International Arbitration 2021

Last Updated August 17, 2021

Italy

Law and Practice

Authors



Legance – Avvocati Associati is an independent law firm with offices in Milan, Rome, London and New York. Founded in 2007 by a group of acclaimed partners, Legance distinguishes itself in the legal market as a point of reference for both clients and institutions. It is no coincidence that the name Legance recalls unity and excellence, principles that were at the forefront in the foundation of the firm. Independent, dynamic, international and institutional are the qualities that most characterise the strength of the firm and have contributed to it becoming a leader in the legal market. In 2007 there were 84 lawyers at Legance, currently there are about 300. The value of the group is regarded as a pillar that amplifies each individual’s qualities and skills, the constant attention to clients, the careful evaluation of business objectives, an unconventional approach capable of anticipating legal requirements, and 24-hour availability have contributed to establish Legance as a recognised leader in domestic and international markets. Due to its outstanding international approach, Legance can support clients over several geographical areas, and can organise and co-ordinate multi-jurisdictional teams whenever required.

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, during 2020, cases related to corporate disputes have increased of 61%. 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.

The COVID-19 outbreak has positively influenced the arbitration field in the perception of clients and users.

Indeed, as opposed to the ordinary courts that have faced some difficulties in setting up an efficient way to handle the cases, arbitral institution have provided clients with a basically uninterrupted dispute resolution services instead. After all, 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. 

In this sense, the COVID-19 outbreak has proven the capacity of the international arbitration community to promptly react to the changed landscape.

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. As mentioned, in the last year, cases related to corporate disputes have dramatically increased.

No area has actually experienced a particular decrease in international arbitration.

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.

No new institution has been set up over 2020–21 to the best of the authors’ knowledge.

There are no courts in Italy designed specifically for arbitration matters.

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 in 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:

  • reducing the caseload of the national courts by having certain disputes automatically transferred to arbitration;
  • broadening the scope of arbitrable disputes; and
  • reconsidering (or repealing) the ban on arbitrators from ordering provisional or urgent measures.

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, email, 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:

  • inalienable rights (ie, rights strictly pertaining to a right which the right-holder cannot freely dispose of (eg, citizenship, nationality or parenthood));
  • in-person rights;
  • labour disputes (unless arbitration is provided in the collective bargaining agreements or authorised in the Worker’s Statute);
  • tax disputes; and
  • disputes against the public administration, which shall be submitted to the jurisdiction of administrative courts.

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.

As to the law governing the arbitration agreement, the courts generally refer to the law governing the contract which includes the arbitration agreement is included. Lacking the law of contract, reference can be made to the criteria set forth under Regulation (EC) No 593/2008 (Rome I).

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 standalone 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:

  • where the parties referred the appointment of one or more arbitrators to the court;
  • where the parties agreed to appoint an even-numbered arbitral tribunal to appoint the final arbitrator;
  • where one or more parties failed to appoint an arbitrator;
  • where the third-party appointing authority failed to appoint one or more arbitrators;
  • where, for any reason, one or more of the appointed arbitrators is removed and the arbitration agreement does not provide any guidance in this respect, or the appointing authority failed to perform the appointment; and
  • in all cases of challenge or removal of arbitrators.

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:

  • they lack the specific requirements set by the parties;
  • they hold a personal interest in the dispute;
  • they, or their companion, have a family or strong personal relationship with any of the parties’ legal representatives or their attorneys;
  • they are currently advising or assisting, on a continuing basis, any of the parties or their affiliated companies (this includes controlling, controlled or sister companies) or have any other economic or associative relationships that might jeopardise his or her independence;
  • they are a trustee of one of the parties; and/or
  • they have already provided advice at an earlier stage of the dispute or have given witness deposition in the same.

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.

See 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:

  • when a dispute subject to arbitration is brought before a court;
  • when an arbitration is pending and a party challenges the validity of the arbitration agreement or the arbitral tribunal's jurisdiction before the court; or
  • when the arbitral award is challenged on grounds of jurisdiction or arbitral agreement validity.

