The International Arbitration Review: Italy
The rules on arbitration embodied in the Italian Code of Civil Procedure (CCP) do not distinguish between domestic and international arbitration. The 2006 Law amending 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
The main international arbitration institution in Italy is the Chamber of Arbitration of Milan (CAM).4 It is internationally recognised as Italy's principal player 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.
A special mention must also be made of the Italian Association for Arbitration (AIA)5 which is based in Rome. It was established in 1958 under the patronage of the Italian branch of the International Chamber of Commerce with the endorsement of several important industrial, commercial and political entities and was set up to promote the development of arbitration and other forms of ADR. AIA has played an important role in the study and modernisation of Italian arbitration and mediation law, as well as in Italy's compliance with international conventions. While from 2020 AIA is no longer active in the administration of arbitration, it publishes the authoritative arbitration journal Rivista dell'Arbitrato and, together with CAM, carries out joint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 only 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 mainly 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 simpler to more closely monitor the development of arbitration administered by institutions. In this respect, statistics for 2017 showed that 582 arbitration proceedings were administered by arbitration institutions in Italy (a decrease from the 708 arbitration proceedings conducted in 2016, but overall a tangible increase with respect to the average of about 500 arbitration proceedings per annum administered over the past 15 years or so). CAM has administered an average of about 130 cases over the past 10 years, with 120 cases being administered in 2020 (with an increase with respect to the 102 cases administered in 2019). This shows 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, 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.
The year in review
The Arbitration Law contained in Articles 806 to 840 of the CCP
The most recent comprehensive reform of Italian arbitration law entered into force in March 2006 (2006 Reform), 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.
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, along the lines of the Model law. A review by the courts of the merits of the dispute for an error of law 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.
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 application).
All in all, the mechanisms of the 2006 Reform described above have proven to be successful and have achieved their main goal to limit the grounds for the setting aside of Italian-seated arbitral awards. This has been shown in recent empirical research – yet to be published – conducted on the annulment proceedings of arbitral awards carried out in several of the main Italian courts of appeal over the past five years.8 Statistical data show that Italian courts tend to interpret strictly the narrow grounds for annulment listed in Article 829 of the CCP, granting due deference to the findings of arbitrators as enucleated in the awards. Most notably, out of almost 1,000 annulment cases analysed, arbitral awards were set aside in less than 90 cases, amounting to less than 10 per cent.
One important difference between the grounds for the annulment of a domestic versus an international award was retained in the 2006 Reform. 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 clause 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: Mediation and Assisted Negotiation
Following a decision of the Supreme Court of Cassation (see Section II.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).9 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 so the partiers do not need to start the proceedings all over again.
No further significant legislative changes affecting international arbitration in Italy have been introduced during the past year, and the 2006 Reform remains largely 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 courts10 and that had created a bottleneck. Following a Constitutional Court challenge in 2012, an amended Mediation Act was enacted (Law No. 98/2013 to comply with the procedural issues raised by the Constitutional Court.
Consequently, mediation procedures are now required as part of the litigation process before Italian state courts.11 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. 132/2014,12 converted by Law No. 162/201413), under assisted negotiation, 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).
As a general comment, it has been noted14 that the above-mentioned measures 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 2018 and 2019.
The debate on further legislative reforms to arbitration and the impact of covid-19
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 the reform in the areas of both arbitration and mediation.15 For the time being, the amendments proposed by the Alpa Commission have not been incorporated into Italian arbitration law. The Alpa Commission has, however, revitalised the debate about some important aspects of ADR in Italy, and the proposals contained therein have been repeatedly echoed in the main discussions on new trends in arbitration in Italy.
From the beginning of 2020 on, the outbreak of the covid-19 pandemic has forcibly put on hold such debates, which hopefully will restart as soon as the situation gets back to normal. In the meantime, the covid-19 pandemic has impacted on arbitration in Italy. A significant number of arbitral proceedings (both institutional and ad hoc) have proceeded in Italy notwithstanding the lockdown meaning that hearings must be held online. In a nutshell, as in many other jurisdictions, the arbitration community in Italy proved to be flexible, and demonstrated that it was also in a position to operate under difficult conditions during the emergency period.
ii Arbitral institution rules
The most recent version of the arbitration rules of the CAM was adopted in 2019.
The main features of the CAM rules are aimed at providing parties with an expeditious, transparent and effective administration of arbitration proceedings. The rules place particular attention on: (1) streamlining the internal rules regulating the role and functioning of the institutional bodies overseeing arbitrations, together with the introduction of emergency procedures; (2) institutions' procedures for ensuring the independence and impartiality of arbitral tribunals; (3) control of the duration and costs of proceedings; and (4) 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 July 2020 (2020 CAM Arbitration Rules). In particular, it improved the efficiency and rapidity of arbitral proceedings, at the same time ensuring the necessary guarantees and included the new simplified arbitration procedure.16
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 CCP17 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.18
Only a few months after the decision of the Constitutional Court, in a landmark judgment,19 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.
