Arbitration is considered to be an alternative to court litigation. Medium to large companies, as well as companies belonging to international corporate groups, tend to refrain from engaging in court litigation in Italy – which is considered somewhat unpredictable, both in terms of timing and of substantive outcomes.
In addition, arbitration is now widely applied in corporate disputes (eg, disputes among shareholders or disputes between companies and their directors, auditors, etc). Indeed, according to the most recent statistics published by the Milan Chamber of Arbitration, 35% of the arbitrations lodged during 2019 were related to corporate disputes. While it can be said that arbitration is the preferred method of dispute resolution with regard to transnational disputes, court litigation is still widely used for domestic disputes and by small to medium-sized enterprises.
Italian companies making use of international arbitration have highlighted concerns relating to conflicts of interest and the impartiality and independence of arbitrators.
Italian arbitral institutions have detected this trend and are responding to this need by publishing arbitrators’ appointments and decisions on arbitrator challenges. This is gradually ensuring the promotion of greater transparency and diversity in arbitration cases, which has received a very positive responses from the stakeholders.
Third-party funding has been increasingly flagged by Italian arbitration users, as the costs of arbitration in the Italian jurisdiction are still somewhat higher than those borne in the context of ordinary proceedings. It is worth mentioning that the Milan Chamber of Arbitration (CAM) has recently addressed this topic in its 2019 Arbitration Rules (CAM Rules). In particular, Article 43 of the CAM Rules now provides that: “The party that is funded by a third party in relation to the proceedings and its outcome shall disclose the existence of the funding and the identity of the funder. Such a disclosure shall be repeated throughout the proceedings, until its conclusion, where supervening facts so require or upon request by the Arbitral or the Secretariat.”
Efficiency and cost-effectiveness are also targeted by arbitral institutions. Indeed, the Milan Chamber of Arbitration has issued its new rules relating to the Simplified Arbitration Procedure, whereby a simplification of the arbitration procedure is combined with a significant reduction of the costs of the proceedings.
Finally, the use of technology is a much-discussed topic, particularly in light of the increasing use of artificial intelligence in arbitration practice, which raises certain ethical and practical concerns.
In general terms, the COVID-19 outbreak has proven the capacity of the international arbitration community, as well as of the major arbitral institutions, to provide users with nearly uninterrupted dispute resolution services.
Indeed, as mentioned above, the efficient use of technology has been a goal of the major arbitral institutions for quite some time and they have therefore been more ready to face the high demand for virtual hearings than national courts.
Over the last few years Italian companies have increasingly resorted to international arbitration, especially in industrial sectors such as energy, construction, procurement, oil and gas, distribution, real estate, pharmaceuticals, aviation and information technology.
Companies involved in the above-mentioned industrial sectors mostly deal with transnational matters and cross-border transactions. As a result, a common playing field to resolve disputes with a certain degree of predictability is much needed, at least with respect to procedure.
International arbitration is key in this respect. The above-mentioned industries seem to be less reluctant to make recourse to arbitration – which, as far as the Italian jurisdiction is concerned, is still considered to be a relatively expensive dispute resolution mechanism.
International arbitration cases seated in Italy or involving Italian parties are mainly dealt with under the auspices of three arbitral institutions: the Milan Chamber of Arbitration (CAM), the International Court of Arbitration of the International Chamber of Commerce (ICC) and the Italian Arbitration Association (AIA).
Companies that have more experience in the field of international arbitration, or which are part of international corporate groups, also resort to other arbitral institutions, such as the Swiss Chambers’ Arbitration Institution (SCAA), the German Arbitration Institute (DIS), the Hong Kong International Arbitration Centre (HKIAC) and the London Court of International Arbitration (LCIA). In any event, the ultimate choice of arbitral institution largely depends on the parties’ previous experience and on their respective nationalities.
Arbitration in Italy is essentially governed by Articles 806 to 840 of the Italian Code of Civil Procedure (ICCP). In addition to the above provisions, a separate set of rules is provided under Legislative Decree No 5 of 17 January 2003 with respect to arbitration relating to corporate matters.
Italian arbitration law is not based on the UNCITRAL Model Law even though their provisions are substantially aligned; the main exceptions concern the powers of the arbitrators to grant interim and urgent relief, which are denied under Italian law.