Italian law provides a clear answer for all these cases:

  • when a dispute covered by a valid arbitration agreement is brought before a court, the defendant shall raise the arbitration objection within their statement of defence, failing which the defendant is considered to have waived their right to arbitral jurisdiction with reference to that specific dispute (Article 819 ter of the ICCP);
  • pursuant to Article 819 ter of the ICCP, the parties are forbidden from raising objections as to the validity of the arbitration agreement or the arbitral tribunal’s jurisdiction before a court while the arbitration is pending; and
  • any lack in arbitral tribunal jurisdiction or invalidity of the arbitration agreement is a ground to challenge the award; however, any challenge on these grounds can only be heard by the court insofar as these objections were raised with the first possible defence in the arbitration proceedings. 

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 of the 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:

  • to perform their duties with the required professional diligence;
  • to act independently and not hinder or delay the performance of their tasks;
  • to render the final award timely, within the deadline specifically set for this purpose; and
  • to ensure that the principle of due process and the parties’ rights to be heard are complied with during the entire arbitration proceedings.

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:

  • a need to gather means of evidence or to carry out a technical expert assessment;
  • the removal of arbitrators; and
  • the issuance of partial or interim awards.

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:

  • the names of the arbitrators;
  • the seat of the arbitration;
  • the names of the parties;
  • the arbitration agreement;
  • the parties’ requests for relief;
  • a brief description of the reasoning;
  • the ruling; and
  • the arbitrators' signatures bearing the relevant date.

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:

  • the arbitration agreement was invalid;
  • the arbitrators were not appointed in the manner and form prescribed by the ICCP;
  • the award was rendered by an individual with no legal capacity to act;
  • the award exceeded the limits of the arbitration agreement;
  • the award did not contain the reasoning, the ruling or the arbitrators’ signatures;
  • the award was rendered after the relevant time limit expired;
  • the procedural rules prescribed by the parties under sanction of nullity were not observed in the proceedings and the nullity was not rectified;
  • the award was contrary to another earlier award, which is no longer subject to appeal, or to a previous judgment, which has the force of res judicata between the parties, provided that such award or judgment was filed in the proceedings;
  • the adversarial principle was not observed in the arbitration proceedings;
  • the award closed the proceedings without deciding the merits of the dispute, which should have been decided by the arbitrators;
  • the award contains contradictory provisions;
  • the award did not rule on any of the claims and exceptions made by the parties in accordance with the arbitration agreement; and
  • the award was contrary to public order.

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:

  • the award does not contain the reasoning, the final decision and the signatures of the arbitrators;
  • the award was rendered after the expiry of the time limit;
  • the forms prescribed by the parties under the express sanction of nullity have not been observed in the proceedings and the nullity has not been rectified;
  • the award is contrary to an earlier award which is no longer subject to appeal or to a previous judgment which has the force of res judicata between the parties, provided that evidence of such an award or judgment has been produced in the proceedings;
  • the adversarial principle has not been observed in the arbitration proceedings;
  • the award terminated the proceedings without deciding on those merits of the dispute that should have been decided by the arbitrators; and/or
  • the award contains contradictory provisions.

In these cases, the court can review and decide the merits of the dispute only if:

  • the parties agreed that the court could decide on the merits of the case; or
  • where one of the parties is a foreigner and the parties expressly agreed that the court shall decide on the merits of the case.

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. However, if a proceeding for the set aside of the award is pending, courts are free to decide on a case by case basis whether or not to stay the proceedings.

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 duty not to discuss a judicial proceeding before the judge/arbitrator in charge without the presence of the counterparty’s lawyer; and
  • the duty not to take advantage of any friendship, relationship or closeness with a judge/arbitrator to obtain or request favours, nor to emphasise the existence of such ties.

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.

Legance – Avvocati Associati

Via Broletto, 20, 20121
Milan

Via di San Nicola da Tolentino, 67, 00187
Rome

+39 02 89 63 071 / +39 06 93 18 271

+39 02 896 307 810 / +39 06 931 827 403

sparlatore@legance.it; dgeronzi@legance.it www.legance.com
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Trends and Developments


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LCA Studio Legale is an independent law firm with offices in Italy (Milan, Genoa and Treviso) and in the UAE, where it operates in international partnership with IAA Law Firm. It is active in all main areas of commercial, corporate, banking, finance, restructuring, tax, criminal, real estate and labour and administrative law, and, more generally, in all aspects of business law – including IP, new technologies, transportation, sport, art and food law – and in the protection of family assets. LCA has over 120 professionals who mainly serve corporate and financial clients and work for industrial, financial and insurance groups, investors and banks, as well as SMEs, family businesses and individual entrepreneurs. The firm advises Italian companies in their internationalisation processes, and foreign corporations interested in investing or expanding in Italy, as well as multinational corporations involved in multi-jurisdictional transactions. LCA represents clients in court proceedings, arbitrations and alternative dispute resolution, especially in the areas of corporate and commercial law.

