Investor–State Arbitration 2025 Comparisons

Italy is generally in favour of investor–state arbitration, and to that end inserts clauses in its investment treaties on a regular basis.

However, as a member state of the European Union (EU), it does not recognise the validity of investment arbitration for intra-EU disputes and has terminated all of its intra-EU bilateral investment treaties (BITs). The European Court of Justice (ECJ) has declared any arbitration clause for intra-EU investment disputes as incompatible with the EU legal order (C-284/16 – Achmea; C-741/19 – Komstroy), and member states would violate EU law if they recognised this method of resolution of disputes under such circumstances.

Italy is party to all major international conventions on arbitration and recognition of arbitral awards, including the Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1965 (the “ICSID Convention”) and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”).

In May 2015, Italy signed the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (the “Mauritius Convention”), but has not yet ratified it. Through the Mauritius Convention, states consent to the application of the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration.

Traditionally, many disputes that can also be resolved under international investment law were, and still are, resolved before domestic courts (see 2.6 Arbitration Clauses in Investor–State Contracts for investment contracts), though this also applies for measures of a general nature, subject in principle to scrutiny under administrative law.

However, more recently, foreign investors have begun to utilise the investment arbitration mechanism. The first case against Italy was taken in 2014 (ICSID ARB/14/3, Blusun SA and Others v the Italian Republic) and was followed by several similar disputes related to the same general measures on incentives to renewable energy production under the Energy Charter Treaty (ECT). Most recently, more diversified cases have been taken to investment arbitration tribunals.

The fact that intra-EU investor–state arbitration is generally considered incompatible with EU law impacts the disputes involving Italy and companies based in other EU member states. These companies might resort to domestic courts as an alternative.

One point is of interest: in the aforementioned renewable energy cases, pioneered by Blusun, many investors, both domestic and foreign, initially appealed to the Italian administrative courts, arguing that the measures were unconstitutional under the Italian Constitution. In this context, many also argued that they were incompatible with the European Convention on Human Rights (ECHR) and the ECT. However, while the administrative judges referred the matter to the Italian Constitutional Court (which found the measures legitimate), calling also upon the ECHR rules, the applicability of the ECT provisions was not finalised.

In Italy, companies that resort to international investment arbitration are typically those involved in infrastructure or large projects abroad. Available data shows that large transportation, telecoms and energy companies make the most use of this instrument. In investment arbitration against Italy, most cases involved the energy sector. Together with energy companies, several investment funds that had participated in investments started arbitration proceedings. Use of this instrument by small and medium-sized companies remains much rarer.

To date, Italy has been involved in 14 arbitration proceedings, some of which have also led to an annulment phase (International Centre for Settlement of Investment Disputes – ICSID) or appeal (Stockholm Chamber of Commerce – SCC). 11 of these concerned the same general renewable energy measures – namely a remodulation of previously granted incentives for photovoltaic energy production – and were based on the ECT. The fair and equitable treatment (FET) standard was invoked – both in terms of the obligation to ensure the stability of the measures and the protection of legitimate expectations – as well as the umbrella clause, since all the contested measures included the stipulation of agreements between the investor and the Italian entity responsible for providing the incentives (GSE). The expropriation clause was also frequently invoked.

In addition to Blusun, other key cases include the following.

• Under ICSID:
1. ARB/15/37, Silver Ridge Power BV v the Italian Republic;
2. ARB/15/40, Belenergia SA v the Italian Republic;
3. ARB/15/50 Eskosol SpA in liquidazione v the Italian Republic;
4. ARB/16/5, ESPF v the Italian Republic;
5. ARB/16/39, VC Holding II Sàrl and Others v the Italian Republic;
6. ARB/20/3 Hamburg Commercial Bank AG;
7. 1ARB/20/39 Encavis AG and Others v the Italian Republic; and
8. ARB/23/14, Suntech Power International Ltd v the Italian Republic.
• Under the SCC:
1. Greentech Energy Systems A/S and Others v the Italian Republic, SCC Case No 2015/095; and
2. CEF Energia BV v the Italian Republic, SCC Case No 158/2015.

