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A. LEGISLATION AND RULES

A.1        Legislation

Arbitration in Italy is governed by articles 806 to 840 of the Italian Code of Civil Procedure (ICCP). Specifically, domestic and international arbitration are regulated by ICCP articles 806 to 832, while the recognition and enforcement of foreign awards are governed by ICCP articles 839 and 840.[1]

On 26 November 2021, the parliament enacted Law no. 206/2021, which delegated the Italian government to adopt within one year (thus, by 26 November 2022) a legislative decree reforming Italian arbitration law (“Arbitration Reform”). Law no. 206/2021 contains the mandatory guidelines for the reform.

Regarding the content of the reform, Law no. 206/2021 guidelines provide for the introduction of a mandatory duty of disclosure for arbitrators. The purpose is to strengthen arbitrators’ impartiality and independence. Furthermore, the guidelines provide for the express power of arbitral tribunals to order interim measures, if so provided in the arbitration agreement, with the implication that in this case the parties should not be obliged to apply to state courts to obtain them.[2]

Once adopted, the Arbitration Reform will change the time limit for appealing arbitral awards before state courts from one year to six months, thus aligning it with the time limit for appealing state courts’ decisions. Finally, the reform will specify and clarify that decrees of state courts recognizing foreign awards are directly enforceable.[3]

The Italian government appointed the working groups for drafting the legislative decree on 15 January 2022. It is difficult to foresee when the Arbitration Reform will enter into force, as it is part of the Italian civil justice system’s global reform. Presumably, the Italian government will adopt the new rules by September 2022.

A.2        Institutions, rules and infrastructure

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

On 1 July 2020, a newly reviewed version of the Arbitration Rules of the Milan Chamber of Arbitration (“CAM Rules 2020”) entered into force (see the previous edition of the Yearbook). The rules were not further amended in the last year, however, CAM carried out some relevant initiatives throughout 2021.

The CAM further expanded its area of operation by entering into cooperation agreements with other Italian local chambers. On 28 June 2021, it signed an agreement with the Bologna Chamber of Commerce (CCIAA), tasking the CAM to handle disputes concerning the Emilia-Romagna Region, previously handled by the CCIAA itself. Similarly, on 29 October 2021, the CAM entered into an agreement with the Pescara Judicial Arbitral Chamber (CAF), also advocating disputes previously handled by the CAF.

As of 1 January 2022, the chamber has launched a new procedure aimed at assisting parties in having ad hoc arbitrations. The “CAM on Demand” service will assist parties of an ad hoc arbitration to perform all the formalities requested under Italian law and will provide a newly crafted registrar service.

The CAM has also introduced a new body aimed at preventing environmental disputes called “Facilambiente.” A group of experts, operating inside the chamber itself, will help businesses, individuals and the public administration to prevent and solve environmental disputes by carrying out a mediation function between the conflicting parties.

According to the CAM figures, 85% of the hearings administered by the chamber were held online during the pandemic. Before the COVID-19 era, only 5% of the hearings were remotely held. Despite the reluctance of the parties in the early stages of the pandemic to have online hearings for their proceedings, the CAM stated that in 2021, parties became more confident in using the tool and the institution is now fully operative in having its procedures administered fully remotely.

Finally, the CAM has enhanced its focus on diversity and inclusion. It reports that women appointed in its proceedings consist of just 25%. However, of these, the chamber nominated 82% of the total number of women.

B. CASES

B.1        Term for challenging an award before state courts

The Court of Cassation stated that the one-year term to challenge an arbitration award shall commence on the date when the arbitrators signed, rather than when the arbitrators communicated the award to the parties.[4]

The Court was asked to rule over the constitutionality of ICCP article 828, paragraph 2 concerning articles 3, 24 and 111 of the Italian Constitution (right of defense). According to the applicant, the fact that the time for challenging an award runs from the date of its signing is a violation of the right of defense, since at that moment the losing party does not yet know the award.

The court rejected the claim and stated that the law is not in contrast with the right of defense as set out in the Constitution. Under Italian law, the arbitrators shall communicate to the parties the content of the award within 10 days of its signing, and the term for challenging it is long enough to guarantee the right of defense of the losing party.