Simplified Arbitration Procedure in the New Milan Chamber of Arbitration’s 2020 Rules

The new rules of arbitration of the Milan Chamber of Arbitration (the "CAM Rules"), the preeminent arbitral institution in Italy, entered into force on 1 July 2020 and are applicable to all proceedings started from that date.

One of the innovations of the CAM Rules is the introduction of a Simplified Arbitration Procedure (Annex D of the CAM Rules), aimed at helping the parties to solve any dispute easily, quickly and at lower costs.

The Simplified Arbitration Procedure applies to:

  • arbitrations in which the value of the claims does not exceed EUR250,000 and unless one party opts-out in the request for arbitration or in the reply to the request for arbitration;
  • all arbitrations, regardless of the value of the claims, if the parties so agree in the arbitration agreement or opt-in by no later than the filing of the reply to the request for arbitration.

The Arbitral Council, upon request of the sole arbitrator or on its own motion before the constitution of the Arbitral Tribunal, may rule that the Simplified Arbitration Procedure is not appropriate because of the complexity of the dispute and that, therefore, the ordinary rules will apply.

The formation of the Arbitral Tribunal and the initial stage

Regardless of the arbitration agreement, the Arbitral Tribunal shall consist of a sole arbitrator, appointed by the Arbitral Council (and not by the parties); the sole arbitrator designated by the Council is automatically confirmed by the Secretariat if no party has filed any comments on the statement of acceptance and independence. Otherwise, the decision on confirmation will be taken by the Arbitral Council.

The Simplified Arbitration Procedure starts with the filing of the introductory submissions (ie, request for arbitration and reply), indicating, inter alia:

  • a statement of the parties’ claims, defences and counterclaims and of their value;
  • a statement of the evidence offered or required to support the parties’ claims and counterclaims, setting forth the facts that each party intends to prove, under penalty of rejection.

Hearings

The parties may submit a supplementary brief which shall not contain new claims, unless otherwise decided by the arbitrator for justified reasons. The arbitrator, upon the request of one of the parties or on its own motion, may schedule a sole hearing for the taking of evidence and the final oral arguments

It is also possible to hold the hearing by videoconference, telephone or similar means of communication, and the hearing may last for several sessions, should the taking of evidence be time-consuming.

The award

The arbitrator shall file the final award with the Secretariat within three months from the constitution of the Arbitral Tribunal. However, the Secretariat may extend this time limit.

Special provisions

Further special provisions aimed at the prompt conclusion of the Simplified Arbitration Procedure are:

  • the duty upon the sole arbitrator, the parties and their counsels to act in an expedited manner;
  • the power of the sole arbitrator, after consultation with the parties, to limit the length and scope of briefs, the number of documents and the number of witnesses;
  • the lapse of the party's right due to the expiration of a time-limit set by the sole arbitrator, unless otherwise determined.

Last but not least, the costs of the Simplified Arbitration Procedure (ie, the fees of the Institution and of the sole arbitrator) are about 30% lower than in ordinary arbitrations. The reduction of the costs intends to make the Simplified Arbitration Procedure more attractive for small and medium-sized companies, which are often parties in low-value disputes.

Disclosure Connected with Third-Party Funding

The third-party litigation funding is in principle admitted under the Italian law.

The CAM has expressly addressed such instrument since the 2019 revision of its rules, acknowledging the interests and the influence that the funder, although not directly involved in the proceedings, might have on its development.

Article 43 of the CAM Rules expressly provides that the party that is funded by a third party in relation to the proceedings and their outcome shall disclose the existence of the third-party funding agreement and the identity of the funder.  The content of the disclosure is limited in first instance. However, the Institution or the Arbitral Tribunal might ask for further information on the agreement.

Such a disclosure shall be repeated along the proceedings in the event of new circumstances so requiring or upon request by the Arbitral Tribunal or the Secretariat.