Among these, VC Holding and Suntech are still pending. In the other cases, the arbitral tribunal rejected the claimant’s claims, except for ESPF, Greentech and CEF. Blusun and ESPF were upheld by an ad hoc annulment committee. Greentech and CEF were annulled by the Stockholm Appellate Court (see 1.6 Reaction to Awards Made Against the State).

The Eskosol case deserves special mention, as it concerned the same circumstances as the Blusun case, since Blusun and the other two claimants were the foreign investor and Eskosol was the Italian special purpose vehicle established for the investment. Since both are theoretically considered “investors” under the ECT and the ICSID Convention, the second tribunal recognised its jurisdiction and therefore ruled on the same facts as the Blusun award. Although the second tribunal adopted a different line of reasoning in assessing the case, it also concluded that the contested measures and conduct were lawful.

In addition to this group of cases, three concerned concessions or individual contracts:

• ICSID, ARB/17/14, Rockhopper v the Italian Republic;
• ICSID, ARB/18/20, Veolia Propreté SAS v the Italian Republic; and
• ICSID ARB/25/34, ArcelorMittal SA v the Italian Republic.

Both Veolia and ArcelorMittal are still ongoing. As for Rockhopper, this concerned the refusal to conclude a procedure for obtaining a concession due to a change in law for environmental concerns. The investor had obtained an exploration concession and based its subsequent request for a production concession on that basis. The investor claimed violation of its legitimate expectations and expropriation, winning the case based on the latter claim (the court found that direct expropriation had occurred without due compensation). However, the award was annulled by an ad hoc panel of the ICSID for improper constitution of the tribunal. Rockhopper very recently resubmitted the dispute to a new tribunal.

To date, Italy has been unsuccessful in three cases. As indicated in 1.5 Major Arbitrations, two of these were submitted to the SCC’s arbitration mechanism and were successfully appealed by Italy before the Swedish Court of Appeal, as they involved intra-EU disputes. The third case (ESPF) also involved an intra-EU dispute, and Italy is therefore opposing its enforcement, which the claimant is pursuing in Switzerland and the United States.

Italy has ratified over 100 BITs.

Since the Treaty of Lisbon (2009), foreign investment policy has been a centralised competence of the EU. However, the European Commission allows member states to maintain and (re)negotiate agreements with third countries in cases where the EU does not intend to proceed with an agreement. This is based on the procedures established by Regulation No 1219/2012 (transitional arrangements for bilateral investment agreements between member states and third countries), which requires member states to request authorisation from the European Commission both to open negotiations and to sign the negotiated text. The Commission imposes similar conditions, and has also adopted a non-paper drafting a model BIT that member states use as a benchmark (Annotations to the Model Clauses for negotiation or re-negotiation of Member States’ Bilateral Investment Agreements with third countries). Member states’ practices in this regard are therefore becoming increasingly similar.

The number of multilateral treaties concluded by Italy in this area is much more limited. Italy withdrew from the ECT in 2014, effective from 1 January 2016 (by virtue of ECT Article 47.3, the so-called “sunset provision”, the protection offered to foreign investors by the ECT continues to apply for a 20-year period running from the effective date of withdrawal, provided that the investment has occurred before the date of such withdrawal).

Italy has long used a Model BIT in its negotiations. For many years, this text was not updated, and many existing BITs still bear the imprint of this model.

Recently, Italy adopted a new Model BIT with several significant changes, which were the result of a gradual progress. This exercise has in fact initiated a dynamic phase of modernisation, partly due to the need to align with the European Commission’s requests as well as best practices. Currently, the Model BIT (2024) largely reflects the model clauses proposed by the European Commission, and:

• contains several provisions on sustainability (Article 19, Corporate Social Responsibility, Responsible Business Conduct and Measures Against Corruption; Article 20, Investment and Environment; Article 21, Investment and Climate Change);
• better clarifies the right of states to regulate (Article 6, Investment and Regulatory Measures); and
• introduces several exceptions (Article 14, Prudential Carve-Out; Article 15, General Exceptions; Article 16, Security Exception).