The judgment clarifies unequivocally which precise moment the term for challenging the award shall commence and dismisses every possible conflicting interpretation of ICCP article 828.[5]

B.2        Formal requirements for challenging an award before state courts

The Court of Cassation held that to correctly challenge an award, it is necessary to attach to the writ of summons the introductory brief originally filed for commencing the arbitral proceeding.

A plaintiff tried to challenge an award, but the court refused to rule over the matter since the plaintiff has not produced, in its writ of summons, the notice of arbitration filed before the arbitral tribunal. The court reasoned that it is not the court’s duty to search for the documents necessary for the plaintiff to prove its right. Instead, it is the plaintiff’s duty to produce such documents when filing the writ of summons.

The judgment, in line with the previous jurisprudence, clearly sets out the mandatory documentation to be produced for a party willing to challenge an award before state courts. The court will dismiss the challenge if it lacks the notice filed to the arbitral tribunal.[6]

B.3        Law applicable to the arbitration agreement and the “agreement in writing” requirement

The Court of Cassation held that the “agreement in writing” requirement for assessing the validity of arbitration agreements should be scrutinized according to the law of the contract and that the formalities prescribed under Italian law for the validity of arbitration agreements are irrelevant when the clause is regulated by foreign law.

An Italian-incorporated company sued a Czech-incorporated company before the Italian courts, despite the presence of an arbitration clause in the contract. In particular, the Italian company argued that the arbitration clause contained in the standard form contract was null and void for lacking the “double signature” requirement, which is mandatory under article 1341 of the Italian Civil Code for having a valid consent to arbitration in standard form contracts. Thus, according to the plaintiff, the arbitration clause should be considered null and void and the arbitral tribunal would not have any jurisdiction over the dispute.

The court rejected the claim and waived its jurisdiction in favor of the arbitral tribunal seated in Prague. Primarily, the court emphasized that the national judge, when asked to rule over the validity of an arbitration clause, shall firstly decide which would be the law applicable to the agreement incorporating the clause. In this respect, the court held that the arbitration clause was regulated by Czech law (being the law of the contract), and, therefore, the double signature prescribed by Italian law for the validity of arbitration clauses incorporated in standard form contracts was not required. In support of its reasoning, the court stated that the “agreement in writing” requirement under the New York Convention was satisfied by the mere presence of the clause itself and that no further signature was needed for the parties to validly express their consent to arbitrate.

The Court of Cassation, in conclusion, held that the formalities prescribed under Italian contract law do not apply to assessing the validity of arbitration clauses when they are regulated by foreign law.[7]

B.4        Enforcement of a foreign award

The Court of Cassation held that the Court of Appeal retains the power to suspend the enforcement of a foreign award at its discretion, pending proceedings for its annulment before foreign courts.

An award was rendered in Singapore between an Italian and an Indian company. The Italian company sought the enforcement of the award in Italy and the Indian company challenged the request, arguing that an annulment proceeding was pending before Indian courts. According to ICCP article 840, the enforcement of an award can be suspended if a proceeding concerning its validity is ongoing in a foreign country. However, the Court of Appeal rejected the suspension. Subsequently, the Indian company appealed to the Court of Cassation.

The Court of Cassation dismissed the appeal, stating that the Court of Appeal holds complete discretion over the suspension of award enforcement while a foreign annulment proceeding is pending.

The judgment is of importance since the Court of Cassation states that the Court of Appeal does not have to automatically stay an enforcement proceeding when the award has been challenged elsewhere and that the power to stay the enforcement is completely discretionary in its nature.[8]

B.5        The power of state courts to rule over the validity of arbitration clauses

The Court of Cassation held that the national judges retain the power to rule over the validity of an arbitration agreement although the arbitral tribunal has already stated its competence on the dispute.

A losing party challenged an award claiming that the arbitral tribunal did not have the competence to render an award, given that the contract referred to the jurisdiction of state courts. The counterparty resisted, arguing that the arbitral tribunal already rendered an award over its competence and that the point of law could not be further questioned.

The court upheld the challenge, stating that state courts have the power to rule over the validity of arbitration clauses, even though the tribunal itself already considered the clause to be valid. Although it is prohibited for state courts to reinterpret contractual provisions when the arbitral tribunal has already done it (since it would be an inadmissible reexamination of the merit of the dispute), this prohibition shall not apply to arbitration clauses.