Third-party funding framework

The framework of the third-party funding in the CAM Rules is now completed by Article 20 of the 2020 revision to the CAM Rules, introducing further requirements for the content of the statement of independence of the arbitrators. Arbitrators are required to disclose any relationship with the parties, their counsels and any other subject involved in the arbitral proceedings also “by virtue of financial relationships”, relevant to their impartiality and independence.

These provisions are set forth in compliance with the principles of independence and transparency which are an inherent characteristic of the procedure, considering the influence that the funder might have over the proceedings. Hence, the Arbitral Institution is required to verify the existence of potential conflicts of interest between the arbitrators and the funder, in line with the rules set forth by other arbitral institutions.

Confidentiality

Even if not specifically addressed by the 2020 CAM Rules, third-party funding has relevant consequences over the confidentiality of the arbitral proceedings and of the award. Indeed, the party funded is obliged to disclose to the funder information and documents concerning the dispute, which might impact on the conduction of the proceedings. The parties of the arbitration should carefully consider extending the obligations of confidentiality on the proceedings to the funder.

Conversely, the party funded is bound to fulfil the disclosure obligation towards the Arbitral Institution pursuant to Article 43 of the CAM Rules, despite any provision of confidentiality included in the litigation funding agreement.

Milan Chamber of Arbitration Statistics on 2020 activity

In February 2021, the Milan Chamber of Arbitration published the statistics on the cases managed in 2020.

  • There were 120 new requests for arbitration, ie, 18% more than in 2019, and 194 hearings, equal to 76.4% of the total, were conducted virtually, in line with international trends in response to the COVID-19 pandemic.
  • The total value of the cases managed by the Milan Chamber of Arbitration was equal to EUR836,129,931.00 and their average value (excluding the four higher and the four lower values) was EUR4,174,105.00. Both figures increased compared to those of 2019.
  • The average duration of the proceedings was 11.5 months, a decrease of 17% compared to 2019 when the average duration of the proceedings was 14 months. As for the outcomes of the cases, 51% of the proceedings were settled and dismissed for withdrawal of the claims, 41% reached the issuance of the award, 7% expired for failure to pay the fees and 1% were declared inadmissible by the Arbitral Council of the CAM.
  • There were 178 arbitrators appointed in 2020, compared to 159, with 87% appointed men and 13% women. This statistic is highly influenced by the appointing authority or party:
    1. among the arbitrators appointed by the parties (47% of the total), only 5% were women;
    2. among the arbitrators appointed by the Arbitral Council (39% of the total), 26% were women;
    3. there were no women among the arbitrators appointed by the other members of the Arbitral Tribunal (9% of the total); and
    4. among the arbitrators appointed by the President of the Milan Chamber of Arbitration (3% of the total), 20% were women.

The Arbitral Tribunal

Other data concerning the diversity in the composition of the Arbitral Tribunals is not available, except for the provenience of the arbitrators appointed in 2020: they were all Italian except four French, two Swiss, one Austrian, one Australian and one from the USA. For the purpose of comparison, in 2019 arbitrators appointed included three French, two Austrian, one Spanish, one Serbian and one Swiss.

The Arbitral Tribunal was formed by a single arbitrator in 41.7% of cases and by a panel of arbitrators in the remaining 58.3% of cases.

The parties were from Italy (93%), extra-EU countries like China, India, Indonesia, Monaco, Namibia, Norway, USA, Switzerland, and Thailand (4%) and EU countries like Belgium, France, Germany, Luxembourg, Malta, United Kingdom and Czech Republic (3%).

The prevailing subject matter is the corporate sector (48%), followed by contracts (9%) and lease, sale and transfer of business units (7.5%).

Ad hoc arbitration

Beside institutional arbitration, Italy has a strong tradition of ad hoc arbitration. There are no statistics on this as ad hoc arbitration is a private dispute settlement instrument.

Recent Court Cases

Decision of the Court of Appeal of Milan on 8 June 2021 No 1790

In a recent ruling, the Court of Appeal of Milan declared void an award issued by an Arbitral Tribunal and asserted its power to decide the merits of the case.

The dispute

The dispute involved an Italian company, which contracted a German company to supply and instal wind turbines for an electric production plant. Both the parties and the American parent company of the contractor signed the contract. The Italian company paid an advance payment to the contractor, which in turn provided an advance payment bond. The contract was thereafter amended because the Italian employer had not obtained the necessary financing for the project. Meanwhile, however, the contractor had delivered part of the works.

