ITALY

Lorenzo de Martinis, Silvia Picchetti and Gaetano Iorio Fiorelli

A. LEGISLATION AND RULES

A.1 Legislation

Arbitration in Italy continues to be governed by articles 806 to 840 of the Italian Code of Civil Procedure (ICCP), which has been significantly impacted and amended by the reform enacted with Law No. 80/2005 and Legislative Decree No. 50/2005.[1] Specifically, domestic and international arbitration are governed by articles 806 to 832 ICCP, while the enforcement of foreign awards is governed by articles 839 and 840 ICCP.

Reform may be expected in future years (see below).

A.1.1   The work of the Alpa Commission

In January 2017, as the first step towards a wide reform of arbitration in Italy, the Commission for the Reform of Arbitration — chaired by Professor Guido Alpa — acting on the basis of a request of the Ministry of Justice, issued a draft reform proposal. This represents the first attempt to reform Italian arbitration law in 11 years, following previous reforms implemented in 1983, 1994 and 2006.

The proposed reforms are intended to meet the new challenges raised by the increased number of arbitration cases, as well as to manage regulatory changes and gaps that have emerged in practice. Indeed, the reform is aimed at speeding up arbitration proceedings, in addition to extending and clarifying the scope of arbitration.

The most significant innovations of the proposed reform include: (i) in cases where the award is challenged for breach of law, the parties should be enabled to skip lower courts and challenge the award directly before Italy’s Court of Cassation; (ii) the institutional arbitral tribunals should be granted the power to issue interim measures; (iii) the scope of application of arbitration proceeding in relation to employment disputes will be broadened and clarified; (iv) disputes involving public administrative bodies should be submitted to arbitration, and (v) arbitration of disputes involving consumers should generally be allowed.

Although the draft law was submitted by the Alpa Commission in January 2017, the project did not register any significant developments and it is still hard to foresee the timing of its submission to the Parliament and subsequent approval.

A.1.2   The Technical Advisory Committee in the public procurement system

The so-called “decreto sblocca cantieri” (Legislative Decree no. 32 of 18 April 2019, converted into Law no. 55 of 14 June 2019) reintroduced, albeit temporarily, the “Comitato Consultivo Tecnico” (Technical Advisory Committee) into the public procurement system.[2]

The purpose of the instrument is to quickly resolve any technical critical issue that may affect the execution phase of the contractual relationship. Specifically, the institute is aimed at settling conflicts between clients and the contractors, avoiding that those conflicts may lead to litigation.

In this regard, article 1, paragraph 11, of the Law no. 55 of 14 June 2019, provides that “in order to prevent disputes relating to the execution of the contract, the parties may agree that before the start of the execution, or in any case no later than 90 days from that date, a technical advisory committee should be appointed to assist in the rapid resolution of disputes of any kind that may arise during the execution of the contract.“

This committee, which is by no means an arbitral tribunal, is in many respects similar to the Dispute Review Board well known in international practice, e.g. in the ICC Rules, but also in internal practice, e.g., in the Milan Chamber of Arbitration Rules.

The main differences from similar boards known in the international experience concern the composition of the panel (which must have three members) and the fact that its members do not need to be independent of the parties (the parties could even appoint their employees).

A.2 Institutions, Rules and Infrastructure

Although several local arbitration institutions are operating in Italy, institutional arbitration is mainly handled by the Chambers of Arbitration, where the Chamber of Arbitration of Milan (CAM) with respect to both domestic and international disputes has assumed a leading role.

Another prominent arbitration institution is the Italian Arbitration Association in Rome (AIA), which plays an important role in the interaction with many international arbitration institutions, such as the ICC and AAA. It also provides academic guidance through the editing of the most important Italian arbitration law review, “Rivista dell’Arbitrato.”

A.2.1   The new Arbitration Rules of the Milan Chamber of Arbitration

The new Arbitration Rules of the Milan Chamber of Arbitration (“CAM Rules”) entered into force on 1 March 2019 and are applicable to all proceedings started from that date.

The CAM Rules attempt to take into account developments in international arbitration and its best practices, in order to enhance and promote Italy as a venue for international arbitration proceedings. In particular, the new rules improve the wording of various provisions and bring some new features of particular interest.

