Season the chicken pieces with salt and pepper. Heat the oil in a large saucepan or sauté pan and fry the chicken pieces on all sides to brown. Drain to a plate.
Add the onion, celery and pancetta to the pan and fry gently for 10 minutes. Add the garlic and bay leaves and fry for a further 1 minute.
Add the vermouth or wine, tomatoes, sugar, tomato paste and seasoning and bring to the boil. Return the chicken pieces to the pan and reduce the heat to its lowest setting. Cook very gently, uncovered, for about 1 hour or until the chicken is very tender.
Stir in the basil and olives and check the seasoning before serving.