The above-mentioned provisions of the ICCP apply to domestic, ad hoc and international arbitrations seated in Italy, but only if they have not been waived by the parties to the arbitration agreement or by the applicable arbitration rules.
Conversely, the public order and mandatory provisions of the law of the seat cannot be waived. Following legislative reform enacted on 2006, Italian law no longer provides for a set of national law provisions specifically governing international arbitration. International arbitration is governed by international conventions, treaties and arbitration rules specific to the case.
Following two comprehensive reforms, enacted in 1994 and 2006 respectively, Italy now has a modern arbitration-friendly regime.
Currently, discussions are underway with regard to a future comprehensive reform of arbitration law, driven, inter alia, by the wish to make arbitration available for low-budget disputes, thus:
Arbitration agreements can be entered into either as a part of a contract (ie, as an arbitration clause) aimed at covering future disputes or as autonomous agreements, usually entered into when a dispute has already arisen.
Pursuant to Articles 807 and 808 of the ICCP, an arbitration agreement must be made in writing and expressly identify the subject of the dispute. Italian law interprets written form widely, hence arbitration agreements can be entered into via electronic means (facsimile, e-mail, electronic forms with electronic signatures, etc). The parties can submit both contractual and non-contractual disputes to arbitration; in the latter case, the parties shall specifically identify the non-contractual relationship.
As far as arbitration of corporate matters is concerned (eg, disputes between shareholders or between shareholders and directors or auditors) arbitration agreements included in a company’s articles of association shall provide for the appointment of all arbitrators by a third appointing authority, failing which the arbitration agreement will be declared null and void.
It is not possible to arbitrate disputes concerning:
As far as agency agreements are concerned, different considerations apply. While disputes involving agency agreements are usually considered as falling within the scope of labour disputes, and are hence in principle excluded from arbitration, a different conclusion might be reached where the agent is a company.
Disputes with the public administration can be arbitrated only if they concern rights iure privatorum (subjective rights not involving public law matters).
In order to establish if a dispute is arbitrable, Italian courts apply the principles of contract interpretation as provided by law, essentially considering the subject matter of the dispute, the nature of the claim and the specific interests safeguarded thereby. In any event, Italian law requires the scope of the arbitration agreement to be broadened to include any dispute arising from either the contract itself or the relationship to which the arbitration agreement refers.
Italian courts usually adopt an arbitration-friendly approach when dealing with arbitration agreements, hence arbitration agreements are interpreted broadly. Furthermore, by virtue of Article 808, a quarter of ICCP agreements are broadly interpreted and, in any case of doubt, arbitration shall be considered applicable to all disputes deriving from a contract or the relationship to which an arbitration agreement refers.
Italian law expressly acknowledges the rule of separability under Article 808 of the ICCP. Hence, circumstances affecting the validity of a contract have no impact on the arbitration clause, the validity of which is assessed on a stand-alone basis. This principle is well settled and uniformly applied. Under Italian law the power to enter into a contract includes the power to enter into an arbitration clause.
The parties retain a wide discretion on the selection of arbitrators. According to Article 812 ICCP, anyone can be appointed as an arbitrator, with the exception of individuals lacking legal capacity, whether in full or in part.
A prohibition against acting as an arbitrator applies to professional figures such as judges or individuals executing certain public functions. A specific limit also applies to parties to an arbitration on corporate matters, where the arbitrators are mandatorily appointed by a third appointing authority.
In the event the parties’ chosen method for selecting arbitrators fails, Italian law provides for a default procedure whereby the arbitral tribunal is composed of three arbitrators who shall be appointed by the president of the court at the seat of the arbitration or, if the seat is not yet defined, by the president of the court of the place where the arbitration agreement was entered into (if in Italy) or by the president of the court of Rome (if abroad).
No specific procedure is provided by Italian law that applies to multi-party arbitration.
Court intervention in the process of selection of arbitrators is very limited and is usually driven by the failure of the parties to appoint. As a consequence, Italian law provides that the court of the seat of the arbitration (in person, the president of that court) can intervene in the selection of arbitrators in the following circumstances:
The president of the court can intervene in the appointment of arbitrators only upon a party’s request and shall perform the appointment provided that such an arbitration agreement exists or provides for foreign arbitration.
