying project receives support from investors and market operators, the more its tokens’ exchange rate rises, starting a spiral of tensions and financial speculation mechanisms that often end up not reflecting the effective market fundamentals.

The SEC’s Ruling in The DAO’s Case

The SEC’s Ruling

On July 25th, the U.S. Securities and Exchange Commission (SEC) decided to step in, and released a Report and an Investor Bulletin on The DAO’s ICO, after investigating whether the offering promoted by the organization had violated federal securities laws.

The DAO was a “decentralized autonomous organization”, a virtual entity without a common legal status, run and managed under rules encoded in computer programmes – called smart contracts –  hosted on a blockchain (often, the Ethereum’s one). It operated as a decentralized venture fund, promoting an ICO that resulted in one of the largest in the industry. Started in April 2016, The DAO’s ICO raised approximately $150 million ethers, the cryptocurrency running on Ethereum’s blockchain. More than 11.000 people decided it was worth investing their money in this project.

But on June 17, some hackers exploited a code problem and drained funds from the platform, for a total of 3.6 million ethers (approximately $70 million at the time).

The investigation pursued by the SEC’s Enforcement Division started straight after these events, with the aim of verifying if The DAO, when launching its funding campaing, was subject to the Commission’s jurisdiction amd then must comply with its provisions. The assessment of whether there was such an infringement ended with the conclusion that The DAO tokens were indeed securities, and therefore their sale was subject to federal securities laws. Specifically, the report reads that “Based on the investigation, and under the facts presented, the Commission has determined that DAO Tokens are securities under the Securities Act of 1933 (“Securities Act”) and the Securities Exchange Act of 1934 (“Exchange Act”)”.

Digital Tokens as Securities

The applicability of U.S. federal securities laws does not depend on the corporate form or the organization type of the issuing entity, but is based on “the particular facts and circumstances, without regard to the form of the organization or technology used to effectuate a particular offer or sale”. And in the case of The DAO, in fact, were the “particular facts and circumstances” that gave the Commission the legal certainty that The DAO Tokens presented specific features of securities, and more specifically investment contracts.

The Howey Test

The principle at the basis of this classification of The DAO Tokens as securities derives from a definition established in 1946 in the case SEC v. W.J. Howey Co. Under the Howey Test, whether an investment instrument is a security requires a substance-over-form analysis. Obiouvsly, a stock or bond is a security, but the definition of “investment contract” can be ambiguous, lending itself to different interpetations. The Commission, building on the Supreme Court’s case-law and interpretation, clearly restates that, in deciding whether something is a security, “form should be disregarded for substance, and the emphasis should be on economic realities underlying a transaction, and not on the name appended thereto”. Even if The DAO defined its ICO as a “crowdfunding campaign”, it did not possess the afore-mentioned requisites for being exempted according to the regulations in force.

Scope of the SEC’s Ruling

The SEC has deemed it appropriate to report exclusively on the legal status of The DAO Tokens. This means that in the future not all ICOs will be immediately brought under its jurisdiction and within the federal legal framework. It will be “the facts and circumstances, including the economic realities of the transaction” to determine whether an ICO involve the offer and sale of a security. Where it is established that these conditions are fulfilled, that ICO must be conducted pursuant to US federal securities laws, with the possibile consequence entrepreneurs looking to raise funds through this avenue that compliance costs associated with the ICO may outweigh the benefits of raising money through this funding method.

The Chinese Ban and Other Positions in Europe and Asia

Shortly after, another authority decided to give new emphasis to the issue. On September 4th, The People’s Bank of China (PBOC), the Chinese central bank, declared ICOs illegal, simultaneously banning any similar funding initiative. The decision came after a long investigation. According to PBOC’s statement, Inital Coing Offerings are a serious disturbance in the economy of the country and in its financial market integrity, and therefore must be considered illegal. Consequently, online platforms trading digital tokens are required to stop conversions between coins and fiat currencies, while banks are prohibited from offering financial services related to ICOs. Companies that received money through an ICO will be required to reimburse the funds (this is approximately $766 million). China, with this statement, has become the first country to ban ICOs.