It is included in what are commonly referred to as “new generation BITs”. One point of interest is that such novel provisions are not justiciable, as the clause on dispute settlement (Article 24 of the Model BIT) exclusively covers obligations included in Section 2 on protection of investors, while the provisions on sustainability and the like follow from Section 3 onwards.

Italy is an EU member state. As previously discussed, with the adoption of the Lisbon Treaty, foreign investment policy became a centralised policy driven by the European Commission. Since then, all member states, although still free to undertake some investment obligations, need to obtain an authorisation to negotiate and then an authorisation to sign an agreement from the European Commission. There is thus co-ordination and monitoring activity by the European Commission that affects member states’ choices, as regards both the substantive provisions and the use of arbitration in dispute resolution.

Moreover, many of the free trade agreements (FTAs) signed by the European Commission are so-called “mixed agreements”, where the European Commission and member states share competence and jointly sign the agreement. Italy is thus party to such agreements; yet, negotiations are directed by the European Commission.

Despite having signed, Italy has not yet ratified the Comprehensive Economic and Trade Agreement (CETA) with Canada, and some press reports of declarations by the Italian government leave one to understand that it might decide not to do so it in the short term. It instead supports the EU-Mercosur Agreement currently under negotiation, and, as previously mentioned, membership in the EU also has an impact on intra-EU agreements and disputes: member states cannot undertake investment obligations against other member states and have to terminate all existing BITs. Furthermore, they cannot use arbitration mechanisms for intra-EU disputes.

Each BIT has an Explanatory Note that helps in the interpretation of the agreement. In fact, the Explanatory Note is related to the law ratifying the treaty and usually contains both a brief commentary on the law itself and an explanatory note on the signed agreement. This Explanatory Note is published in the Official Journal of the Italian Republic in accordance with internal transparency regulations.

The Model BIT is not accompanied by any Explanatory Note.

Italy does not have a general national investment law.

Despite the lack of a specific law on direct investment, Italy has adopted various norms over the years to encourage foreign investment; these are implemented through support measures that are currently mainly provided by the Interministerial Committee for the Attraction of Foreign Investment (CAIE) and the Ministry of Business and Made in Italy (MIMIT), through a special unit.

Furthermore, as with many other countries, Italy has a comprehensive legal framework on so-called “Golden Power” (2012, with more recent amendments) to protect strategic assets in key industries such as energy, transport and telecoms. This framework grants authorities special powers to review and potentially block or impose conditions on foreign investments that could threaten national security or public order.

International investment agreements undertaken by Italy usually contain provisions on protection of national security or public order as exceptions to the general principles on investment protection.

Although such kinds of legislation are thus legitimate in principle under international investment law (at least when submitted in accordance with certain conditions and/or qualifications), they add additional duties of due diligence and constraints for foreign investors.

In Italy, investment contracts concluded by the State or State-owned enterprises are classified as public law contracts governed by administrative law. In practice, direct (international) arbitration clauses are not the norm. Disputes are typically resolved before Italian administrative or civil courts. Domestic arbitration may occasionally be used, particularly in mixed concessions such as joint ventures with foreign investors (eg, before the CCIAA), but always under Italian law and with seat in Italy.

Direct international arbitration is excluded, as such contracts are deemed to involve State aid/public contracts (subject to EU public procurement law) and fall under the jurisdiction of national courts and the oversight of the Court of Auditors. Direct international arbitration is frequent in corporate transactions with listed SOEs (eg, share purchase agreements).

To date, the cases taken against Italy have all been under the ECT. In this context, the legal basis consistently invoked is the FET standard – particularly, its articulation of the sub-standard of legitimate expectations. The various awards have often elaborated in detail on the duty of due diligence of an investor entering a foreign highly regulated market.

