The rules on arbitration embodied in the Italian Code of Civil Procedure (CCP) do not distinguish between domestic and international arbitration. The 2006 reform of Articles 806 to 840 of the CCP (see Section II.i) unified the system by extending to all arbitration proceedings the rules previously applicable to international arbitration. As a result, Italy has a modern and updated legal framework for arbitrating international disputes, which includes allowing for the conducting of hearings and other phases of proceedings abroad as well as for the signing of awards by arbitrators when abroad.2 The parties may agree to conduct an arbitration in any language.3
i Local institutions
There are two main international arbitration institutions in Italy: the Italian Association for Arbitration (AIA)4 and the Chamber of Arbitration of Milan (CAM).5 They are internationally recognised as Italy's principal players for institutional arbitration.
CAM is a branch of the Chamber of Commerce of Milan and was established in 1985 to provide arbitration services. Through Law No. 580 of 1993, regulatory market functions were attributed by law to the chambers of commerce and, as a result, CAM gained a further boost as an alternative dispute resolution (ADR) provider. In 1996, mediation services were introduced, and CAM now provides an array of ADR services and tools that are tailored to specific types of dispute and to the needs of the parties involved.
AIA has offices in Rome. It was established in 1958 under the patronage of the Italian branch of the International Chamber of Commerce and through the endorsement of several important industrial, commercial and political entities for the purposes of promoting the development of arbitration proceedings and other forms of ADR. AIA has played an important role in the modernisation of Italian arbitration and mediation law, as well as in Italy's compliance with international conventions. AIA is a prestigious institution that administers both national and international arbitrations. It also publishes the authoritative arbitration journal Rivista dell'Arbitrato.
AIA and CAM increasingly carry out joint projects to further promote arbitration and ADR in Italy, such as international conferences and training courses. In addition, most of the main chambers of commerce administer arbitrations in accordance with their own rules, although few of these are international arbitrations.
ii Trends and statistics relating to arbitration
State court proceedings still remain the most commonly used means of dispute settlement in Italy. Despite that, problems related to the length of proceedings in the courts (studies have shown that the average time required to complete first instance civil and commercial proceedings is more than 500 days)6 and an increasing knowledge of ADR services have led to a recent increase in commercial arbitration. Accordingly, small and medium-sized companies have also started to make frequent use of both institutional and ad hoc arbitration, which was previously resorted to more by larger corporate players for reasons of confidentiality.
There are no statistics on the use of ad hoc arbitration. Despite this, we can confirm that this form of arbitration plays an important role, and especially in high-value domestic disputes. Arbitration clauses referring to ad hoc arbitration are widely adopted by major industrial and construction companies, and there is a circle of well-known lawyers active in this area.
It is possible to more closely monitor the development of arbitration administered by institutions. In this respect, statistics for 2016 showed that 708 arbitration proceedings were administered by arbitration institutions in Italy (a decrease from the 784 arbitration proceedings conducted in 2015, but overall a significant increase with respect to the 505 arbitration proceedings administered over 10 years ago in 2006). CAM has administered an average of about 140 to 150 cases over the past 10 years, with 130 cases in 2018. Despite the slight decrease last year, there has been a modest positive trend over recent years (in 1998, CAM only administered 39 cases). CAM figures also show that many of its arbitrations involve at least one foreign party (that is, as party with its registered office abroad). Finally, it is also worth noting that CAM, with the aim of promoting greater transparency, has since 2016 published the names of arbitrators appointed in the arbitral proceedings administered by the institution.
In 2008, a group of Italian practitioners specialising in international arbitration and ADR set up the Italian Forum for International Arbitration and ADR (ArbIt)7, an informal interest group whose main objective is to promote arbitration as an effective tool for resolving international disputes and to develop a culture and ethos of arbitration among Italian legal practitioners. ArbIt pursues its objectives through various initiatives, including organising conferences, courses and seminars focusing on the law and the practice of international commercial and investment arbitration, and developing relations with Italian and foreign arbitral institutions. Both the number of conferences organised or co-organised by ArbIt in Italy and abroad, as well as the number and arbitration experience of its members, are continuing to grow, and ArbIt is looked on as an authoritative group of arbitration practitioners. In the wake of such growth, in 2019 the Italian Under 40 Arbitration Group (AIA-ArbIt-40) was launched, with the aim of developing the exchange of ideas and professional experiences among young practitioners, academics and students with an interest in arbitration and other ADR mechanisms.
II THE YEAR IN REVIEW
The reform of Articles 806 to 840 of the CCP
The most recent comprehensive reform of Italian arbitration law entered into force in March 2006, updating the provisions on arbitration contained mainly in Articles 806 to 840 of the CCP. The purpose of the reform was to make Italy's arbitration system more efficient and cost-effective in line with the major international arbitration jurisdictions. The amended articles extend to all arbitrations the regime that was previously applicable only to international arbitration, and permit parties to agree to conduct an arbitration in any language.
Limited grounds for setting aside
Another important step taken in the 2006 reform was to strictly limit the grounds for the setting aside of an Italian-seated arbitral award. Both the final award and any partial award that decides the merits of a dispute may only be set aside on the limited grounds of nullity or revocation of the award, or for a third-party opposition when an award affects a third party's rights. The grounds for setting aside an award are limited to those procedural grounds specifically listed in the CCP. A review of the merits of the dispute is allowed only if expressly agreed to by the parties to the arbitration proceedings or as expressly foreseen in other very limited cases, such as for breaches of public policy.
All applications relating to the setting aside of an award must be made to a court of appeal, with the possibility of a further appeal on limited grounds to the Supreme Court of Cassation.
A challenge for the nullity of an award is possible only where the interested party has promptly raised an objection to the alleged violation of its rights during the course of the arbitration proceedings and has neither itself caused the ground for the challenge nor waived it. The grounds for nullity are listed in Article 829 of the CCP.8
An application to set aside an award must be filed within 90 days of service of the award or, if the award has not been served, within one year of the date on which the last arbitrator signed the award.
The filing of an application to set aside does not suspend the validity and enforceability of an award unless the court decides to stay enforcement for serious reasons (e.g., irreparable damage to the losing party before the determination of the appeal).
Recently, the Constitutional Court9 held as ungrounded the question of constitutional legitimacy raised by the Court of Appeal of Milan with respect to Article 829, Paragraph 3 of the CCP.
In particular, Article 829, Paragraph 3, in its current wording, states: 'an application to set aside an award for error of the rules of law relating to the merits of a dispute is permitted only if expressly provided for by the parties [in the arbitration agreement] or by law. A challenge of decisions [awards] contrary to public policy is admitted in any event.' This provision thus precludes the possibility to have an award set aside for an error of law in deciding the merits of a dispute, in the absence of an express provision contained in the arbitration agreement or in the law. Before the current wording of the Article was introduced in 2006, it provided that an appeal against an award for error of law was always permitted, unless the parties had authorised the arbitrators to decide according to equity or declared the award not subject to appeal.
In light of the interpretation subsequently given by the Supreme Court of Cassation in plenary session – pursuant to which the new Article 829, Paragraph 3 does not apply to arbitration proceedings brought under arbitration agreements stipulated before the 2006 reform, even when the proceedings were commenced after – the Milan Court of Appeal raised a question of constitutionality of the Supreme Court's interpretation, in that this interpretation violated Article 3 of the Constitution on the ground that it resulted in unequal treatment between similar situations.
The Constitutional Court rejected the Court of Appeal's application, holding instead that those who have stipulated an arbitration clause during the validity of the previous wording of Article 829, Paragraph 3 CCP, which always permitted an appeal against an award for error of law (unless the parties had authorised the arbitrators to decide according to equity or had declared the award not subject to appeal), are in an objectively different situation compared to those who, after 2 March 2006, must express a specific will to achieve the same objective.
Furthermore, the Court observed that, even in the regime prior to the 2006 reform, the autonomy of a party's negotiations stood as a fundamental principle of arbitration law, as the law allowed for the challenge of an award for an error of law, unless the parties agreed otherwise. The change of discipline, which restricts the grounds of appeal against an arbitration award, cannot therefore be considered as being based on the choice of attributing greater importance to the autonomy of the parties, given that the legal principle was already fully applied and protected under the prior wording of Article 829.
One important difference has been retained between the grounds for the annulment of a domestic award and an international award. Under Article 830 of the CCP, in the case of a domestic award, following an annulment order, the same court of appeal will directly decide the case on the merits, unless otherwise agreed by the parties either in the arbitration agreement or by subsequent agreement. On the other hand, in cases where one of the parties at the time of entering into an arbitration agreement was resident or had its administrative offices outside Italy, then following the annulment of the award, the court of appeal will decide the merits only if the parties have so agreed in the arbitration agreement or by subsequent agreement.