The Supreme Court of Cassation, again in plenary session,20 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 proceedings, provided that the defendant did not expressly or tacitly accept the Italian jurisdiction.
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 Cassation21 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,22 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. 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.23 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'.24 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.25 And, in fact, in Vittoria SpA and Vittoria Industries Nord America Inc v. Northwave,26 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 in the case of conflict, based on the principle contained in the cited Article 808 quater CCP: in dubio, pro arbitrato.
The approach of the Italian courts in respecting and enforcing arbitration clauses, where legally possible, has been confirmed in a number of decisions of the Supreme Court of Cassation. It is worth mentioning, first, judgment No. 3464 of 20 February 2015,27 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 this clause in its entirety.
More recently, the Supreme Court of Cassation, while confirming that an arbitration clause covers all claims arising out of a contract, also included, in the absence of an express agreement of the parties to the contrary, any disputes relating to the period prior to the signing of an arbitration clause.28 By the same token, claims brought in an arbitration that the contract containing an arbitration clause is actually only an artificial contract to disguise different agreements between the parties also fall within the jurisdiction of the arbitral tribunal.29
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).30
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 as a shareholder is the subject of dispute. It also may be binding on the company directors and statutory auditors upon their acceptance of their appointment.
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.
The Supreme Court of Cassation in TC v. MG31 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.32
It is worth mentioning that in 2017, Assonime, the Italian association of companies limited by shares, together with AIA, carried out a joint study specifically focused on the arbitration of company disputes in Italy.33
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 current 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.34
Interim measures of protection
A distinctive feature of arbitration in Italy is that the legislator has decided not to follow the UNCITRAL Model Law35 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'.36 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 17J37 of the Model Law. The approach reflects the reticence in Italy to give 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 23.2 of the ICC Arbitration Rules, which foresee the possibility of interim measures of protection to be issued by courts.
Advantages of the Italian approach are 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.38 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.
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. This 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 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 Cassation39 has held that the production of both of these documents at the time of the filing of an 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.40 Subsequently, the Court of Appeal of Venice, in a judgment dated 1 July 2013,41 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.
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.42
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 an 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.43 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.44 The answer to these questions can lead to a significant difference in the time required for effective recovery in Italy of a foreign award.
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.45 Recent decisions of the Supreme Court of Cassation interpreting objections to recognition based on international public policy include the following:
- The Supreme Court of Cassation46 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 Milan47 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.
- In Third Millennium Company Srl in liquidation v. Guess? Inc.,48 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.
- In a 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 Kazakhstan49 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 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 in open contradiction with the 'web of values' and laws making up the Italian legal system.
A much-debated issue is the costs (court fees and taxes) for the enforcement of foreign awards 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 (currently €200,00).50 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 an award and declares it enforceable.
iv 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 six pending cases.51
Outlook and conclusions
The outlook for both domestic and international arbitration in Italy continues to be bright. Since 2006, the arbitration law has created a more favourable environment for arbitration that, together with other ADR systems, is steadily growing. This trend is also confirmed by several recent factors:
- 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);52
- the prompt response of the arbitration community to deal with the effects of covid-19 (see Section II.i);
- the recent introduction of a permanent arbitral tribunal for financial disputes in Consob (the regulatory body for Italian stock exchange);53 which entered into force on 9 January 2017; and
- the new provision in the Code of public contracts that provides that disputes arising out of contracts with the public administration can be referred to arbitration administrated by a special arbitration chamber.54
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 more 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 means it is 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 the circle of countries considered to be reliable and convenient venues for international 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 2020 EU Justice Scoreboard dossier prepared by the European Commission, available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52020DC0306&from=EN.
8 The research has been conducted by Michelangelo Cicogna, one of the authors of this chapter, who was assisted by Marco Seregni, an associate in De Berti Jacchia Franchini Forlani's Milan office. The research will be published later in 2021.
9 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.
10 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.
11 Within a major legislative reform on medical malpractice, Article 8 of Law No. 24/2017 provided, as a condition precedent to the commencement of judicial proceedings concerning actions for damages, the possibility for the parties to opt between mandatory mediation and a settlement attempt with the help of a technical expert, appointed by the judge pursuant to Articles 696 and 696 bis of the CCP.
14 See Monitoring of civil proceedings – years 2003–2019, published by the Ministry of Justice on 29 April 2020, available at www.giustizia.it/giustizia/it/mg_1_14_1.page?contentId=SST1287132&previsiousPage=mg_14_7.
15 In particular, regarding arbitration, the following proposals were made:
a 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;
b extending the application of the translatio iudicii to all first instance proceedings pending before the state courts (see Section II.iii on the standing of arbitration proceedings);
c 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);
d 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
e 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:
a extending the classes of dispute requiring mandatory mediation, inter alia, to disputes arising from franchising agreements, subcontracting agreements and disputes arising in business partnerships;
b 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
c 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 as to make sure that a serious mediation attempt is made.