The challenge and removal of arbitrators is governed by Articles 813 bis and 815 of the ICCP. Pursuant to Article 813 bis ICCP, arbitrators who do not timely fulfil their duties can be removed upon the parties’ agreement or by the president of the court, upon a party’s request, 15 days from receipt of a formal demand of performance.
As far as challenges to arbitrators are concerned, the appointment of an arbitrator can be challenged upon the occurrence of any of the following circumstances, which jeopardise his or her impartiality and independence:
Italian law does not rule expressly on an arbitrators’ duty to act impartially and independently, nor on their duty to disclose potential conflicts of interest. Nevertheless, the duty to be independent can be inferred from the provisions on challenges to the arbitrators, which acknowledge lack of independence as a ground for challenge.
The duty to act impartially and independently, as well as the duty of disclosure, are clearly dealt with in the arbitration rules of all main arbitral institutions. In particular, the arbitration rules of CAM, recently renewed in March 2019, provide for the detailed regulation of arbitrators’ impartiality and independence as well as grounds for the incompatibility of members of the Board/Arbitral Council/auditors or employees of the Chamber acting as arbitrators.
All arbitrators selected for appointment under the CAM arbitration rules shall provide the parties with a statement of impartiality and independence and disclose to the parties all circumstances which, to their knowledge, could give rise to a conflict of interest or cast doubts as to their impartiality or independence. Failing any objection by the parties and the Arbitral Council, the arbitrators are then appointed.
Like other relevant institutions, CAM has issued a code of ethics for arbitrators which addresses all arbitrators’ duties.
Please refer to 3.2 Arbitrability.
The competence-competence principle applies in Italy, pursuant to Articles 817 and 819 ter of the ICCP. Therefore, arbitrators have the power to rule on a party’s challenge to the tribunal’s own jurisdiction, as well as on any issues relating to the validity of the arbitration agreement. On the other hand, when an arbitration is pending, according to Article 819 ter ICCP, the parties are prevented from raising claims as to the validity of an arbitration agreement or as to the arbitral tribunal’s jurisdiction before the court.
Italian law provides for clear limits within which an Italian court can deal with issues of tribunal jurisdiction; Italian courts are usually reluctant to go beyond these boundaries. Typically, issues of arbitral tribunal jurisdiction can only be brought before the courts in three circumstances:
Italian law provides a clear answer for all these cases:
The same principles apply in case of negative rulings on jurisdiction.
Parties can challenge the jurisdiction of the arbitral tribunal only after an award has been rendered and insofar as the challenge has been timely raised within the arbitration proceedings.
The standard of judicial review for questions of admissibility and jurisdiction is a full review.
Italian Courts pursue an arbitration-friendly approach; therefore, Italian courts are generally reluctant to allow a party to commence court proceedings in breach of a prima facie valid arbitration agreement. If court proceedings are commenced despite a valid arbitral agreement, the court will usually dismiss the claim and declare in favour of the arbitral jurisdiction. In addition, the court usually orders the plaintiff to bear the costs of the court proceedings and is also empowered, if the circumstances allow, to order the plaintiff to pay compensation to the defendant.
Third parties are neither signatories to a contract containing an arbitration clause nor party to an arbitration agreement and are not bound to arbitrate. However, third parties can be considered bound by an arbitration agreement in cases of assignment of contracts or where there is a substantial overlap in the management chain of a group of companies.
In any event, Italian law also allows third parties to intervene in arbitration proceedings (irrespective of their nationality). However, such intervention is subject to the agreement of all parties and the consensus of the arbitral tribunal (Article 816 quinquies of the ICCP). The above agreement is not required in cases of compulsory joinder ordered by the arbitral tribunal or joinder to support one of the parties’ arguments.
Article 818 of the ICCP allows the arbitrators to ban the award of preliminary or interim relief, unless otherwise provided for by the law. In particular, arbitrators on corporate matters are entrusted, by operation of law, with the power to suspend the execution of a challenged company’s resolution.
In the absence of the arbitrators granting interim relief, the Italian courts are the sole authority entrusted with such powers. Italian courts can grant several kinds of interim or preliminary relief, such as seizures, astreintes and urgent orders in aid of evidence gathering. They may also support foreign seated arbitrations provided that, in the absence of an arbitration agreement, the Italian courts would have had jurisdiction over the dispute.