Challenges for revocation are available in limited circumstances only, such as where the award is the result of fraud on the part of one of the parties or an arbitrator, where decisive documents are discovered after the award was issued or where the award is based on evidence later recognised to be false.
It is also possible for a third party to oppose an award in cases in which the award prejudices that third party's rights, or if the award is the result of fraud or collusion to the detriment of the successors in title or creditors of one of the parties.
Law Decree No. 132/2014
Following the lead of the Supreme Court of Cassation (see subsection iii), Law Decree No. 132/2014 (converted into Law No. 162/2014) provides that the parties to ordinary legal proceedings, either at first instance or on appeal and up to the stage when the court reserves the matter for final decision, are entitled to present a joint application for the transfer of the pending proceedings from the court to an arbitral tribunal. Such a transfer from court to arbitration is of course still subject to the Italian rules on the arbitrability of the dispute, which generally means that the dispute does not concern non-disposable rights under Italian law (see Article 806 CPP).10 A fundamental advantage of this latest amendment is that in the case of a transfer of the proceedings to arbitration, Article 1, Paragraph 3 of Law Decree No. 132/2014 clearly establishes that the substantive and procedural effects of the original legal action are preserved and that the ensuing arbitral award will produce the same effects as a court judgment.
Law Decree No. 83/2015 (converted into Law No. 132/2015) has also introduced a tax benefit for fees paid to arbitrators in arbitration proceedings started under Law Decree No. 132/2014 and concluded by the issue of a final award.
No further significant legislative changes affecting international arbitration in Italy have been introduced during the past year, and the most recent major reform of arbitration introduced in 2006 remains in place.
In connection with other forms of ADR, the Legislative Decree on the Mediation of Civil and Commercial Disputes (No. 28/2010), which entered into force on 20 March 2011, introduced modern rules on mediation (including provisions on confidentiality, ethical standards for mediators and counsel, and enforcement of mediation settlements), and also required mandatory mediation in a number of classes of dispute covering many types of cases that were frequently brought to courts11 and that had created a bottleneck.
In 2012, the Italian Constitutional Court held as unconstitutional certain provisions of Legislative Decree No. 28/2010.
In 2013, a new Mediation Act was enacted (Law No. 98/2013, which converted Law Decree No. 69/2013 into law) fixing all of those procedural issues that had been considered problematic by the Constitutional Court.
Consequently, the current state of play is that mediation procedures are required as part of the litigation process before Italian state courts. An important role is also given to the courts, which can refer parties to mediation if they consider that settlement discussions are worth trying in the circumstances.
Another interesting development with regard to the variety of ADR methods adopted by the Italian legislator is assisted negotiation. Starting from February 2015 (by way of Law Decree No. 132/201412 and converted by Law No. 162/201413), under assisted negotiation, the parties, before resorting to the courts, are required to attempt to amicably negotiate a dispute with the assistance of their lawyers (although without the involvement of a mediator). In particular, assisted negotiation is mandatory in disputes concerning less than €50,000, excluding those cases in which the mediation is already compulsory; and actions for damages resulting from motor traffic, regardless of the value. The party wishing to file a judicial claim for the above matters shall invite the other party to enter into an assisted negotiation. If the other party does not reply within 30 days, the claim can be filed in court. On the other hand, if the parties agree to enter into a negotiation process, there are two possible outcomes: either an agreement is reached and the settlement agreement becomes binding, or an agreement is not reached and legal proceedings can be started. Law Decree No. 83/2015 (converted into Law No. 132/2015) also provides a tax benefit for the fees paid to lawyers involved in a successful assisted negotiation.
As a general comment, it has been noted14 that the above-mentioned tax benefits enacted to further promote ADR in Italy have started to have a positive impact on the Italian justice system. In particular, the spread of arbitration, mediation and assisted negotiation gave rise to a slight decrease in the number of proceedings commenced before the first instance courts and the courts of appeal during 2017 and 2018.
Legislative Decree No. 50/2016
A noteworthy reform introduced by Legislative Decree No. 50/2016 (as amended by Legislative Decree No. 56/2017 and further amended by Law No. 96/2017) has been the recent revision of the rules governing arbitration arising out of contracts with public entities regulated in the Code of Public Contracts (Code).
Pursuant to Article 209 of the Code, any dispute concerning subjective rights arising out of the execution of public contracts regulating works, services or supplies, both between a private party and the public administration or between two different entities of the public administration, may be referred to arbitration overseen by a special arbitration chamber set up by the Italian Anti-Bribery National Authority (ANAC). The arbitration chamber consists of a president and a five-member council that is appointed by ANAC from professionals and experts in the area of public contracts.
In particular, the tender documentation must clearly indicate whether a final contract with the public entity will include an arbitration clause submitting any dispute to the arbitration chamber. On the bidder's side, consent to arbitration is deemed to exist unless the party winning the tender objects to the applicability of the arbitration clause within 20 days of its knowledge of the adjudication of the tender (see Article 209, Paragraph 2 of the Code). The Code prohibits, in any case, an agreement to arbitrate once a dispute has arisen between the parties.
The arbitral tribunal consists of three arbitrators and is appointed by the arbitration chamber. Each party shall designate its own arbitrator, while the presiding arbitrator is chosen by the arbitration chamber from a list of recognised arbitrators with specific competence in the field of arbitration. In cases where a dispute arises between two different entities of the public administration, the party-appointed arbitrators shall be identified from a list of public managers (see Article 209, Paragraph 5 of the Code).
The arbitration procedure, unless otherwise indicated in the Code, follows the general rules of the CCP, and the parties have at their disposal the evidentiary rules contained therein, save for the making of solemn declarations. The seat of the arbitration can be agreed upon by the parties and, in the absence of agreement, is deemed to be at the offices of the arbitration chamber in Rome.
A last remark has to be made on the procedures following the issuance of an arbitral award. In this regard, it is noted that a condition precedent to the efficacy of the arbitral award is its deposit by the arbitral tribunal with the arbitration chamber. This deposit shall be made before the filing of the award before the court of first instance in order to obtain the enforceability of the award pursuant to Article 825 of the CCP. Another difference with respect to the usual arbitration procedure concerns the grounds for challenging an arbitral award. Article 209, Paragraph 14 of the Code prescribes that, in addition to the grounds for nullity enumerated in Article 829 of the CCP, the award may also be challenged on the basis of an error of law applicable to the dispute. Legal commentators have favoured this addition, as it allows for the possibility of controlling any possible bribery or other unlawful act that might otherwise not be picked up during a prima facie review of the ordinary annulment court.15
The reform of the rules governing arbitration in the Code has received some support from legal commentators, but also some criticism for the excessive administration involved in the arbitration procedure and the undue compression of party autonomy.16 The first available data seems to confirm this criticism, given that there has been a reduction in arbitration proceedings conducted on the basis of the Code.17
Through a ministerial decree dated 7 March 2016, the Ministry of Justice set up a commission composed of leading professionals and academics in the field of ADR. The commission, known as the Alpa Commission (after Guido Alpa, a distinguished law professor appointed to chair the committee), was given the mandate to assess the state of ADR in Italy, and to put forward reform proposals aimed at rationalising the regulations in this area. On 18 January 2017, the Alpa Commission submitted a report to the Ministry of Justice that contained interesting proposals for reform in the areas of both arbitration and mediation.
In particular, regarding arbitration, the following proposals were made:
- conferring on arbitrators the power to issue interim measures in institutional arbitrations on the condition that the interim measures are regulated under the rules of the institution administering the arbitration;
- extending the application of the translatio iudicii to all first instance proceedings pending before the state courts (see subsection iii on the standing of arbitration proceedings);
- the possibility for parties to agree that any challenge of an award be made directly to the Supreme Court to speed up any setting aside proceedings (currently, such challenge shall be filed before the court of appeal, and its decision may be challenged before the Supreme Court);
- extending the range of arbitrable matters to all labour disputes and to certain types of company disputes that were previously excluded (currently, labour disputes can be arbitrated only if provided by law or by the applicable collective bargaining agreement); and
- extending the range of arbitrable matters to disputes involving consumers (provided that the consumers have agreed to arbitration as a means to resolve a dispute and that the seat of the arbitration is identified by reference to the residence of the consumers).
Regarding the field of mediation, the following proposals were put forward:
- extending the classes of dispute requiring mandatory mediation, inter alia, to disputes arising from franchising agreements, subcontracting agreements and disputes arising in business partnerships;
- extending the efficacy of the mandatory mediation provisions contained in Law No. 98/2013 (see above) until 2023 (considering that 10 years from the enactment of the law is a reasonable time frame for promoting a mediation culture in Italy, following which parties should be able to decide on a voluntary basis whether to resort to mediation); and
- bolstering the effectiveness of the first meeting in mandatory mediations provided by Law No. 98/2013. It has been proposed that parties must be present in person at that meeting or shall delegate a third party (which cannot be a lawyer representing them) to act on their behalf so to make sure that a serious mediation attempt is made.