A dispute arose and the Italian company commenced arbitral proceedings under the CAM Rules against both the German contractor and its American parent company.

The arbitral proceedings

During the arbitral proceedings a partial award was issued, in which the Tribunal found that the parties had put the contract on hold, until a financing of the project would be found and that later, once it had become clear that no financing would be granted, the parties had abandoned the project. Each of the parties had alleged that the other had breached the agreement, but the arbitral tribunal held that the contract had to be considered terminated because the condition precedent consisting in the realisation of the project financing had not been fulfilled. Therefore, the tribunal held that neither party was entitled to damages but rather that, because of the retroactive effect of the termination of the contract, the contractor was entitled to a payment for the works delivered and ordered that the arbitral proceedings be continued to determine the relevant amount.

The partial award was unsuccessfully appealed and became final. Thereafter, the arbitration proceedings were resumed, and, after a successful challenge of the Chairman of the Arbitral Tribunal and his substitution, the Tribunal issued a final award.

The final award was appealed by the respondent before the Court of Appeal of Milan, claiming it was inconsistent with the partial award. While the partial award had stated the retroactive effect of the termination of the contract and the right of the contractor to be reimbursed for the costs incurred only, in the final award the Tribunal had held that the contract had excluded the retroactive effect of the termination, regulating the consequences of the termination in the case of unfulfillment of the condition precedent.

The findings of the Court of Appeal

The Court of Appeal upheld the argument of the respondent, also relying on the dissenting opinion of the only Italian member of the Arbitral Tribunal, that after the issuance of the partial award, the Tribunal should have limited its decision to the calculation of the costs to be reimbursed to the contractor because of the termination and not to the re-examination of the effects of the termination. The inconsistency between the partial award and the final award made the reasoning of the Tribunal unclear, hence the Court declared the final award void.

In addition, the Court held its was entitled to decide on the merits of the case, because the arbitration was not to be considered an international arbitration under Italian law, pursuant to Article 830 of the Italian Civil Procedure Code. According to this provision, if one of the parties, at the date of signature of the arbitration agreement, resides or has its actual seat abroad, the Court of Appeal is allowed to decide the dispute on the merits only if the parties have so agreed in the arbitration agreement or if they so request.

However, the Milan Court of Appeal found that:

  • one of the respondents had an Italian branch, with a representative vested with all the powers for the ordinary management of the company;
  • the two respondents had appeared in the proceedings as a sole party; and
  • the final award was issued against both of them, as a sole “centre of interests”.

Therefore, the Court of Appeal excluded the international nature of the arbitration and held it was allowed to decide the merits of the case.

Decision of the Supreme Court, unified divisions, on 30 March 2021 No 8776

In Italy, a party wishing to challenge an arbitral award must commence proceedings in the court at the seat of the arbitration within 90 days of service of the award (Article 828, paragraph 1 of the Code of Civil Procedure). If the award is not formally served on the parties, the relevant deadline is one year from the latest signature of the arbitrators (Article 828, paragraph 2). In the captioned decision, the Supreme Court confirmed the validity of such latter provision.

The dispute

The dispute in question related to a decision of the Court of Appeal of Bologna, which declared that the appeal against an arbitration award was inadmissible because it was submitted after the expiration of the one-year time limit. The party which had filed the appeal brought the case before the Supreme Court, contending that the provision under exam is in breach of the principles of equality, rights of defence and due process set forth by the Italian Constitution, because the actual moment of the signature of the award could be unknown to the parties. Indeed, Articles 823 and 824 of the Code of Civil Procedure do not provide for any form of publication of the award, unlike court decisions.

The court reasoning

The Supreme Court, however, confirmed the decision of the Court of Appeal, on the basis of the following reasoning:

  • the wording of Article 828, paragraph 2 of the Italian Code of Civil Procedure is clear;
  • the provision setting forth the one-year deadline for challenging an award has its rationale in the fact that since its signature by the arbitrators, the award has the same effects and authority of a judgment pronounced by a court;
  • the provision is consistent with the general framework of the rules governing arbitration; and
  • the unreasonable consequence of allowing that the time limit for appealing against an award runs from the time when it is communicated to the parties is that, in the absence of service, the time limit would never run.
LCA Studio Legale

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