16 The main features of the 2020 CAM Arbitration Rules are as follows:
a the introduction of a general duty of all parties involved in arbitral proceedings to act in good faith. In particular, the 2020 CAM Arbitration Rules empower arbitral tribunals to sanction any unlawful conduct that is contrary to good faith (see Article 9 of the 2020 CAM Arbitration Rules);
b new provisions on the arbitration of company disputes entailing that arbitrators shall be appointed by a third party outside of a company (see Article 17 of the 2020 CAM Arbitration Rules);
c the possibility for 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 2020 CAM Arbitration Rules prescribe that any provisional measure adopted by a arbitral tribunal will have a 'binding contractual effect upon the parties' (see Article 26 of the 2020 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;
d new provisions on the appointment of emergency arbitrators. In particular, Article 44 of the 2020 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 2020 CAM Arbitration Rules and mentioned above under point (c) (see Article 44, Paragraph 1 of the 2020 CAM Arbitration Rules);
e 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 2020 CAM Arbitration Rules); and
f the offer of a simplified arbitration procedure providing for a streamlined arbitration with reduced scales of fees (see Annex D of the 2020 CAM Arbitration Rules).
17 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.
18 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.
19 Luxury Goods International Sa C Staili Diffusioni srl in liquidation, plenary session, No. 24153 dated 25 October 2013, in Diritto & Giustizia 10 December 2013.
20 Ryanair Ltd v. Fallimento Aeradria SpA, plenary session, No. 10800 dated 14 April 2015.
21 Fallimento Lucania Cavi SpA v. Ministero delle Attività Produttive, Section I, No. 16332 dated 24 July 2007.
22 Del Medico v. Soc Iberprotein, Section I, No. 13231 dated 16 June 2011.
23 In this sense, see recently RCD Europe Lts and Waree Industries Private Ltd v. Targa SpA and Immogar SpA, Tribunal of Milan, Spec. Sect., 8 January 2020.
24 See also Model Law, Article 7, in similar terms.
25 A Carlevaris, 'Ambito oggettivo dell'accordo compromissorio', Rivista dell'Arbitrato No. 4/2010, p. 611.
26 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.
27 Finanziaria Imm Braidense Srl in liq ne v. Bevilacqua, Section II, No. 3464 dated 20 February 2015.
28 Section I, Court of Cassation, No. 3795 dated 8 February 2019.
29 Section III, Court of Cassation, No. 14884 dated 31 May 2019.
30 Arbuatti v. Unidental labor odontotecnici Ancona soc coop a rl, Section III, No. 941 dated 17 January 2017.
31 TC v. MG, No. 18600 of 12 September 2011.
32 See, inter alia, 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.
33 L'arbitrato Societario nella prospettiva delle imprese, Note e Studi Assonime No. 5 of 2017: www.assonime.it/attività-editoriale/studi/Pagine/noteestudi5-2017.espx.
34 Article 34, Paragraph 1 of Legislative Decree No. 5/2003.
36 CCP, Book IV, Chapter III, Articles 669 bis to 700.
37 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'.
38 Tevere SpA v. Luciano Vinella, Tribunal of Rome, specialised section for company disputes – Section XVI, judgment dated 15 February 2018 No. 3413.
39 Microware v. Indicia Diagnostics, No. 17291 of 23 July 2009.
40 Global Trade Italiana v. East Point Trading Ltd, Supreme Court of Cassation, No. 24856 of 8 October 2008.
41 Quarella SpA v. Scelta Marble Australia Pty Ltd, Court of Appeal of Venice, No. 1563 of 1 July 2013, unpublished.
42 See Article IV, New York Convention.
43 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).
44 In this sense, see also Nuovi Cantieri Apuani SpA v. Featherstar Ltd, Court of Appeal of Geneva, Sez. I, of 18 December 2019.
45 P Bernardini, 'Riconoscimento ed esecuzione dei lodi stranieri in Italia', Rivista dell'Arbitrato No. 3/2010, p. 438.
46 Parrot v. Fimez, Supreme Court of Cassation, No. 1183 dated 19 January 2007.
47 CG Impianti v. MAAB and Son International Contracting Co, dated 29 April 2009. In the same sense: Helios Technology SpA v. Jiangxi LDK Solar Hi-Tech Co Ltd, Venice Court of Appeal judgment dated 10 January 2013.
48 Third Millennium Company Srl in liquidation v. Guess? Inc, Section I, No. 27734 dated 11 December 2013.
49 Stati et al. v. Republic of Kazakhstan, Rome Court of Appeal, Section I, judgment No. 1490/2019 deposited on 27 February 2019.
51 ARB/16/5, ARB/16/39, ARB/17/14, ARB/18/20, ARB/20/3, ARB/20/39.
52 Available at www.mondoadr.it/wp-content/uploads/TESTO-FINALE-Commissione-ALPA-Aggiornato.pdf.pdf (accessed 13 June 2017).
54 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.