The Alpa Commission has revitalised the debate about some important aspects of ADR in Italy. While it is hoped that this will lead to the introduction of important further developments in ADR legislation that will make Italy more ADR friendly, it is noted that, for the time being, the amendments proposed by the Alpa Commission have not been incorporated into Italian arbitration law. The influence exercised by the work of the Alpa Commission, however, is still remarkable after two years from the submission of its final report. Notably, the proposals contained in the Alpa Commission have been repeatedly echoed in the main discussions on new trends in arbitration in Italy. For example, legal commentators have recently noted a consensus on the need to confer on arbitrators the power to issue interim measures as suggested by the Alpa Commission.18
ii Arbitral institution rules
The most recent versions of the arbitration rules of CAM and AIA were adopted in 2019 and 2016, respectively.
The main features of the CAM and AIA rules are aimed at providing parties with the expeditious, transparent and effective administration of arbitration proceedings. The rules place particular attention on:
- streamlining the internal rules regulating the role and functioning of the institutional bodies overseeing arbitrations, together with the introduction of emergency procedures;
- institutions' procedures for ensuring the independence and impartiality of arbitral tribunals;
- the duration and costs of proceedings; and
- the widening of the powers of arbitrators to assist in the issue of awards containing a full and final resolution of all issues forming part of a dispute.
CAM has embraced several of the latest legal developments in international arbitration in its new Arbitration Rules, which came into force on 1 March 2019 (2019 CAM Arbitration Rules). In particular, it has tried to 'improve the efficiency and rapidity of arbitral proceedings, at the same time ensuring the necessary guarantees'.19
The main additions to the 2019 CAM Arbitration Rules are:
- the introduction of a general duty of all parties involved in the arbitral proceedings to act in good faith. In particular, the 2019 CAM Arbitration Rules empower arbitral tribunals to sanction any unlawful conduct that is contrary to good faith (see Article 9 of the 2019 CAM Arbitration Rules);
- new provisions on the arbitration of company disputes entailing that the arbitrators shall be appointed by a third party outside of the company (see Article 17 of the 2019 CAM Arbitration Rules);
- the possibility for the arbitrators to adopt urgent interim or provisional measures that are not barred by mandatory provisions. As is well known, Article 818 of the CCP prevents arbitrators from conceding conservatory or other interim measures unless the law provides otherwise. As a consequence, the 2019 CAM Arbitration Rules prescribe that any provisional measure adopted by the arbitral tribunal will have 'binding contractual effect upon the parties' (see Article 26 of the 2019 CAM Arbitration Rules). The practical consequence is that, if the party against which a provisional measure is ordered does not comply with the arbitral tribunal's determination, the other party may take legal action against it for breach of contract;
- new provisions on the appointment of emergency arbitrators. In particular, Article 44 of the 2019 CAM Arbitration Rules, seeking to meet the needs of business, provides that any party may file an application for the appointment of an emergency arbitrator prior to the commencement of the arbitration proceedings, requesting the arbitrator to order provisional measures provided in Article 26 of the 2019 CAM Arbitration Rules and mentioned above under point (c) (see Article 44, Paragraph 1 of the 2019 CAM Arbitration Rules);
- the imposition upon any funded party of a duty to disclose the existence of its funding and the identity of its funder (see Article 43 of the 2019 CAM Arbitration Rules).
iii Arbitration developments in local courts
There have been several recent developments of interest in the Italian courts regarding arbitration. The areas dealt with below concern five aspects of special relevance to international arbitration practitioners dealing with cases with an Italian connection:
- the standing of arbitration proceedings;
- the agreement to arbitrate;
- the arbitration of company disputes, relevant to international joint ventures in Italy;
- the court's exclusive power in Italy to issue interim measures of protection and its practical effects; and
- the recognition and enforcement of foreign arbitral awards in Italy.
The standing of arbitration proceedings
Notably, in Decision No. 223 of 19 July 2013, the Constitutional Court held as unconstitutional a part of the Second Paragraph of Article 819 ter of the CCP (regulating the relationship between arbitration and court proceedings), which provides that Article 50 of the CCP20 does not apply to arbitration proceedings. The effect of this decision is that, should a party commence an arbitration and it is subsequently found that there is no valid arbitration clause, the proceedings can be continued before the courts, thereby preserving the substantive and procedural effects of the original reference to arbitration. In certain cases, this may be vital to the exercise of the rights in dispute where the relevant action is subject to a strict limitation period. Thus, the Court has held that proceedings may now migrate from a court to an (institutional) arbitration, and vice versa. The judgment of the Constitutional Court represents an important step forward in the sense that there is a unique procedural
relationship between arbitration and court proceedings that narrows the distance between court, public justice and arbitration, or private justice.21
Only a few months after the decision of the Constitutional Court, in a landmark judgment,22 a plenary session of the Supreme Court of Cassation went to some length to affirm the principle of the jurisdictional nature of arbitration, which it said derives directly from the Constitution. In particular, the Supreme Court clarified that institutional arbitration has a jurisdictional function and is an alternative means of dispute resolution to the ordinary courts. In the Court's view, it followed that the question of whether a dispute should be decided through arbitration or through the court was an issue of the competence of the court or tribunal, and not a question of jurisdiction (as would be the case in a dispute over the jurisdiction of the ordinary courts in relation to a foreign court). Similarly, in an important recent judgment, the Supreme Court, in plenary session,23 held that an issue relating to the existence or validity of an arbitration clause is to be considered as a preliminary procedural question and does not go to the merits of the case. Accordingly, the Court considered the decision issued by the arbitral tribunal on the arbitration clause as a non-definitive award; as such, it could not be immediately set aside for nullity, but only together with the final award.
The Supreme Court of Cassation, again in plenary session,24 subsequently reaffirmed and further clarified the above principle. In particular, it held that the jurisdictional nature of institutional arbitration also applies with respect to international arbitration. According to the Court, basing its interpretation on Articles 4 and 11 of Law No. 218/1995, it can be concluded that, if ordinary court proceedings are commenced, the objection that the dispute must be referred to international arbitration (in light of the existence of an arbitration clause) is a procedural objection to jurisdiction. Therefore, the lack of jurisdiction of the ordinary courts can be declared at any stage and at any level of the proceedings, provided that the defendant did not expressly or tacitly accept the Italian jurisdiction. In other words, it was only necessary for the defendant, in its statement of defence, to raise the relevant objection of the lack of jurisdiction of the Italian courts.
In another recent decision of the Supreme Court of Cassation of 2016, the closeness of the arbitrators' role to the jurisdictional (or court's) role was (again) implicitly confirmed. In this decision, the Court clearly recognised the power of the arbitral tribunal to issue mandatory procedural time limits that the parties are required to comply with (the mandatory nature of the time limit, however, must be express in order to comply with the principle of due process). The principle contained in this judgment is of particular interest and of an innovative nature in Italy, as the possibility for an arbitral tribunal to introduce mandatory time limits (and consequent preclusions) has been traditionally considered extraneous to arbitration, which the legislator has always considered should be 'fluid' and 'elastic'.25
Legal commentators have also consistently embraced the concept of the jurisdictional nature of arbitration and of the resulting award.
On this basis, one legal commentator recently affirmed that the similarity of the procedural effects of an award to those of a court judgment shows that an award, which is no longer subject to appeal, carries with it res judicata effects that can also be raised by a court on its own motion in pending legal proceedings. This defence would be sufficient to prevent the continuation of legal proceedings commenced before the state court having identical issues for decision.
However, the same author has also pointed out that the above conclusions, while based on the agreed premise of the jurisdictional nature of arbitration proceedings and the resulting award, do not in any way imply the public nature of the powers exercised by arbitrators. The arbitrator, in fact, is a private judicial authority, extraneous to the judicial power of the state, whose powers are conferred directly by the parties to an arbitration agreement. Based on this view, he concluded that arbitrators, in the exercise of their private powers, carry out a jurisdictional function that is not in the exclusive domain of the state courts. However, at the same time, he also clarifies that an award is different both from a judgment of the state court (not being the result of the exercise of a public power) and from a contract, being the result of a decision made by a third and impartial judge based on the powers attributed to him or her by the parties, following procedures based on the principles of due process.26
The agreement to arbitrate
The formal requirement that an agreement to arbitrate must be in writing can also be satisfied by an exchange of letters or other written communication (Article 807 CCP), and also by the production of copies of documents that have not been disowned or challenged by the other party. The Court of Cassation27 has consistently held, in compliance with the New York Convention, that the requirement is satisfied when the writing shows a clear intention to refer any dispute to arbitration, even when such writing makes reference to a separate contract or document, as long as it identifies the ambit and scope of the possible disputes to be referred to arbitration.