The FET, in the specific formulation of Article 10 ECT, is similarly invoked to ensure the stability of the relevant legislation. In such instances, various considerations can be found in the awards on the balance between the right to regulate by a state and its obligations under the ECT to maintain a stable legal framework, together with considerations on the scope and content of stabilisation clauses.

In all cases where contractual obligations exist, the umbrella clause is also invoked. In some instances, applying the umbrella clause in the event of general measures has also been attempted, with varying results.

Finally, Article 13 on expropriation is frequently invoked, as is the most constant protection and security standard. The expropriation standard is usually applied in its definition of indirect expropriation.

Based on the available data, and always keeping in mind that each treaty may have different language and therefore a different articulation of the same standard, it can be assumed that Italian claimants against third countries also base their disputes predominantly on these legal bases.

The Italian Model BIT mirrors old BITs – after attempting an amicable solution, the parties may resolve a dispute by choosing an arbitration procedure from among the following:

• an ad hoc arbitration tribunal, in compliance with the Arbitration Rules of the UN Commission on International Trade Law (UNCITRAL);
• an arbitral tribunal that is established pursuant to the Dispute Resolution Rules of the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA) or the SCC; or
• ICSID.

As illustrated, almost all investment arbitrations opened against Italy are subject to ICSID Rules (only two arbitrations have been conducted under the SCC rules). The selection of arbitrators is therefore governed by the ICSID Rules, which grant the parties considerable freedom (Article 37 ICSID Convention).

The ICSID Convention acts as a self-contained international regime for the arbitration. Thus, for ICSID arbitrations, the seat of arbitration does not determine the procedural law. Conversely, in non-ICSID arbitrations, the seat of arbitration (lex loci arbitri) is crucial, as it determines the applicable procedural law to complement the agreement of the parties or the rules of the institution. However, all arbitration regulations included in the Italian Model BIT have procedures for selection of arbitrators (as well as default procedures: see 4.2 Default Procedures). Furthermore, under arbitration rules other than ICSID, in investor–state arbitration parties are also not expected to choose the respondent’s country as the seat of arbitration.

Italian law should thus not play a role in investment arbitrations having Italy as a respondent; equally, it would be extremely rare for an Italian claimant to be allowed to choose Italy as the seat of the arbitration in investor–state proceedings against a third country. Should this yet be the case, Article 812 of the Italian Code of Civil Procedure (CCP) establishes who cannot be an arbitrator, specifying that anyone who lacks, in whole or in part, legal capacity cannot serve as an arbitrator. This includes, for example:

• minors;
• persons under interdiction;
• persons under incapacity;
• those who are bankrupt; and
• those disqualified from holding public office.

Default procedures are usually included in all arbitration regulations referred to in the Model BIT. Should Italian law yet apply in the selection of arbitrators, the default procedure is established by Article 810 CCP (see 4.3 Court Intervention). Furthermore, Article 816-quater CCP is the default procedure under Italian arbitration law in the case of a plurality of parties. It establishes that, where more than two parties are bound by the same arbitration agreement, each party may include all or some of the others in the same arbitration proceeding if:

• the arbitration agreement delegates the appointment of the arbitrators to a third party;
• the arbitrators are appointed with the agreement of all the parties; or
• the other parties, after the first has appointed the arbitrator or arbitrators, jointly appoint an equal number of arbitrators or entrust their appointment to a third party.

The default procedure under Article 810 CCP establishes that, if no agreement is reached on the appointment of arbitrators, the president of the court of the seat intervenes to appoint them. The recent reform of arbitration (Law Decree 149/2022), known as the “Cartabia reform”, introduced the criteria of transparency, rotation and efficiency for the appointments by the president of the court, and the appointments must be published on the judicial office's website.

Arbitration regulations referred to in the Model BIT contain specific procedures for arbitrator challenges.