Italian law does not provide for the use of emergency arbitrators.
Pursuant to Article 816 septies ICCP, arbitrators may submit the costs of the continuation of the proceedings to the advance payment of foreseeable expenses. The amount of these expenses is usually determined by the arbitrators unless otherwise agreed by the parties. If one or both parties do not advance the requested amount within the scheduled deadline, the other party may advance all costs, otherwise the arbitration will be discontinued and the parties will no longer be bound by the arbitration agreement.
There is no specific ban on courts granting securities for costs; however, these orders are seldom issued in practice.
As a general principle, the parties can freely determine the rules of the arbitration procedure provided that due process is always complied with. Also, pursuant to Article 832 of the ICCP, the parties are expressly permitted to refer to the arbitration rules of the arbitral institution of their choice.
In case of disagreement, the arbitration agreement shall prevail. In the absence of any determination on procedure by the parties, the arbitrators shall establish the applicable rules of procedure in the way they consider most appropriate.
The parties are free to determine the procedural steps to apply in the arbitration proceedings, provided they are not in breach of mandatory rules of law.
Arbitrators are subject to the following obligations:
Arbitrators enjoy ample powers as to the conduct of the proceedings, within the limits of due process and with respect to all matters of procedure where the parties have not reached an agreement (eg, the arbitration seat or the language of the proceedings). Also, arbitrators retain full powers to manage the evidence gathering phase, have the right to the reimbursement of their expenses and the payment of their fees, and can exercise an ample degree of discretion in allocating the arbitration costs between the parties.
There are no specific qualifications or requirements for legal representatives to appear in proceedings. Pursuant to Article 820 ICCP, the parties can benefit from the assistance of a legal counsel in the proceedings, whereupon a power of attorney shall be provided.
As a general rule, the parties and arbitrators to an arbitration seated in Italy have ample discretion in choosing the rules that apply to the evidence gathering phase. In practice, even though discovery, disclosure and, to a certain extent, witness statements are not entirely familiar to Italian law, the IBA Rules on the Taking of Evidence in International Arbitration are widely known and applied (either as guidance or as governing rules).
With regard to witness testimony, Article 816 ter of the ICCP provides that witness examination can be gathered either orally (at the seat of arbitration or at the witness's residence or office) or in writing, as per the arbitral tribunal instructions.
The same evidence rules that apply to domestic matters apply to arbitral proceedings. While the question of whether rules of evidence are a matter of substantial or procedural law is not entirely settled in the international arbitration community, under Italian law the rules of evidence are considered to be part of substantive law.
In this respect it is worth mentioning that in cases of contractual breaches, the non-breaching party (usually the claimant) only has the burden of proving the existence of the (breached) contract, while the burden of proving the non-occurrence of the claimed breach lies with the breaching party (the defendant).
The arbitral tribunal may ask the court to order the production of documents from the public administration as well as the personal attendance of witnesses for deposition.
The ICCP does not provide for the specific confidentiality of arbitral proceedings or of the relevant pleadings. Nevertheless, the parties usually enter into confidentiality agreements and the rules of the main arbitral institutions expressly provide for such a confidentiality burden.
In addition, lawyers’ professional regulations provide for a duty of confidentiality covering all outputs from their professional practice for a certain period of time.
According to the ICCP, arbitral awards shall be delivered within 240 days from the arbitrators’ acceptance of their appointment; however, this term can be extended upon the parties’ agreement or by an order of the president of the court of the seat of arbitration. Furthermore, pursuant to Article 820 of the ICCP, the deadline for rendering the final award is de jure extended an additional 180 days in case of:
Any arbitral award (including potential dissenting opinions) shall be rendered in writing upon a majority vote within the deadline set by the parties for that purpose and shall include:
There are no specific limits on the types of remedies that an arbitral tribunal may award, with the sole exception of preliminary or interim relief which cannot be granted by arbitrators – unless otherwise provided by the law (please refer to 6.1 Types of Relief).
The principle that "costs follows the event" applies; as a consequence, the losing party is usually ordered to bear the full costs of the proceedings. Nevertheless, arbitrators retain ample discretion in awarding costs of proceedings and are free to allocate such costs in a different manner, taking into account the parties’ behaviour during the proceedings.