In particular, an important judgment of the Supreme Court of Cassation, Del Medico v. Soc Iberprotein,28 reversed the Court's previous insistence that arbitration clauses contained in a different agreement from the one that is the subject of a dispute need to be specifically approved by the parties.
In Del Medico, the arbitration clause was contained in a Grain and Feed Trade Association-prescribed form that was referred to in the separate agreement signed by the parties but that did not make express reference to the arbitration clause. The Court held that the agreement to arbitrate complied with the requirements of the New York Convention, which were directly applicable in Italy and which must also be interpreted in light of the less formal practice of international commerce and the preference for the arbitration of international disputes. The wording of Article 2 of the New York Convention was considered broad enough to cover the present facts in which there was only a general reference to the standard conditions and no specific reference to the arbitration clause in the agreement signed by the parties.
This decision was a significant step, departing from a previous tendency of the courts to take a formal approach to the signing of an arbitration clause by the parties. It is also relevant here that the 2006 arbitration reform introduced a provision aimed at assisting the courts in their interpretation of arbitration clauses in such disputes, which may also extend to the tortious liability of parties to a contract. In particular, Article 808 quater provides that 'In the event of doubt, the arbitration agreement shall be interpreted in the sense that the power of the arbitral tribunal shall extend to all of the disputes that arise from the contract or from the relationship to which the contract refers'.29 Legal commentators are of the view that this provision should put an end, once and for all, to restrictive interpretations of arbitration clauses motivated by the presumed exceptional nature of the derogation to the jurisdiction of the courts, thereby imposing a wider interpretation of whether a dispute falls within a contractual arbitration clause.30 And, in fact, in Vittoria SpA and Vittoria Industries Nord America Inc v. Northwave,31 the Supreme Court openly recognised that the 2006 reform not only led to the complete substantial equipollence of arbitration and ordinary court justice as a means of dispute resolution – both having a jurisdictional nature – but also confirmed the principle of favor arbitrati. In this specific case, the parties had included in the same contract both an arbitration clause and the choice of a specific state court to have jurisdiction over any disputes that could not be decided through arbitration. The Supreme Court, in its reasoning, clarified that the coexistence of the two clauses did not give rise to any ambiguity or conflict. On the contrary, it was compatible with the clear will of the parties to refer to arbitration any disputes arising in the future between them. The Supreme Court applied in its decision the traditional criteria for the interpretation of contracts and confirmed the trend of both jurisprudence and legal commentators, following the 2006 reform, to give prevalence to the arbitration agreement and, as a consequence, a restrictive interpretation of the clause choosing the jurisdiction of a state court, based on the principle contained in the cited Article 808 quater CCP: in dubio, pro arbitrato.
A similar approach favouring arbitration has been taken by the Italian courts in proceedings commenced through the summary monetary claims procedure. In this type of proceeding, an injunctive decree ordering payment is issued ex parte on the basis of, inter alia, a sworn declaration made before a notary that the claimants' accounts show the commercial debt outstanding. In the event that the other party files an opposition contesting the claim and fails to raise a defect of jurisdiction based on a valid arbitration clause, the opposing party is considered to have accepted the jurisdiction of the courts only with respect to the claim and not with respect to other claims that may arise under the same arbitration clause, which remains valid and binding on the parties for such other claims.32 This principle is confirmed in Article 819 ter of the CCP.
The approach of the Italian courts in respecting and enforcing arbitration clauses, where legally possible, has recently been confirmed in a number of decisions of the Supreme Court of Cassation. It is worth mentioning, first, judgment No. 3464 of 20 February 2015,33 in which the Court of Cassation affirmed the principle that an 'all-embracing' arbitration clause – that is, a clause referable to all civil and commercial disputes arising in connection with the parties' disposable rights in a contract containing an arbitration clause – applies to each single dispute arising between said parties. As a consequence, the waiver (even implicit) by a party of the right to enforce an arbitration clause in a dispute does not entail of itself a definitive waiver to the arbitration clause with respect to any other dispute between the same parties (provided that the new dispute does not involve the same petitum and causa petendi) unless the parties by agreement have expressly and validly renounced or terminated such clause in its entirety.
Shortly after, the Supreme Court of Cassation, in plenary session, in judgment No. 10800 of 14 April 2015 (see footnote 24), held that a company receiver of a bankrupt company who opted to continue the performance of a contract – so succeeding in the relevant obligations – that contained an arbitration clause was also bound by that clause, which remained fully valid and effective in relation to the receiver. The facts of the case were that the claim for payment of services supplied by the company before having been declared bankrupt had to be decided within arbitration proceedings, and with the exclusion of the bankruptcy courts. The Court reasoned that the respecting of the arbitration clause corresponds to the need that disputes arising out of a contract (even if expired) must be resolved in accordance with the procedure agreed upon by the parties in said contract.
Finally, the Supreme Court, again in plenary session,34 giving a wide interpretation to the 1998 law that expressly repealed the prohibition on the arbitrability of residential lease disputes, found that the repealing law applied to all leases on the basis that the law could be interpreted either restrictively or extensively, and that the extensive interpretation was the preferred one in view of constitutional principles. On that basis, in deciding the case, the Court declared that the arbitration clause contained in a lease of a major holiday resort was valid also in connection with the determination of the rent and its indexation. This judgment is a landmark decision in the area that will have repercussions on all commercial leases.
Obviously, the will of the parties encounters certain limits. For example, as to the term for the issuing of an arbitration award, it is worth mentioning a recent judgment of the Supreme Court of Cassation in Coop Edilizia Srl v. M, dated 19 January 2015.35 In this judgment, the Supreme Court of Cassation affirmed the principle that the indication of a term within which the arbitrator or arbitrators have to issue a decision pursuant to Article 820 CCP is mandatory. Therefore, the Court considered that, although the parties have the possibility to establish a different term (even one longer than that term fixed by Article 820 CCP), they cannot validly renounce in a generic way a term by simply agreeing that there is no time limit (sine die) for the duration of the arbitration. In particular, the parties may give the arbitrators the power to extend the arbitration for a longer period than the term limit established by law, provided that a final term is nonetheless indicated. Otherwise, the delegation of ad libitum to the arbitrators is to be considered null and void, and will be replaced by the legal provisions of the CCP. The approach of the Court appears to balance the interests of a time limit to the arbitration proceedings with the contractual freedom of the parties to agree a different time limit for the issue of the award.
Notwithstanding the above general trend in favour of arbitration, we still feel obliged to add a word of caution. In a recent judgment, it was held that an arbitration clause contained in a contract does not automatically apply to other contracts, although these may be linked in some way to the main contract (in the specific case, the court held that an arbitration clause contained in a lease agreement that had not been expressly recalled in a sub-lease did not apply to the sub-lease).36 Furthermore, in another decision, the Section VI of the Supreme Court stated that an arbitration clause that generally referred to all disputes arising out of a contract shall be interpreted as covering only those disputes having their object (or causa petendi) in the same contract, unless otherwise expressly agreed by the parties. In the specific case, the Court held that the arbitration clause contained in a works and services contract did not apply to the case in dispute, having as its object a tort claim brought by the plaintiffs in connection with an alleged serious defect of the goods purchased by them.37 These decisions appear to be closely tied to the specific facts of the cases, and do not appear to reverse the favourable stance regarding arbitration taken by the Italian courts referred to above. In connection with the latter case, it should be noted that Article 808 quarter of the Civil Code provides 'In case of doubt, an arbitration clause should be interpreted in the sense that it extends to all disputes arising out of the contract or the relationship to which the clause refers'.
Finally, within the ambit of this more restrictive approach, it is also worth mentioning a decision of Section VI of the Supreme Court in which the Court held that only judicial courts and not arbitrators have jurisdiction to decide a dispute where a defendant denies ever having signed a contract (containing an arbitration clause), and disowns his or her signature therein, based on the legal principle that referral to arbitration is possible only when the conclusion of the contract and the exact identification of the parties are not disputed.38
Arbitration of company disputes
Italy has a specific law to facilitate the arbitration of both domestic and international corporate disputes. This law simplifies and facilitates the arbitration of such disputes, which may often involve parties who have not signed or expressly accepted an arbitration clause or agreement.
