Italy was the first European state to endorse China’s Belt and Road Initiative in 2019, when President Xi Jinping visited the country on a three-day trip. The country was under the leadership of the first government of former Prime minister Giuseppe Conte, supported by the Five Star movement and the Lega led by Matteo Salvini. Two years and two governments later, Italy’s financial crime police (Guardia di Finanza, GdF) charged six managers of a private firm, Alpi Aviation s.r.l. headquartered in Friuli-Venezia Giulia, for violations of military-exports and the “golden-power” legislation.
The firm, which produces drones, light and ultralight aviation aircrafts, is now in Chinese hands despite repeated warnings from U.S. diplomatic sources. Italy has become aware – and wary – of the covert manner through which China has acquired defence and high-technology firms, directly impacting national security.
According to recent investigations, in 2018 two Chinese state-owned companies took over control of the firm without formal disclosure to the relevant Italian authorities. Alpi Aviation is a leader in the production of military drones, aircraft and spacecraft, and supplies the Italian ministry of Defence as well as Leonardo S.p.a., the leading Italian aerospace company partly owned by the ministry of Economy with a 30% share. Among others, Alpi Aviation produces the Strix UAV, which was used by the Italian Air Force in Afghanistan. It weighs 10 kg, has a 3-meter wingspan, and can relay video and infrared imagery in real time. It takes 8 minutes to set it up, and then it is launched by catapult and is equipped with a parachute for landing.
Violation of Italian Laws on Arms Exports
The charges filed against Alpi Aviation are fundamentally two: breach of the law that governs the export of arms and the so-called “golden-power” legislation, which was introduced in march 2012 to protect Italy’s strategic companies in the defence, energy and telecommunications sectors. Alpi Aviation had previously been investigated by the GdF for the alleged violation of the international embargo on Iran through the sales of military drones via a Japan-based company.
According to a GdF statement from earlier this month, investigations have revealed that 75% of Alpi Aviation was purchased in 2018 by a foreign company named Mars Information Technology Co, based in Hong Kong. The latter had been set up ad hoc, right before the actual purchase was to take place and could not even count on independent financial resources. At that point, Alpi Aviation’s share was valued much higher than its nominal value. Denton, a global law firm, executed the takeover, the first transaction where “a Chinese holding company acquired a company in the European high-tech aviation sector”, according to the CV of a senior partner of the law firm. According to Italian investigators, the buyers of the Italian firm were two major Chinese government companies, the Chinese Corporate United Investment (CCUI) and CRRC, he world’s largest supplier of rail transit equipment.
Significantly, Alpi Aviation informed the ministry of Defence about the change in its corporate structure only two years after the purchase and only at the request of ministerial officials. The GdF explained that the takeover was “perfected with opaque methods aimed at preventing the traceability of the new foreign shareholder.”
According to the GdF statement, the transaction was “exclusively for the acquisition of (Alpi’s) technological and production know-how, including military.” That is the reason for which they allegedly planned to transfer the production facility from Italy to the technological district of Wuxi, an industrial city in Jiangsu province, less than 150 km from Shanghai.
Action against Alpi as per Italian Law
As the takeover had not been notified within the required timeframe by the company, it is no longer a matter of authorisation, but rather of initiating sanctions under Italian law. This could range from the suspension of voting rights to the invalidation of the deeds, including the actual sale of the company. As per Italian law, an administrative sanction could amount up to double the value of the transaction, and in any case not less than 1% of the company’s turnover in the last financial year. The decision to prosecute Alpi Avaition is now in the hands of the Presidency of the Italian Council of Ministers, in the form of a provision that will eventually be upheld in court. Meanwhile, Alpi Aviation, which is also related to Italy’s Ministry of Defence, remains in the hands of the government of the People’s Republic of China, a country that does not fall within the framework of Italy’s alliances, especially since former European Central Bank governor Mario Draghi took the reins of the government last February. Until justice completes its course, China will possess drone technology with unforeseeable consequences.