After the PBOC’s move, several other governmental and financial authorities defined their position on Bitcoin and Initial Coin Offerings. Central banks of Indonesia and Ukraine has highlighted that bitcoins will no longer be considered and accepted as a means of payment. The Deputy Chairman of Ukraine’s central bank said at the Ukrainian Financial Forum that global regulators are not taking action moved by fears regarding cryptocurrencies’ growing volume, regulators are instead concerned only with the fact that people can lose money investing in cryptocurrencies. The conclusion of the Ukrainian official was that Bitcoin cannot even be considered a currency, due to the fact that it is not issued by any government body; thus it can’t be used and legally recognized as a means of payment.

Similar observations were made by the Bank of Indonesia: the Indonesian authority stated that Bitcoin transactions are not legally allowed under the Service Provider of Payment System legislation.

The Singapore Monetary Authority and the Hong Kong Securities and Futures Commission took a more open position, stating that under certain conditions ICOs may fall under securities laws but not taking any excessively strong position.

Long-Term Scenarios

After the entry into the field of global regulators as new, active players in the ICO space, it is difficult to predict what could be the likely future scenarios in ICOs and the cryptocurrencies’ market.

The SEC did not await to draw up a complete regulation before addressing the matter. Its decision to circulate some preliminary statements on ICOs in relation The DAO’s case can be interpreted as an early signal given to the market: the SEC’s intention is in all likelihood that of developing a comprehensive legal framework on the issue. A path, however, that might be gradual and targeted to specific occurrences.

The actions taken by the PRC’s central bank on the contrary take a much firmer standpoint on the matter.

An explanation to this strong and drastic decision is offered by Stefano Tresca in an article published on Economyup.it. Tresca is an entrepreneur, co-founder of Canary Wharf’s Level39, Europe’s biggest Fintech accelerator. First of all, Tresca draws a clear distinction between Bitcoin and Ethereum: while bitcoins can be mined in a limited amount, at the opposite ethers – the cryptocurrency of the Ethereum ecosystem – can be issued with no maximum limit. An explanatory comparison could be made between gold and fiat currencies: gold is a finite resource, and owes its value from this feature, while central banks can issued much more dollars or pounds than they can guarantee.

According to Tresca, once this fact has been assimilated, we should answer these two questions: where do the most important miners live? And where is the largest amount of bitcoins in the world located? In both cases, the PRC. By banning ICOs, the PRC – as we’ve just said a fundamental country in Bitcoin geopolitics – obtains two results at the same time: avoid chaos and further instability in its financial market – which has been growing fast already for some years – and prevent the issuing of several new Ethereum-based digital tokens from companies launching ICOs, thereby favouring Bitcoin, the other cryptocurrency where the country is the worldwide market leader. In the short-term, the PRC’s ban has resulted in a sharp fall in Bitcoin’s exchange rate: despite new ICOs lead to the issuance of new Ethereum-based tokens, in fact, these tokens can be bought using bitcoins, pushing up its demand and the already high exchange rate. But in the long-term, the PRC’s ban – together with the SEC’s decision to regulate ICOs in the next future – may generate a positive effect.

The future is uncertain but what is certain is that cryptocurrencies and raising capital through Initial Coin Offerings is increasingly becoming an important way of financing for companies. This means that regulators worldwide will need to find a way to thread this into their rules, and in the long term this might provide a boost for entrepreneurship.

Each country should therefore consider how it can accept, perhaps regulate this space in order to allow it to thrive in safety for market operators and investors, carving out a place for itself on the market.


foto giacomo b




Stefania Lucchetti and Giacomo Bocale

© 2017. For further information Contact the Authors

Articles may be shared and/or reproduced only in their entirety and with full credit/citation.  This post is for information only and is it is not to be considered legal advice.