Article 34 of Legislative Decree No. 5 of 2003 provides that the memorandum of incorporation or by-laws of unquoted companies may contain arbitration clauses that will also bind certain parties who did not sign the deed of incorporation or by-laws containing the arbitration clause. Article 34 requires that, to be valid, the arbitration clause must provide for the appointment of a sole arbitrator or members of the arbitral tribunal through an appointing authority that is external to the company (to overcome the question of which party or parties to a multiparty arbitration have the right to appoint their own arbitrator). The clause is binding on the company and on its members, including those shareholders and members who did not sign the corporate constitutional documents containing the arbitration clause and those whose status of shareholder is the subject of dispute. It also may be binding on the company directors and statutory auditors upon their acceptance of their appointment.
Through judgment No. 22008 of 2015, the Supreme Court of Cassation clarified that the principle set out in Article 34 referred to above also applies to 'free' arbitration under Italian law. Free arbitration in Italy is arbitration that does not follow the procedural rules laid down by the CCP, and that does not give rise to a final award but only to contractual obligations. The Court held that the requirement of Article 34 that arbitrators appointed to decide a dispute must be external to the company also applies to free arbitration. Thus, a clause contained in a company's by-laws is invalid if it provides for the appointment of arbitrators who are not external to the company. Thus, in this case, the dispute must be referred to the ordinary courts.
For corporate arbitration provisions to apply, a dispute must involve rights concerning internal corporate relationships, such as disputes regarding the running of a company, the approval of its financial statements, and the appointment of persons to its boards and committees. However, an important limitation on the arbitrability of corporate disputes under this law is that the dispute may only concern disposable rights and not those rights that an individual party is not free to give up (rules for the protection of collective company rights or of categories of persons). Non-disposable rights include, for example, rules regarding the preparation of financial year-end balance sheets that also protect company creditors, and the requirement that corporate objects comprise only legally permitted activities.
A dispute involving the remuneration of the directors and auditors of a company was also considered to be excluded from the ambit of the application of Article 34. The case concerned an arbitration commenced by Z against company X for the recognition of Z's right to remuneration as a director and managing director of the company. However, the sole arbitrator denied his competence to determine the matter in favour of the ordinary courts.39 He asserted that the relationship between the company and its directors is equivalent to a para-subordinate relationship, and therefore falls within Article 409 CCP (regulating, in general, individual employment disputes). The arbitrability of such disputes is to be excluded in light of the express provision of Article 806, Paragraph 2 CCP (see footnote 10), as they involve a non-disposable right.
According to the sole arbitrator, Article 806 CCP and Article 34, Paragraph 4 of Legislative Decree No. 5/2003 have different functions, and therefore the ambit of application of Article 34 can in no case override the general principle in Article 806 CCP.
More recently, however, in deciding a similar case concerning the remuneration of the chair of the board of directors of a company, a court of first instance expressed its view to be the opposite.40 In this case, the Tribunal of Rome held that, in light of the arbitration clause contained in the by-laws of the company referring to arbitration all disputes between the company and its directors, a dispute concerning the payment of the directors' fees to the chair of the board of directors fell within the arbitration clause.
The Tribunal considered that the by-laws of the company were ultimately the expression of the willingness of the parties, who had adhered to it, to avoid litigation and resort to arbitration. Therefore, it concluded that the claims raised by the company against the chair of the board of directors undoubtedly concerned disposable patrimonial rights relating to the corporate relationship, this certainly including the administrator's right to remuneration for the preparation of the end-of-year financial statements.
Another frequently recurring question considered by the courts concerns the arbitrability of disputes involving the approval by a shareholders' meeting of corporate annual financial statements, as these must be prepared in compliance with mandatory rules aimed at protecting all shareholders and corporate creditors. Is the right of a shareholder to cast a vote approving or rejecting draft financial statements proposed by the board a disposable right?
A recent case before the Court of First Instance of Milan41 considered the jurisdiction of the Court to decide a dispute in the face of an arbitration clause contained in a company's articles of association. The defendant to the proceedings invoked the arbitration clause, which the applicant submitted was inapplicable because the issues in dispute involved non-disposable rights. The Milan Court refused its own jurisdiction, deciding in favour of the arbitrability of the dispute. In particular, the Court reasoned that the right of a shareholder to inspect the balance sheet before a shareholders' meeting need not be exercised; in fact, the right to bring proceedings for a breach of obligations of a complete, fair and truthful reporting in financial statements becomes statute-barred after three years; furthermore, the evolving arbitration legislation tends to recognise arbitration as an alternative to court proceedings for the protection of a party's rights and not as 'merely' a private means of dispute resolution with respect to the traditional public court system. This judgment has a strong pro-arbitration flavour, and the principle contained in it has recently been confirmed by the Constitutional Court in the judgment described in Section II.iii.
The judgment of the Court of First Instance of Milan in particular appears to support the arbitrability of any corporate dispute that involves the protection of a party's rights, even when connected with the subject matter, such as a company's balance sheets, which were previously considered non-disposable and, as such, not arbitrable. The Court has held that the correct approach is to consider the rights for which protection is sought, and not consider arbitrability only on the basis of an abstract characterisation of the subject matter involved.42
A similar, but less incisive, approach was recently taken by the Supreme Court of Cassation in TC v. MG,43 which confirmed the principle that non-disposable rights are limited to those protected by mandatory law and that are made for the protection of the shareholders of a company as a category, or its creditors or other third parties. However, while the courts on the merits (generally, first and second instance courts) have consistently shown a tendency to widen the scope of the arbitrability of corporate disputes, the Supreme Court of Cassation has been more restrictive, and has remained of the view that certain categories of company dispute are not arbitrable, such as those involving a challenge for nullity (and therefore for alleged breach of mandatory law) of the resolutions of shareholders' meetings because of the mandatory nature of the rights involved.44
Nevertheless, small openings towards a narrower interpretation of what are non-disposable rights, in the sense that not all mandatory law is necessarily non-disposable, may be found in the most recent decisions of the Supreme Court. For instance, in Energo Srl v. UBI Leasing Spa, the Court expressly qualified as 'disposable' the right actioned in a claim for the restitution of sums paid under an allegedly usurious interest rate notwithstanding the mandatory nature of Italian law on usury.45
Finally, it is worth mentioning that in 2017, the Italian Association of Companies limited by shares (Assonime), together with AIA, carried out a joint study specifically focused on the arbitration of company disputes in Italy.46
In particular, the study sees the arbitration of corporate disputes as an important tool to create a legal system that is favourable to companies and also competitive in attracting foreign investment. The purpose of the study was to highlight the potential of arbitration and, on the other hand, the problems posed by the present legislation with a view to identifying possible solutions in a prospective further law reform.
The following were identified in the study as central topics for the enhancement of corporate arbitration: a clearer definition of the area of arbitrability of company disputes, in particular, with respect to those disputes having as their object a challenge to shareholders' resolutions; and the elimination of the prohibition on the arbitration of disputes involving companies that raise risk capital on the capital market.47
Interim measures of protection
A distinctive feature of arbitration in Italy is that the legislator has decided not to follow the UNCITRAL Model Law48 regime, which gives arbitral tribunals the right to hear and determine applications for interim measures of protection. On the contrary, Italian law gives exclusive power to the courts to hear applications for urgent interim relief independently of whether a dispute is the subject of a domestic or international arbitration clause.
Consequently, a comprehensive system of procedures for interim measures is found in the CCP, in the section entitled 'Provisional measures'.49 As the procedures are the same for both proceedings pending before a court and before an arbitral tribunal, the law complies with the principles set out in Articles 9 and 17J50 of the Model Law. The approach reflects the reticence in Italy to give the power to arbitrators in domestic arbitrations to hear such applications, and the same approach has prevailed with respect to international arbitration. The acceptance of jurisdiction by an Italian court with respect to interim measures of protection is not considered to be a breach of Article 2 of the New York Convention, as confirmed by the Model Law (Article 17J) and also by Article 23.251 of the ICC Arbitration Rules, which foresee the possibility of interim measures of protection to be issued by courts.
An advantage of the Italian approach is that applications for interim measures are heard swiftly by the courts (and also ex parte where sufficient urgency has been shown), and that orders are quickly and directly enforceable in Italy.
In this respect, there has been a recent judgment of the Rome Tribunal that is of interest.52 The Court expressly stated that the existence of an arbitration clause does not automatically exclude the jurisdiction of the state court to issue an injunctive decree ordering the payment of liquid sums. In the event, however, that the injunctive decree is subsequently opposed by the debtor based on the existence of an arbitration clause, the court must declare the injunctive decree null and void and refer the dispute to arbitration.