The Court of Cassation, according to the principle of separability, has reaffirmed state courts’ power to assess the validity of the arbitration clauses, and thus to rule over the jurisdiction of arbitral tribunals seated in Italy.[9]

B.6        State’s consent to arbitrate

The Court of Cassation held that the arbitration clause contained in the statute of a company is unenforceable toward the state when it became ex lege a shareholder of the company.

A company was seized from the Mafia and its stocks were automatically allocated to an Italian public agency (ANAS), which thereafter sued the previous members of the board before a state court. The court waived its jurisdiction in favor of an arbitral tribunal, in accordance with the statute of the company, which included an arbitration clause. ANAS appealed the decision before the Court of Cassation, arguing that the Italian state never expressed its consent in relation to the arbitration clause, and thus it is not bound by it. The court stated that the arbitration clause was unenforceable toward the state for lack of consent.

The judgment clarified that the arbitration clauses enshrined in companies’ statutes are unenforceable for lack of consent toward state-owned entities if the latter have become shareholders ex lege. In this event, any dispute involving the public shareholder should be brought before state courts. [10]

B.7        Non-arbitrability of “legitimate interests” toward the public administration

The Court of Cassation held that a dispute concerns a “legitimate interest” vis-à-vis a public entity rather than a full right shall be considered not arbitrable under Italian law.

A company entered with a public entity into a territorial planning project containing an arbitration clause. The project (that included the obligation for the administration to put in place an active conduct), was originally performed as planned but subsequently withdrawn for public policy reasons, so frustrating the planned activity of the plaintiff company. The company started an arbitration proceeding against the public entity demanding compliance with the project. In turn, the public entity lodged a claim before state courts, arguing that the matter was not arbitrable under Italian law since it concerned a “legitimate interest”. When acquiring a “legitimate interest” in a public project under Italian administrative law a private party remains subject to the authoritative power of the public entity and only has a right to demand that such power is exercised legitimately, not being allowed to enforce the original terms of the plan. According to the court, a dispute regarding the exercise of a faculty of amendment to the original project in the public interest by a public administration only entails a legitimate interest of the private entity and thus it shall be considered not subject to arbitration. In conclusion, the Court of Cassation upheld the request of the plaintiff and stated that the judgment should continue before the competent administrative court.

The judgment is in line with the Court of Cassation’s jurisprudence. The arbitration clause is unenforceable toward the public administration when the subject matter of the dispute is a “legitimate interest.” Conversely, the clause remains fully enforceable when the dispute concerns a “subjective right” of the plaintiff, deriving from a private agreement with a public entity not subject to review for public interest reasons.[11]

B.8        Relationship between arbitral proceedings and parallel criminal proceedings

The Court of Appeal of Milan held that an arbitral tribunal cannot assess the facts under scrutiny in an ongoing criminal proceeding.

Two parties entered into a sale-purchase agreement. Subsequently, a criminal proceeding for fraud commenced against the managers of the seller. The buyer, as a civil party in the criminal proceeding, asked the criminal court to liquidate the damages suffered. In parallel, it started an arbitration under the arbitration clause contained in the contract for having the contract declared null and void on grounds of willful misconduct of the counterparty. The arbitral tribunal rejected the claim, maintaining the contract’s consent to be validly formed between the parties. The losing party challenged the award before the Milan Court of Appeal, arguing that the arbitral decision was vitiated since it omitted to consider in its reasoning some facts under examination in the parallel criminal proceeding, as requested by the plaintiff. The latter further maintained that should the arbitral tribunal have taken into account the facts under scrutiny in the criminal proceeding, the conclusion would have been the annulment of the contract.

The court rejected the claim, stating that the arbitral tribunal correctly based its decision solely on the facts necessary to assess the validity of the contract, without further addressing the facts under scrutiny in the undergoing criminal proceeding. Moreover, the court held that the arbitral tribunal’s decision concerning the contract cannot be challenged before state courts, it being a decision on the merit of the dispute devolved solely to the arbitrators.