In the case of ICSID, arbitrators can be challenged under Article 57 of the ICSID Convention. Furthermore, an award can be annulled if the tribunal was not properly constituted (Article 52(1)(a)). In Rockhopper, the ad hoc committee annulled the award as the tribunal was deemed to be improperly constituted, because an arbitrator had failed to disclose in his statements at appointment that he had been the subject of criminal proceedings in Italy. In that award, the committee also established very rigorous standards of independence, autonomy and moral integrity, as well as transparency on the part of arbitrators in disclosing their potential conflicts or reasons for incompatibility.

Moreover, the Italian Model BIT contains a provision on the challenge of arbitrators (Article 27.2), stating that, if a disputing party considers that an arbitrator does not meet the requirements set out in the same article (see 4.5 Arbitrator Requirements) or in the UNCITRAL Code of Conduct for Arbitrators in International Investment Dispute Resolution (as adopted on 7 July 2023), it should send a notice of challenge to the President of the International Court of Justice or the appointing authority, who shall transmit it to the arbitrator concerned. This provision, if included in a BIT, might overlap with the provisions contained in the rules of the arbitral institution chosen by the parties.

Finally, under Italian law an arbitrator may be challenged if:

• they do not have the qualifications expressly agreed upon by the parties;
• they, or an entity, association or company of which they are a director, have an interest in the case;
• they or their spouse are a relative up to the fourth degree, or are a cohabitant or habitual companion of one of the parties, of a legal representative of one of the parties, or of any of their counsel;
• they or their spouse have a pending case or serious enmity with one of the parties, with their legal representative, or with any of their counsel;
• they are linked to one of the parties, to a company controlled by the latter, to the entity that controls it, or to a company under joint control, by an employment relationship or by a continuous consultancy or paid service relationship, or by other financial or associative relationships that compromise their independence – and furthermore if they are the guardian or trustee of one of the parties;
• they have provided advice, assistance or defence to one of the parties at a previous stage of the matter or have testified as a witness; and
• there are other serious reasons of convenience, such as those that affect the independence or impartiality of the arbitrator.

According to Article 27 of the Italian Model BIT, arbitrators must be independent of, and must not be affiliated with or take instructions from, a disputing party or the government of a party with regard to trade and investment matters. Arbitrators should not take instructions from any organisation, government or disputing party with regard to matters related to the dispute. They should not participate in the consideration of any disputes that would create a direct or indirect conflict of interest. They should comply with the UNCITRAL Code of Conduct for Arbitrators in International Investment Dispute Resolution of 7 July 2023. In addition, upon appointment, they should refrain from acting as counsel in any pending or new investment protection dispute under this or any other agreement or domestic law.

Independence, impartiality and disclosure are also regulated in the Code of Ethics of Arbitrators adopted by the Milan Chamber of Arbitration (CAM) and attached to the CAM Rules of Procedure. An arbitrator who does not comply with this Code of Ethics may be replaced by the Chamber, which may also refuse to confirm them in subsequent proceedings by taking into consideration the seriousness and relevance of the violation.

The Cartabia reform introduced a dramatic change in existing arbitration rules, previously prohibiting arbitral tribunals from awarding preliminary or interim relief. Law Decree 149/2022 amended Article 818 CCP by providing that “[t]he parties may, also by reference to arbitration rules, confer to the arbitrators the power to grant interim measures in the arbitration agreement or in a separate agreement in writing prior to the commencement of the proceedings”.

Article 818 CCP further provides that, if the parties have agreed to grant the arbitral tribunal the power to issue interim measures, that power is exclusive: once the arbitral tribunal has been constituted, the parties can thus no longer seek interim relief from domestic courts.

There is no limitation as to the types of interim measures that can be issued by arbitrators.