Furthermore, the Supreme Court, after over 60 years, recently has revisited the issue of the arbitrability of disputes that are the object of opposition to enforcement procedures. The Supreme Court, in particular, set down the legal principle that an arbitration clause referring to 'any disputes' also includes in the arbitration jurisdiction opposition proceedings to enforcement. On the contrary, oppositions to the acts and deeds of the enforcement procedure are not arbitrable, as the verification of the observance of procedural rules concerns public policy rights that are not arbitrable. In particular, in an opposition to the acts and deeds of the enforcement procedure, a party may claim a breach of the procedural rules governing the enforcement procedure. Since these procedural rules are of a public nature and therefore mandatory, according to the Supreme Court, it follows that opposition proceedings against an enforcement procedure involve non-disposable rights. Accordingly, pursuant to Article 806 CCP, Paragraph 1, the matter cannot be referred to arbitration. Based on the same judgment, a different conclusion applies to opposition proceedings to an enforcement: since the object of these proceedings is the substantive right of the creditor, which, like any other property right, is freely disposable (save for limited exceptions), the opposition to enforcement can be decided by arbitration.53
An unresolved issue may arise, however, in the face of a valid arbitration clause for an arbitration with its seat outside of Italy that expressly includes the exclusive power of the arbitral tribunal to entertain applications for interim measures. Such clause would exclude the Italian courts from hearing the application.
If the court were to decide in this case that the application could not proceed even where there were significant assets in Italy that were the subject of measures aimed at freezing assets (such as a seizure), prejudice could arise. If, on the other hand, the court determined that it could hear the application, it could be argued that the intention of the parties expressed in the arbitration clause was not fully respected, in breach of Article 2 of the New York Convention.
The recognition and enforcement of arbitral awards
Recent decisions of the Italian courts continue to make direct reference to the provisions of the New York Convention when considering applications for the recognition and enforcement in Italy of foreign arbitral awards and the ensuing opposition proceedings often brought by the losing party.
In the Italian system, a foreign arbitral award is one made in the territory of a state other than Italy and does not include an award resulting from an arbitration with its seat in Italy. If an award has been set aside by a court of the seat of the arbitration and the losing party produces evidence of this in the recognition proceedings, then the award will not be recognised in Italy, pursuant to Article 840, Third Paragraph (5) of the CCP.
The procedure for recognition and enforcement in the CCP consists of two phases. In the first phase, an applicant files an application to the court of appeal for recognition of the award. The application must be accompanied by the original or certified copies of both the arbitral award and the arbitration agreement. In relation to these requirements, the Supreme Court of Cassation54 has held that the production of both of these documents at the time of the filing of the application is essential to proceeding with the application, and obiter dictum that the failure to produce an authenticated original award (as foreseen by the New York Convention) is fatal to the application, although it also considered that the application for recognition could be re-presented.55 Subsequently, the Court of Appeal of Venice, in a judgment dated 1 July 2013,56 followed the Supreme Court's decision. In the Venice case, the applicant produced the original award in support of its application for recognition. However, the Court refused to apply the more favourable Article 839 CCP (which requires the production of the original or a certified copy of the award) in favour of the direct application of Article IV 1(a) of the New York Convention, which requires the production of an 'authenticated original or certified copy' of the award. This decision appears to be wrong, as the Court did not take into consideration Article VII of the New York Convention, which provides that 'The provisions of the present Convention shall not . . . deprive any interested party of any right he may have to avail himself of an arbitral award in the manner and to the extent allowed by the law or treaties of the country where such award is sought to be relied upon'. Thus, the more favourable provision of Article 839 of the CCP was not applied by the Court. The Court was of the view that, because of its comprehensive and autonomous nature, the New York Convention prevails over the different substantial and procedural requirements provided by the domestic law of Member States.
Although this judgment has since been indirectly overturned in fresh proceedings for recognition of the same awards, in which the Court held that the authentication requirement had been badly formulated as there was no doubt as to the origin of the award, it being an ICC arbitration, we nevertheless wish to emphasise these requirements, as international readers may be surprised that the Italian courts can take such a strict approach to the formal requirements.57
The first phase of the proceedings is conducted ex parte on a documents-only basis, leading to a court decree either granting or rejecting the application for recognition. This phase of the proceedings usually takes one to three months. The second phase commences in the event that the decree is opposed by the other party or by the applicant in the case of rejection, to be served on the applicant within 30 days of receipt of service of the decree. The grounds for opposition follow very closely the seven grounds for refusal in Article V of the New York Convention. Opposition proceedings before a court of appeal take an average of two years for determination, and the procedural rules follow procedures that do not foresee articulated applications for the taking of witness and expert evidence.
There have been conflicting decisions of the Italian courts on the immediate provisional efficacy of a decree granting recognition. The position on this is of critical importance as, if recognition decrees are immediately effective, the enforcement of foreign arbitral awards in Italy takes just a few months, subject to any subsequent opposition made by the losing party. In a recent unpublished decision of the Venice Court of Appeal, the Court considered that a presidential decree recognising an award in the first phase of proceedings could immediately be made provisionally enforceable, pending the opposition proceedings.58 However, the courts of other districts, as well as some respected legal commentators, have taken the view that a decree is not immediately provisionally enforceable against a defendant, and that an applicant must wait for the possible filing of an opposition by the other party before seeking the provisional enforceability of the decree during any opposition proceedings. To decide, the court will evaluate the nature and prima facie strength of the defendant's grounds of opposition. The answer to these questions can lead to a significant difference in the time required for effective recovery in Italy of a foreign award.
The Court of First Instance of Nocera,59 in a decision issued on 10 January 2012, considered that the ex parte decree of recognition of the Court of Appeal was immediately enforceable, and executive proceedings for forced sale and attachment could be based on the decree. The reasoning of the Court was that, since the 2006 reform (see Section II.i), internal awards become immediately enforceable upon their registration with the court and, in compliance with Article III of the New York Convention, the enforcement of foreign awards should not be significantly more difficult to achieve. However, the Court of Appeal of Venice, in a decision of 9 March 2012,60 took the opposing view, considering that the requirement to wait for the expiration of the filing of an opposition did not render the procedures substantially more onerous for foreign awards than for local awards.
Of particular interest in international arbitration is the public policy ground for refusal found in Article V2(b) of the New York Convention. The Italian system distinguishes between internal and international public policy, and the ground contained in the Convention has been limited by consolidated Italian jurisprudence to international public policy. This concept is widely understood and accepted to be the sum of those fundamental rights found in the Italian Constitution and in EU legislation (such as competition law) that reflect the ethical, social and economic morals of the Italian community at the relevant time.61 Recent decisions of the Supreme Court of Cassation interpreting objections to recognition based on international public policy include the following:
- The Supreme Court of Cassation considerably limited the scope of this ground by holding, in its 2004 decision in Vigel v. China National Machine Tool Corporation,62 that the public policy ground only applies to the orders in an award and not to the reasoning of the award. In that case, the non-application of the United Nations Convention on Contracts for the International Sale of Goods by an arbitral tribunal with its seat in China in the reasoning for the award was not held to constitute a violation of Italian public policy. This was because no breach of public policy would arise in Italy from the concrete effects of the recognition and enforcement of the orders contained in the award.
- The Supreme Court of Cassation63 held that the enforcement in Italy of an award containing US-style punitive damages was against Italian public policy because damages in the Italian civil justice system aim to compensate effective loss and not to satisfy exemplary or punitive purposes.
- With respect to a Kuwaiti award containing contradictions in its reasoning, the Court of Appeal of Milan64 followed the consolidated line of authority that states that a breach of public policy must involve a breach of the fundamental principles of the Italian legal system and not be used for the improper purpose of allowing the court to review the merits of an award. Further, to justify refusal of recognition, the contradictions would need to be in the orders themselves or between the reasoning and the orders, not simply in different parts of the reasoning for the award, unless they were such as to make the logical and legal reasoning completely unintelligible.
- A decision of the Court of Appeal of Venice65 held that the public policy ground should be interpreted narrowly in keeping with one of the founding principles of the New York Convention of favouring the international circulation of arbitral awards. It was not sufficient for a party to show a breach of Italian contract law in the provisions of the contract66 between the parties (governed by English law) that was not considered in the award, as this would amount to a re-examination of the merits of the dispute. Further, the terms of the award itself must contain a breach of international public policy and not only the contract forming part of the dispute that was freely entered into. The Court also confirmed, as stated above, that the principles of Italian international public policy are limited to those positive principles contained in the Constitution and in fundamental EU law, such as human rights and antitrust.