First, with regard to interim and provisional measures, the new Rules have introduced a provision (article 26), providing that arbitrators have the power to issue interim and provisional measures not prohibited by mandatory rules applicable to the proceedings. In line with the private nature of the arbitration, it is provided that in any case, unless otherwise agreed by the parties, the arbitral tribunal, at request of a party, has the power to adopt any determination of provisional nature with binding contractual effect upon the parties, possibly requiring the applicant to provide appropriate security for costs as a condition of issuing the measure. The CAM Rules specify that any request for interim relief made by a party in an arbitration to a judicial authority does not imply any waiver of the effects of the arbitration agreement or of the request for arbitration.

A new procedure was introduced with reference to “emergency arbitration” (article 44), applicable only where the arbitration agreement was concluded after the entry into force of the Rules, and unless otherwise provided by the parties to arbitration, aimed at reviewing applications for interim relief under article 26.

A party may file an application, even without notice to the other party, for the appointment of an emergency arbitrator for measures and determinations under article 26. CAM appoints the emergency arbitrator and collects his/her statement of independence. Within 15 days from receiving the files, provided that the due process is respected, the arbitrator issues the requested interim, urgent and provisional measures by way of an order, where he/she deems that the application is manifestly grounded.

Where the applying party so requests, within five days from receiving the files, the arbitrator may issue the order without notice to the other party if prior disclosure risks causing serious harm to the applying party. In this case, the arbitrator, where his/her order admits the application, schedules a hearing within 10 days to discuss the case with the parties and sets any time limit to submit any briefs. At the hearing or in any case within a further five day period, provided that the due process is respected, the arbitrator issues an order to confirm, amend or revoking any measures that were previously granted.

The arbitrator may make its order subject to the provision of appropriate security for costs. The order can be challenged, amended and revoked before the arbitral tribunal once constituted. Until the arbitral tribunal is constituted, the arbitrator remains competent for any request for amendment or revocation of the order.

Unless the application is filed together with or after the request for arbitration, the request for arbitration shall be filed with the Secretariat within the mandatory time limit of 60 days from the filing of the application, or within the time limit set by the emergency arbitrator, that in case can not be shorter than 15 days. Failing such a condition, the emergency measure becomes ineffective. The emergency arbitrator shall not act as arbitrator in any arbitration related to the disputes that gave rise to the application.

The new CAM Rules also acknowledge third party funding, establishing on this regard precise disclosure obligations (article 43).

With reference to corporate law arbitration, the CAM Rules provide that, where the arbitration clause in the statute or bylaws does not refer the power to appoint any arbitrators to an authority other than the company itself, the Arbitral Council shall appoint the arbitral tribunal (article 17).

Other interesting provisions concern the replacement of the arbitral tribunal (article 23) and the introduction of a specific obligation to act in good faith on the part of all parties involved in the arbitration (article 9).

B. CASES

B.1 Interpretation of arbitration clauses and favor arbitrati

In the case at stake, in order to determine the scope of application of an arbitration agreement, the Court of L’Aquila has applied the principle of favor arbitrati, as introduced by the last main reform of the arbitration proceeding (2006). In particular, the court has ruled that the scope of the arbitration agreement, containing an indication of the disputes to be assigned to arbitrators, must be reconstructed not only on the basis of the common will of the parties, enshrined in the same agreement but also on the basis of the mentioned principle of favor arbitrati, without limiting the interpretative activity to the literal meaning of the words.

The court has thus held that the parties with the arbitration clause had expressed their intention to refer to the arbitrators the power to settle the disputes arising from the agreement, derogating then from the ordinary criteria of jurisdiction. This is notwithstanding the use of the phrase “potrà essere risolta con giudizio arbitrale” (“may be settled by arbitration”), and thus of the servile verb “potrà” (“may”).[3]

The decision is coherent with the case-law of the Court of Cassation (enshrined, among the others, in the cases no. 26553/18 and 20880/14) that underlines the role of the favor arbitrati principle in the interpretation of the arbitration clauses.[4]

B.2 The challenge of an arbitral award and the lack of power of the arbitrators

Under Italian law, pursuant to article 817 ICCP, paragraph 2, the party that does not object in the first defense, following the acceptance of the arbitrators to the incompetence of the arbitrators on the grounds of the non-existence, invalidity and ineffectiveness of the arbitration agreement, cannot, therefore, appeal the award. Furthermore, on this regard, article 817, paragraph 3, ICCP provides that – in any case – the party that does not object during the course of the arbitration proceedings that the conclusions of the other parties go beyond the limits of the arbitration agreement cannot, for that reason, challenge the award. In this regard, however, it is debated if the latter time limit applies also to the party that did not appear in the arbitration proceeding.