Italian courts have the power to grant interim measures only before the constitution of an arbitral tribunal, provided that, after the constitution of the tribunal, pursuant to the amended Article 818 CCP, the parties have conferred on the arbitrators the power to grant interim measures in the arbitration agreement or in a separate written agreement. No distinction is made between commercial and investment arbitration, or between domestic and foreign arbitration; thus, the rule also applies in the case of investment arbitration.

An interim measure issued before the constitution of the arbitral tribunal will also remain in force during the arbitral proceedings, unless the arbitral tribunal revokes it or modifies it upon request by a party. The intervention of national courts is, however, contemplated after the issuance of the interim measures of an arbitral tribunal in the case of challenge and for their enforcement. Indeed, according to Article 818-bis CCP, the arbitral tribunal’s decision on interim measures may be challenged before the Court of Appeal of the district in which the arbitration is seated. The grounds for the challenging of interim measures are the same as those provided for arbitral awards.

The Italian CCP allows arbitral tribunals to order interim measures, which can include security for costs, as no limitation is imposed. Moreover, the CAM procedural rules currently in place also empower arbitral tribunals to order security for costs as an interim measure.

Italian law does not prohibit third-party funding (TPF) of claims, and the practice is considered compatible with the Italian legal system. TPF agreements are classified as atypical contracts, and their validity is recognised provided they do not contravene public policy or mandatory rules. In Italy, TPF is also permitted in investor–state disputes, as no specific restrictions apply.

Over the past few years, TPF has gained traction in complex, high-value disputes. The rising costs, duration and sophistication of international arbitration have made TPF an attractive option for claimants lacking the resources to pursue lengthy proceedings against sovereign states.

The Italian litigation finance market is still developing, with specialised funds and international players increasingly active. While less mature than in common law jurisdictions, a growing share of investor–state dispute settlement cases now involves funders covering legal and procedural expenses in exchange for a share of the proceeds deriving from the (successful) enforcement of the award or from a settlement.

Despite this growth, the sector remains largely unregulated in Italy. At the EU level, however, the European Parliament has called for minimum standards on transparency, governance and authorisation of funders.

In some of the previously mentioned cases against Italy, the claimant was financed through TPF. Unlike the rules currently in force, ICSID did not previously require disclosure of the existence of a TPF, so the information was not always transparent in the initial disputes.

In some cases, Italy requested security for costs to protect itself from the risk that the TPF would not meet the claimant’s obligations, with mixed results.

Just as ICSID has introduced the obligation to disclose the existence of a TPF relationship and the option for the parties to extend the disclosure to additional elements (for example, making known the terms of the signed agreement), the CAM also has a rule that regulates the TPF: the party that is funded by a third party in relation to the proceedings and its outcome must disclose the existence of the funding and the identity of the funder. Such declaration must be repeated along the proceedings, where supervening facts so require or upon request by the arbitral tribunal or the CAM Secretariat.

Moreover, the Model BIT also contains a clause on TPF, including its definition and requiring disclosure of more information than found in arbitral regulations:

• TPF is any funding provided by a natural or legal person who is not a disputing party but who enters into an agreement with a disputing party in order to finance part or all of the cost of the proceedings in return for a remuneration dependent on the outcome of the dispute or in the form of a donation or grant;
• a disputing party benefiting from TPF must notify to the other disputing party, and to the arbitration tribunal hearing the claim, the name and address of the third-party funder and of its beneficial owner; and
• such notification must be made at the time of submission of a claim, or, if the funding agreement is concluded or the donation or grant is made after the submission of a claim, without delay as soon as the funding agreement is concluded or the donation or grant is made.

The Model BIT (Article 27) establishes that any dispute must, as far as possible, be settled amicably through direct consultation, negotiation and mediation. It then fixes rules for negotiations: a written request for negotiations must include the legal and factual basis for the request, including any disputed measures, the provisions of the relevant investment treaty which were violated in the opinion of the investor, and the investor’s proposals for a possible settlement of the dispute.