- A decision of the Supreme Court of Cassation on the recognition of foreign awards, which confirms the favourable approach to recognition, is contained in Third Millennium Company Srl in liquidation v. Guess? Inc.67 The Supreme Court held that to prevent the enforcement of an award on grounds of a breach of due process in the arbitral proceedings (under Article 840, Paragraph 3, No. 2 of the CCP), the opposing party must show that it was impossible for it to defend itself in the arbitration. On the other hand, a mere violation of specific foreign law procedural rules applicable to the dispute could only be invoked in the foreign country through a setting-aside application there. Further, in the same judgment, the Supreme Court also held that whether the conclusion of a second agreement, which supplemented the original agreement containing an arbitration clause, may also negatively affect the applicability of an arbitration clause is a question going to the merits of the dispute, and that any such argument as to the validity of the arbitration clause can only be raised in the arbitration and not with the court asked to enforce the award.
- In a very recent judgment, the Rome Court of Appeal, in rejecting all objections and defences raised by Kazakhstan against an application for recognition in Italy of an arbitral award in Stati et al v. Republic of Kazakhstan68 emphasised that, for the purposes of the compatibility of an award within the domestic legal system, regard must be had to the subject matter of the award. The Court noted that, pursuant to Article 840 CPC, a review of compatibility with public policy cannot regard the reasoning of the entire arbitral award but only the final dispositive orders contained in the award. The Rome Court of Appeal in the same judgment also clarified that a review of a foreign judgment in recognition proceedings does not concern the correctness of the decision adopted in application of the foreign legal system, but rather consists of a verification of the compatibility of the effects of the decision with the Italian legal system. It concluded that it is necessary therefore to decide if these effects are abnormal to the Italian legal system because they are in open contradiction with the 'web of values' and laws that govern the matter. The Court also cited, on these same terms, the decision issued by the Supreme Court of Cassation in plenary session, No. 16601/2017. On the facts of the case, the Rome Court of Appeal considered that there had not appeared to be any conflict with procedural public order, given that nothing emerged in the proceedings showing a 'manifest or excessive breach of the rights of the parties to rights of due process and of defence'. In particular, the false evidence on which Kazakhstan alleged the award to have been based was not contained in any res judicata judgment (Article 395 No. 2 CPC). Furthermore, the facts showed that the appointment of the arbitral panel had been carried out in accordance with the terms of the arbitration agreement and of the Rules of the Arbitration Institute referred to therein.
A much-debated issue is the cost (court fees and taxes) for the enforcement of a foreign award in Italy. According to several commentators, a court decree granting recognition of an award in Italy, when definitive, gives rise to the payment of a 3 per cent registration tax calculated on the amount of the award (if not based on commercial invoices subject to VAT), others consider that the recognition of an award is subject to a fixed registration tax (presently €200,00).69 Tax authorities have had different approaches to the matter. As the difference can be very significant, clarity from the legislator or tax authorities is warranted. We consider that the correct interpretation is that of applying the fixed fee, as the court decree recognising the award does not contain, per se, any order or assessment of rights, but rather acknowledges the formal validity of the award and declares it enforceable. Recently, the Turin tax office applied the registration tax on a fixed fee, thus recognising the merits of this approach.70
iii Investor–state disputes
Italian nationals and companies have both been the investor parties to several recent ICSID arbitrations involving bilateral investment treaties between Italy and other states. Italy is currently the respondent in eight pending cases.71 The rising number of arbitrations that Italy is facing (mostly because of the measures adopted in the renewable energy sector) is possibly one of the causes of Italy's withdrawal from the Energy Charter Treaty (ECT) as of 1 January 2016. This move took place in a context where the European Commission appears also to be aiming to prevent the use by European investors of the ECT against EU Member States.
III OUTLOOK AND CONCLUSIONS
The outlook for both domestic and international arbitration in Italy continues to be promising. Since 2006, the arbitration law has created a more favourable environment for the use of this means of dispute resolution, which, together with other ADR systems, is steadily growing. This trend is also confirmed by the most recent legislative proposals made by the Alpa Commission set up by the Ministry of Justice for the purposes of enhancing and increasing the use of ADR systems (see Section II.i).72 Further examples of this trend can also be seen in the recent introduction of a permanent arbitral tribunal for financial disputes in Consob (the regulatory body for Italian stock exchange),73 which entered into force on 9 January 2017, as well as the new provision in the Code (see Section II.i, Legislative Decree No. 50/2016) that provides that disputes arising out of contracts with the public administration can be referred to arbitration administrated by a special arbitration chamber.74 Furthermore, the courts of appeal to which applications for the enforcement of foreign awards are made are more open and respectful in their evaluation of international awards, having gained broad experience in dealing with foreign legal principles and civil procedures. The proceedings are usually rapid.
Because of its position in the global economy, Italy is a major player in the international arbitration arena (in terms of the number of parties involved in arbitral proceedings), although proportionally speaking, fewer international arbitrations are conducted in Italy. Italy's cultural and geographical position makes it well placed as a centre for arbitration in the Mediterranean region, and in arbitrations between European parties and Middle Eastern and African countries. The professional and logistical costs are often lower than in other, more popular European arbitration locations such as Paris, London and Switzerland. Interest in international commercial and investment arbitration is increasing among practitioners, with growing numbers of well-qualified lawyers actively working in the field, holding positions in leading arbitral institutions and making respected contributions to international academic know-how. This is all part of a process that is expected within the next few years to place Italy within a widening circle of countries that are considered reliable and convenient venues for international commercial and investment arbitration.
1 Michelangelo Cicogna and Andrew G Paton are partners at De Berti Jacchia Franchini Forlani.
2 Article 816 of the CCP.
3 Article 816 bis of the CCP.
6 See the 2018 EU Justice Scoreboard dossier prepared by the European Commission, available at https://ec.europa.eu/info/sites/info/files/justice_scoreboard_2018_en.pdf.
8 The grounds for a declaration of nullity of an award are contained in Article 829 of the CCP:
a the arbitration agreement is invalid;
b the arbitrators were not appointed in the prescribed manner, provided that this objection had been raised during the arbitration proceedings;
c the award was rendered by a person who could not have been appointed as arbitrator;
d the award goes outside the scope of the arbitration agreement, provided that the party challenging the award objected to the scope of the other party's applications for relief during the course of the arbitration, or the award otherwise decides on the merits of the dispute in which it had no jurisdiction to do so;
e the award does not decide the dispute or does not give (brief) reasons for the decision;
f the award was not signed by the arbitrator or arbitrators or by a majority of them, provided that it was decided with the participation of the entire arbitration panel;
g the award was rendered after the expiration of the prescribed time limit;
h in the course of the proceedings, the formal requirements for the arbitration as prescribed by the parties under sanction of nullity were not observed;
i the award is in conflict with a previous award no longer subject to appeal, or with a previous final judgment between the parties, provided that such award or judgment was filed in the arbitration proceedings;
j due process principles were not complied with in the course of the arbitration proceedings;
k the final award fails to decide on the questions of substance that were referred to it for decision;
l the award contains contradictory provisions; or
m the award fails to decide one or more issues submitted to arbitration.
9 Constitutional Court, No. 13 of 30 January 2018, published in G. U. No. 6 of 7 February 2018.
10 Article 806 CCP, 'Arbitrable disputes':
[I] The parties may submit to arbitration disputes which do not involve non-disposable rights unless expressly prohibited by law.
[II] Disputes regulated by Article 409 CCP [employment/social security disputes] may be decided by arbitrators only if so provided by the law or by collective bargaining agreements.
11 Inter alia, real property, joint ownership of property, division of deceased estates, family estates, leases of real property and of going concerns, gratuitous loans, medical malpractice, defamation, insurance, banking and financial agreements.
14 See Monitoring of civil proceedings – years 2003–2018, published by the Ministry of Justice, available at https://www.giustizia.it/giustizia/it/mg_1_14_1.page?contentId=SST1287132&previsiousPage=mg_14_7.
15 R D'Angiolella, 'La nuova disciplina dell'arbitrato e degli altri strumenti alternativi per la soluzione delle controversie in materia di contratti pubblici: luci ed ombre', Rivista dell'Arbitrato No. 2/2018, p. 345 et seq.
16 See, e.g., F Marone, 'Favor arbitratus e arbitrato amministrato in materia di contratti pubblici', Rivista dell'Arbitrato No. 1/2018, p. 1 et seq.
17 R D'Angiolella, 'La nuova disciplina dell'arbitrato e degli altri strumenti alternativi per la soluzione delle controversie in materia di contratti pubblici: luci ed ombre.', Rivista dell'Arbitrato No. 2/2018, p. 345 et seq.
18 E Odorisio, 'Poteri cautelari agli arbitri: la proposta della Commissione Alpa', Rivista di Diritto Processuale No. 1/2018, p. 104 et seq.
19 See the main amendments of the 2019 CAM Arbitration as summarised on the CAM website: https://www.camera-arbitrale.it/upload/documenti/arbitrato/arbitration-rules-main-amendments.pdf.