Arbitral awards can be challenged on the following grounds:
In addition, arbitral awards can be challenged on grounds pertaining to the law applicable to the merits of the dispute, but only if this challenge is expressly provided for by the law or by the agreement of the parties.
The award can be challenged within 90 days from service of the award or, in any case, no later than one year from the date of the last arbitrators’ signature in front of the Court of Appeal of the seat of the arbitration.
The parties cannot exclude or limit their right to challenge an arbitral award before the Court of Appeal of the seat of arbitration. The scope of challenge to the award can, however, be expanded upon the parties’ agreement.
Italian courts apply the provisions on challenges to arbitral awards in a strict way and are generally forbidden from reviewing the merits of the dispute as decided by the arbitral award. A review of the merits of the case is performed only in very limited cases (eg, where a challenge on the merits is agreed by the parties or provided by law). The court will uphold a challenge for one of the following reasons:
In these cases, the court can review and decide the merits of the dispute only if:
Italy ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards on 31 January 1969. Italy is also party to the 1927 Geneva Convention on the Execution of Foreign Arbitral Awards, the 1965 Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States and the European Convention on International Commercial Arbitration, 1961.
Arbitral awards rendered in Italy are enforced by filing a petition, along with an original or a certified copy of the award and the arbitral agreement, to the Court of Appeal of the counterparty’s residence or to the Court of Appeal in Rome in the case of foreigners. The President of the Court of Appeal shall declare the enforceability of an award upon an ex parte evaluation of the same. Thereafter, the award can be enforced through the usual means of judicial enforcement (attachment, garnishment, etc).
Arbitral awards that have been set aside by the courts of the seat of arbitration are usually not enforced by Italian courts.
The sovereign immunity defence can successfully be raised at the enforcement stage in relation to all assets that the state or state entity can prove are functional to the exercise of public powers, as well as in circumstances provided for by international or bilateral conventions.
Italian courts apply a strict standard to the enforcement of foreign arbitral awards. In particular, the courts tend to consider a foreign arbitral award contrary to public policy if its ruling (and not the reasoning) is in blatant and manifest contrast with the root principles of Italian law, which constitute the domestic public policy to be assessed and interpreted in light of international public policy principles.
Italian law does not provide for class action or group arbitration. However, rules on multiparty arbitration can apply, provided that certain specific rules safeguarding the balanced constitution of the arbitral tribunal and the right of all parties to be heard are safeguarded.
Italian lawyers admitted to the Italian Bar are required to comply with the ethical principles and professional standards provided for in the Italian Lawyers’ Code of Conduct.
The ethical principles provided for in the Italian Lawyers’ Code of Conduct also apply to foreign lawyers practising within Italian territory (as per Article 3 of the Code of Conduct). With specific reference to arbitration, the Italian Lawyers’ Code of Conduct provides that lawyers dealing with arbitrators shall comply with the same duties and prohibitions as provided in dealing with court judges, such as:
The Milan Chamber of Arbitration has also issued a specific Code of Ethics that all arbitrators appointed in proceedings conducted under the Auspices of the Milan Chamber of Arbitration shall abide by.
There are no specific rules governing third-party funding in Italy.
The ICCP does not provide for an express rule on consolidation. Nevertheless, upon the agreement of all parties, claims brought under separate but identical arbitration clauses can in principle be brought within a single arbitration proceeding.
On the other hand, a court would not consolidate two separate arbitral proceedings, based both on the lack of rules for this provided by the ICCP as well on the general reluctance of national courts to step into arbitration proceedings.
As a rule, third parties who are not signatories to a contract containing an arbitration clause nor parties to an arbitration agreement are not bound to arbitrate. Nevertheless, third parties can be considered to be bound by an arbitration agreement in case of an assignment of contracts or where there is a substantial overlap in the management chain of a group of companies.
Italian law allows third parties to intervene in arbitration proceedings (irrespective of their nationality). However, such intervention is subject to the agreement of all parties and the consensus of the arbitral tribunal (Article 816 quinquies of the ICCP). The above agreement is not required in the case of compulsory joinder ordered by the arbitral tribunal or joinder to support one of the parties’ arguments.