If a dispute cannot be settled within six months from the date of a written application for settlement, the investor may commence arbitration. This provision is common to Italian BITs generally and to other investment agreements. This is also included in the ECT (Article 26). In all cases against Italy, such request for an amicable solution was submitted thus but never produced a positive result. Owing to the confidentiality of such phases, it is not known whether any dispute was settled amicably at any point in the past.

As stated in 1.2 Arbitration Conventions, Italy has signed the Mauritius Convention on transparency in investment arbitration. Although it has not yet ratified the Convention, it tends to implement its principles in its arbitral procedures. In light of the different confidentiality requirements of both parties, confidentiality has been favoured in most of the procedures open against it – typically owing to matters of confidentiality linked to the public interest at stake, though in many instances the claimant also has an interest in confidentiality (particularly if it is a listed company).

Nonetheless, greater openness to the principles of transparency has been imposed with the new ICSID Rules, adopted in 2022. In fact, today – in comparison to the past – the parties can consent to ICSID’s publication of the award or the final decision in a post-award remedy proceeding, as well as consent to publication with or without redaction of the relevant document. However, if neither party objects to the publication of the document within 60 days after its issuance, consent to publication is deemed to have been given and it is made available on the ICSID website (Arbitration Rule 62(3)).

Limits do exist, as Italian law generally disallows punitive damages for arbitration due to public policy, while injunctions and rectification are permitted under public policy principles. Foreign awards including punitive damages may not be enforceable in Italy on these grounds.

The primary limit on remedies is Italian public policy, which prohibits punitive damages as the Italian legal system does not recognise them, though this is a complex and evolving area of law.

Other remedies – such as declaratory relief, specific performance and termination orders – are allowed. Injunctions are permitted as they are considered a necessary remedy to prevent harm and ensure a just outcome, provided they comply with public policy. Rectification is admissible when ordered by a state court or an arbitral tribunal as a remedy for breach of contract. Tribunals may then issue declaratory relief to clarify the legal relationship between the parties. Finally, specific performance and termination orders are allowed as remedies for breach of contract.

In Italy, as in many other jurisdictions, common valuation methodologies for quantifying damages include the discounted cash flow (DCF) method and the market approach, alongside cost-based methods.

Italian arbitration law contains no specific rule on cost allocation. If the arbitration agreement is silent in that respect, arbitrators generally apply the “costs follow the event” rule, which also applies to ordinary court proceedings.

In Italy, a civil law jurisdiction, courts are generally obligated to award interest on monetary claims if the claimant has placed the debtor in default through proper notice. This interest serves as compensation for the delay in payment, essentially “curing” the claimant’s inconvenience in waiting for the money. The entitlement to interest arises once a sum is in arrears, and the defaulting party is given formal notice of the default, even if the underlying obligation is unliquidated or the exact sum of damages is not yet determined.

Italian law imposes a duty on an investor to mitigate its losses. This is a general principle of law that requires the aggrieved party to take reasonable steps to minimise the damage resulting from a breach or wrongful act, with the aim that unmitigated losses will not be recoverable in damages. This principle is recognised internationally in agreements such as the UNIDROIT Principles, and its application in the Italian legal system results in a reduction of the compensation awarded to a party that fails to take reasonable steps to reduce their loss.

As indicated in 1.2 Arbitrations Conventions, Italy is party to both the ICSID Convention and the New York Convention. The ICSID Convention (Article 54) obliges all contracting states to recognise ICSID awards as binding and to enforce the pecuniary obligations within them. National courts cannot refuse to recognise and enforce an award on any grounds other than those related to the sovereign immunity of states from execution. This means that domestic courts are not permitted to scrutinise ICSID awards in the same manner as is allowed under Article V of the New York Convention. Non-ICSID awards are instead covered by the New York Convention. Article V of the New York Convention sets forth the grounds on which recognition and enforcement of an arbitral award may be refused. These include:

• the incapacity of a party or invalidity of the arbitration agreement;
• the violation of due process;
• the arbitral tribunal exceeding its authority;
• the improper constitution of the arbitral tribunal or procedural irregularities; and
• when an award has not yet become binding or has been set aside or suspended.