On the point at stake, the Court of Cassation has ruled that the objection as to the arbitrator’s lack of power referred to in article 817 ICCP, paragraph 2, beyond the hypothesis of nullity of the arbitration clause due to his own genetic defect relative to a not arbitrable dispute, is to be considered as a procedural objection in the strict sense, and as such is subject to the time limit indicated by article 817 ICCP, paragraph 3, only for the party who has participated in the relative arbitration proceedings, and not for the party who, having remained absent during the proceeding, lately contests that the dispute is attributable to the arbitrators.

The Court has here followed that perspective according to which, if the defendant in arbitration proceeding turns himself in, he has the burden of raising the objection, as per article 817, paragraph 3, ICCP, but if he does not actively participate in the arbitration proceeding, it does not lose the power to challenge the award, on the grounds of the arbitrators’ lack of power, after the issuance of the arbitral award.[5]

B.3 Simulated agreements and arbitration

The issue brought before the Court of Cassation concerns the request to ascertain that the simulation of an agreement is an issue genetically linked to the latter, although it does not concern either the interpretation or the execution of the same agreement.

In this respect, the Court of Cassation has ruled that the arbitrators’ scope of review, and jurisdiction, except for any very precise legal limits, is extended to any aspect of the agreement negotiation process that is brought to their review, including the ascertainment of the simulated nature of the agreement itself since this is a circumstance relevant for the purposes of establishing whether and to what extent the claim made by a party is grounded.

In other terms, the jurisdiction of the arbitrators is extended also to disputes concerning the existence of the – absolute or relative – simulation of the agreement in which the relevant arbitration clause has been agreed. To deny that the arbitrator, unlike the judge, can know and decide on such matters would mean to unjustifiably compress the scope of the arbitration with particular reference to the activity and cognitive investigation of the arbitrators themselves.[6]

B.4 The recognition of an ICSID award in Italy

Recognition of arbitration awards made in accordance with the ICSID Convention does not require any resolution, declaration of enforceability or other similar procedure and related burden, but only the opposition of the formula concerning the order of enforcement (“formula esecutiva“), pursuant to article 475, paragraph 3, ICCP.

The judgment at stake, issued by the Court of Appeal of Milan, follows the ICSID arbitration proceedings started in September 2012 by Italian entrepreneurs against the Government of Romania, on the basis of the Investment Agreement (1990) between Romania and Italy. In particular, with the award dated 18 April, 2017, the arbitral tribunal had condemned Romania to pay damages suffered by the plaintiff entrepreneurs. Following unsuccessful requests to the Romanian Government to comply in an amicable manner, the plaintiff requested the recognition and enforcement of the award in the Italian legal system with an application that gave rise to a sort of exequatur decree by the Court of Appeal of Milan.

With the recognition of the award, for the first time, an ICSID award became enforceable in Italy, by means of the mere application of an order of enforcement upon the award at stake.

Specifically, the judgment states that, although the enforcement of an ICSID award remains subject to local law (in this case, Italian law), the recognition of the enforceability of the ICSID award is governed exclusively by the ICSID Convention rules, with the exclusion of the rules of the New York Convention. As such, the examination of the Court of Appeal upon the ICSID award is actually a mere check of the authenticity, formal regularity and definitiveness of the award, Italian Courts being prohibited from rejecting the request of enforcement of an ICSID award on the grounds of article V of the New York Convention and/or articles 839-840 ICCP.[7]

[1] See International Yearbook 2016-2017, pages 243-244, for the relevant analysis.

[2] The instrument was repealed by Legislative Decree no. 56 of April 19, 2017. It will remain in force until the entry into force of a further Regulation pursuant to Article 216, paragraph 27 opties, of the Public Procurement Code.

[3] The arbitral clause stated that: “qualunque contestazione o vertenza sorta tra le parti sull’interpretazione, esecuzione e risoluzione del presente contratto e non risolta amichevolmente, potrà essere risolta con giudizio arbitrale” (any dispute or dispute arising between the parties on the interpretation, execution and termination of this contract and not settled amicably, may be settled by arbitration).

[4] Court of L’Aquila, Judgement of December 31, 2018.

[5] Court of Cassation, Judgement no. 5824 of February 28, 2019.

[6] Court of Cassation, Judgement no. 14884 of June 31, 2019.

[7] Court of Appeal of Milan, Judgement of September 21, 2018.