20 Article 50 of the CCP grants to parties to court proceedings, in which a particular court declares itself incompetent, the possibility to save the procedural and substantive effects of their court application, provided that they continue the proceedings before the correct court within a specified term.
21 C Consolo, 'Il rapporto arbitri-giudici ricondotto, e giustamente, a questione di competenza con piena traslatio fra giurisdizione pubblica e private e viceversa', Il Corriere Giuridico No. 8-9/2013, p. 1,110 et seq.
22 Luxury Goods International Sa C Staili Diffusioni srl in liquidation, plenary session, No. 24153 dated 25 October 2013, in Diritto & Giustizia 10 December 2013.
23 De Luca Picione Costruzioni Generali srl v. Istituto Autonomo Case Popolari Provincia Benevento, plenary session, No. 23463 dated 18 November 2016, in Rivista dell'Arbitrato 2017, p. 87 et seq.
24 Ryanair Ltd v. Fallimento Aeradria SpA, plenary session, No. 10800 dated 14 April 2015.
25 Section 1, Court of Cassation, No. 1099 dated 21 January 2016. See also commentary to the above judgment by F Locatelli, 'Preclusioni nell'arbitrato nel rispetto del principio di previa conoscibilità contro le decadenze 'a sorpresa', ma con una clausola di salvaguardia e senza timore di usare rigore nei casi di abuso', Rivista dell'Arbitrato No. 3/2016, p. 457 et seq.
26 Giuseppe Ruffini, 'L'efficacia del lodo arbitrale nell'ordinamento italiano', available at http://www.judicium.it/wp-content/uploads/2018/12/G.-Ruffini.pdf, Dec. 2018.
27 Fallimento Lucania Cavi SpA v. Ministero delle Attività Produttive, Section I, No. 16332 dated 24 July 2007.
28 Del Medico v. Soc Iberprotein, Section I, No. 13231 dated 16 June 2011.
29 See also Model Law, Article 7, in similar terms.
30 A Carlevaris, 'Ambito oggettivo dell'accordo compromissorio', Rivista dell'Arbitrato No. 4/2010, p. 611.
31 Section VI, Court of Cassation, No. 20880 dated 14 October 2016. See also the commentary on the judgment by C E Mezzetti-M Di Toro, 'Convenzione di arbitrato - Interpretazione - Presenza nello stesso contratto di clausola sul foro competente - Conseguenze' Rivista dell'Arbitrato No. 1/2016, p. 101 et seq.
32 Trasporti Internazionali Srl v. Società capital Logistic & Transport Srl, Court of First Instance of Livorno, judgment dated 11 February 2011.
33 Finanziaria Imm Braidense Srl in liq ne v. Bevilacqua, Section II, No. 3464 dated 20 February 2015.
34 Club Med Sas v. Ability Real Estate, plenary session, No. 14861 dated 15 June 2017, in Il Corriere Giuridico 10/2017, p. 1185 et seq.
35 Section I, Court of Cassation, No. 744.
36 Arbuatti v. Unidental labor odontotecnici Ancona soc coop a rl, Section III, No. 941 dated 17 January 2017.
37 Supreme Court of Cassation, Section VI, No. 4035 dated 15 February 2017.
38 Supreme Court of Cassation, Section VI, No. 13616 dated 5 July 2016.
39 Sole arbitrator (Graziosi); award dated 5 March 2013, Bologna.
40 Tevere SpA v. Luciano Vinella, Tribunal of Rome, Specialised Section for company disputes – Sect XVI, judgment dated 15 February 2018 No. 3413.
41 Court of First Instance of Milan, Section VIII, judgment dated 22 February 2011. See also E Marinucci, 'L'arbitrabilità delle controversie aventi ad oggetto le delibere assembleari', Rivista dell'Arbitrato No. 2/2011), p. 291 et seq.
42 F Terrusi, 'I limiti oggettivi dell'arbitrato societario e la questione dei diritti disponibili', Giustizia Civile, No. 11/ 2011, p. 525 et seq.
43 TC v. MG, No. 18600 of 12 September 2011.
44 See, recently, RA v. Radelpi Immobiliare, Section VI, No. 17950 dated 10 September 2015; in the same sense, BL and others. v. SEN SpA, Section VI, No. 18761 dated 30 October 2012.
45 Supreme Court of Cassation, Section VI, No. 4035 dated 15 February 2017, commented on by B Tavartkiladze, 'Sulla compromettibilità in arbitri della lite avente ad oggetto il pagamento di interessi usurari', Rivista dell'Arbitrato No. 3/2016, p. 478 et seq.
46 L'arbitrato Societario nella prospettiva delle imprese, Note e Studi Assonime No. 5 of 2017: http://www.assonime.it/attività-editoriale/studi/Pagine/noteestudi5-2017.espx.
47 Article 34, Paragraph 1 of Legislative Decree No. 5/2003.
49 CCP, Book IV, Chapter III, Articles 669 bis to 700.
50 Article 17J provides: 'A court shall have the same power of issuing an interim measure in relation to arbitration proceedings, irrespective of whether their place is in the territory of this state, as it has in relation to proceedings in courts.'
51 ICC Rules, Article 23.2: 'Before the file is transmitted to the arbitral tribunal, and in appropriate circumstances even thereafter, the parties may apply to any competent judicial authority for interim or conservatory measures. The application of a party to a judicial authority for such measures or for the implementation of any such measures ordered by an arbitral tribunal shall not be deemed to be an infringement or a waiver of the arbitration agreement and shall not affect the relevant powers reserved to the arbitral tribunal.'
52 Tevere SpA v. Luciano Vinella, Tribunal of Rome, Specialised Section for company disputes – Sect XVI, judgment dated 15 February 2018 No. 3413.
53 Court of Cassation, ordinance dated 30 March 2018 No. 7891, in Rivista dell'Arbitrato No.3/2018, page 517.
54 Microware v. Indicia Diagnostics, No. 17291 of 23 July 2009.
55 Global Trade Italiana v. East Point Trading Ltd, Supreme Court of Cassation, No. 24856 of 8 October 2008.
56 Quarella SpA v. Scelta Marble Australia Pty Ltd, Court of Appeal of Venice, No. 1563 of 1 July 2013, unpublished.
57 See Article IV, New York Convention.
58 Court of Appeal of Venice, Decree No. 210/2014, commented on in the subsequent opposition proceedings No. 922/2014 deposited on 11 November 2014 granting the provisional enforceability of the decree (unpublished).
59 Court of First Instance of Nocera Inferiore, Section I, dated 10 January 2012.
60 Ibid., No. 33.
61 P Bernardini, 'Riconoscimento ed esecuzione dei lodi stranieri in Italia', Rivista dell'Arbitrato No. 3/2010, p. 438.
62 Supreme Court of Cassation, No. 6947 of 8 April 2004.
63 Parrot v. Fimez, Supreme Court of Cassation, No. 1183 dated 19 January 2007.
64 CG Impianti v. MAAB and Son International Contracting Co, dated 29 April 2009.
65 Helios Technology SpA v. Jiangxi LDK Solar Hi-Tech Co Ltd, Venice Court of Appeal judgment dated 10 January 2013.
66 The contract contained a 'take or pay' clause under which the purchaser was required to pay the full purchase price for the goods even in the event that the purchaser, subsequent to the contract, did not proceed with the purchase either in breach or for its own reasons.
67 Third Millennium Company Srl in liquidation v. Guess? Inc, Section I, No. 27734 dated 11 December 2013.
68 Stati et al. v. Republic of Kazakhstan, Rome Court of Appeal, Section I, judgment No. 1490/2019 deposited on 27 February 2019.
69 See Alfonso Badini Confalonieri, 'Sul riconoscimento dei lodi arbitrali esteri registro con dubbi', in Eutekne.it, 13 November 2015.
70 Decision of the Agenzia delle Entrate – Direzione Provinciale I di Torino, 22 December 2014, unpublished.
71 ARB/14/3, ARB/15/37, ARB/15/40, ARB/15/50, ARB/16/5, ARB/16/39, ARB/17/14, ARB/18/20.
72 Available at www.mondoadr.it/wp-content/uploads/TESTO-FINALE-Commissione-ALPA-Aggiornato.pdf.pdf (accessed 13 June 2017).
74 See F Tizi, 'La costituzione del tribunale arbitrale nel recente codice dei contratti pubblici', Rivista dell'Arbitrato No. 2/2016) p. 375 et seq.; Sent Corte Cost 6 May 2016, No. 99; I Lombardini, 'Il nuovo arbitrato nei contratti pubblici, obbligatoriamente amministrato dalla Camera arbitrale: rivoluzione copernicana o restaurazione?', Rivista dell'Arbitrato No. 4/2016, p. 715 et seq.