Under both conventions, the procedural steps for obtaining recognition of an arbitral award are left to the domestic procedures of the state. In Italy, the party seeking recognition and enforcement must file a request before the President of the Court of Appeal in the place where the other party resides or, if that party does not reside in Italy, before the Court of Appeal of Rome. Certified copies of the award and the arbitration agreement must be filed with the request. The award is declared immediately enforceable by decree subject to ex officio review by the President of the Court of Appeal, confirming that:

• the award complies with the required formal requirements;
• the dispute is arbitrable under Italian law; and
• the award does not violate public policy (Article 839 CPC).

Pursuant to Article 840 CPC, the presidential decree granting recognition and enforcement of the foreign award may be challenged before the Court of Appeal on the grounds provided for by Article V of the New York Convention. As stated, this would not apply to ICSID awards.

Article 840 CPC does not permit the enforcement of a foreign award set aside by the courts at the place of arbitration, as it lists the following among the reasons to challenge the recognition of a foreign award: “the award has not yet become binding on the parties or has been annulled or suspended by a competent authority of the state in which, or under the law of which, it was made”.

Under Article 827(2) CCP, courts can set aside arbitral awards and partial arbitral awards, which can be challenged immediately, as well as interim awards, which can be challenged exclusively together with the final arbitral award.

Italian courts tend to adopt a rather restrictive interpretation of the grounds for refusing enforcement. Enforcement is therefore generally granted. This also applies in case of a challenge based on public policy (understood as international public policy). Firstly, parties cannot use the public policy ground to re-evaluate the facts that the arbitral tribunal has already ascertained. Secondly, the challenge must demonstrate that the award’s outcomes are radically unacceptable to the legal order, not just an error in legal reasoning or application. Finally, as stated, Italian courts tend to interpret public policy narrowly, ensuring that challenges do not become a broad avenue for appealing the merits of an arbitration award.

As indicated in 9.1 Enforcement Procedure, Article 840 CPC does not permit the enforcement of a foreign award set aside by the courts at the place of arbitration. In contrast, should an award be set aside by the courts of the seat after the Italian court’s decision granting the exequatur, this circumstance may be used as a defence during enforcement proceedings or as a ground for revocation of the exequatur pursuant to Article 395.2 CPC.

When it comes to enforcement of the award on assets of a foreign state or entity, Italian courts will grant enforcement only on assets that are not used for a sovereign purpose. Italian courts tend to follow a fairly prudent approach. The primary category of non-attachable public assets includes those considered part of the demanio pubblico (public domain), such as beaches, ports and public roads, as well as other state property such as military planes and certain cultural goods.

More generally, Italian courts have no jurisdiction over enforcement or interim measures against assets belonging to a state or its public entities, provided that these assets are intended for the exercise of sovereign functions or, in any case, for their public purposes (Supreme Court, 8 June 2018, No 14885). Therefore, such jurisdiction may be asserted where the assets are intended for commercial or (in general) private activities. Furthermore, under Italian law, certain types of assets enjoy specific protection. By way of example, pursuant to Article 11, Law No 112 of 8 August 2024, the following may not be seized or attached: money, securities and other valuables that constitute foreign currency reserves of foreign states that the central banks or foreign monetary authorities hold or manage on their own behalf or on behalf of the state and that are deposited with the Bank of Italy in special accounts. The seizure and attachment of these assets is ineffective, and there is no obligation for the Bank of Italy to allocate funds. The ineffectiveness is noted by the enforcement judge, even ex officio.

As for the doctrine of veil piercing, Italian courts pierce the corporate veil by holding parent companies or individuals liable for a subsidiary’s debts primarily when there is an abuse of power, disregard for good governance, or fraudulent acts that harm subsidiary creditors. It would thus be rare to apply such a doctrine in a typical situation of enforcement of an arbitral award.