The judgment is a relevant clarification of the relationship between arbitration proceedings and parallel court proceedings when they are grounded on the same historical facts. In those cases, if the arbitration began after the commencement of the court proceeding, the arbitral tribunal shall limit its scrutiny to matters that are not under scrutiny in the judgment pending before state courts. This approach would not be a violation of the parties’ consent to have their dispute submitted to arbitration.[12]

B.9        “Ritual” and “nonritual” arbitration

According to the Court of Reggio Emilia, when there is doubt regarding the qualification of an arbitration proceeding as “ritual” or “non-ritual,” the will of the parties shall be interpreted as having presumably referred to the former.[13]

A dispute arose after the bankruptcy of a company. The statutory clause containing the arbitration agreement did not indicate whether the arbitration clause was referring to ritual or nonritual arbitration. In fact, the problem of jurisdictions between the arbitral tribunal and state courts could have been raised only in the former case, since the arbitral tribunal does not retain any adjudicatory power in nonritual arbitration. The Court of Reggio Emilia held that, when it is impossible to determine the will of the parties in respect of such a choice, preference should be given to ritual arbitration.

According to the court’s reasoning, when nothing is specified by the parties in their arbitration agreement, the presumption is that they intended to grant adjudicatory powers over their matter to the arbitral tribunal. Therefore, according to the Court of Reggio Emilia’s judgment, there would be a presumption in favor of ritual arbitration over nonritual arbitration in the Italian legal system. Thus it should be considered ritual arbitration when nothing is specified by the parties regarding the nature of the arbitration.[14]

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

[2] According to ICCP article 818, arbitral tribunals seated in Italy are currently prohibited to order interim measures. The reform will align Italian legislation to article 17 of the UNCITRAL Model Law.

[3] Currently, there is a jurisprudential contract regarding the direct enforceability of the decree recognizing foreign awards. See Genova Court of Appeal, order dated 21 June 2006; Bologna Court of Appeal, order dated 27 May 1996 (both against); Catanzaro Court of Appeal, order dated 25 March 1996 (in favor).

[4] Under ICCP article 828, the one-year term (so-called long term) applies if the adverse party does not directly notify the award to the losing party. The Arbitration Reform should reduce this term from one year to six months (see section A.1 of the present edition of the Yearbook).

[5] Court of Cassation, Judgment no. 8776/2021.

[6] Court of Cassation, Judgment no. 39949/2021.

[7] Court of Cassation, Judgment no. 36374/2021.

[8] Court of Cassation, Judgment no. 29429/2021.

[9] Court of Cassation, Judgment no. 23495/2021.

[10] Court of Cassation, Judgment no. 6068/2021.

[11] Court of Cassation, Judgement no. 2738/2021.

[12] Milan Court of Appeal, Judgment dated 23 June 2021.

[13]Arbitrato irrituale” (“nonritual” arbitration) is a particular type of arbitration regulated by ICCP article 808ter, according to which the award rendered by the arbitrators only creates contractual obligations between the parties, rather than having the binding effect of a court judgment.

[14] Court of Reggio Emilia, Judgment dated 27 January 2021.

Author

Lorenzo de Martinis is a partner and coordinator of the Dispute Resolution Practice Group of Baker McKenzie Italian Offices (Rome and Milan). He specializes in technology disputes and trade secrets litigation. From 2001 he is professor from practice at MBA programs of the University of Bologna and Bocconi University of Milan. He acted as advisor to the EU Commission and authored the Study on trade secrets and confidential business information in the internal market, part of the impact assessment and preliminary works for the EU Trade Secrets Directive 2016/943. Lorenzo can be reached at [email protected] and + 39 02 76231 334.

Author

Silvia Picchetti is a counsel in Baker McKenzie Italian Offices. She has a vast experience in arbitration, with a special focus on distribution, manufacturing, franchising, sub-supply, licensing disputes and product liability cases.

Author

Gaetano Iorio Fiorelli is an Of counsel in Baker McKenzie Italian Offices. Throughout his career, he represented multinational and Italian companies in arbitration particularly on corporate and post acquisition, finance and insurance cases. Since 2004 he is adjunct professor of international and European law at Bocconi University of Milan. He is author of several publications in commercial and European law matters.