Litigation 2021

Last Updated June 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 with 84 lawyers, Legance currently employs more than 280 legal professionals. The firm is regarded as a pillar that amplifies each individual’s qualities and skills. The constant attention to clients, the careful evaluation of business objectives and an unconventional approach capable of anticipating legal requirements, as well as 24-hour availability have contributed to establishing Legance as a recognised leader in domestic and international markets. Due to its strong international practice, Legance can support clients over several geographical areas, and can organise and co-ordinate multi-jurisdictional teams whenever required.

The Italian legal system is based upon the Roman legal tradition, thus a civil law system.

Italian civil courts follow a model which cannot be considered as purely adversarial, nor purely inquisitorial, but rather a mixed one. Italian judges do not play a strong, active role in civil proceedings and parties are free to introduce their claims in the manner, and to the limits, they deem fit – unless public interests are involved, in which case the Public Prosecutor is also allowed to submit a civil claim – and the judge is then bound by these limits.

The mixed nature of the procedural model can also be seen in the taking of evidence phase, where, as a general rule, the burden to submit the evidence which is necessary to support their claims lies entirely upon the parties. Unlike in purely civil and commercial matters, in labour law proceedings, the rules governing the taking of evidence follow more of an inquisitorial model, where the judge has broader discretion in acquiring evidence on their own motion. 

According to the Italian civil procedural rules, civil cases are dealt with primarily through the exchange of written submissions and oral discussion during public hearings.

The Italian Constitution provides for an autonomous and independent judiciary, which is formed by ordinary (full-time) judges and honorary judges.

The Italian civil judiciary system is divided into: Courts of First Instance, Courts of Appeal and the Supreme Court.

All civil courts are national courts. Courts of First Instance and Courts of Appeal are located in court districts through the entire Italian territory; the Supreme Court has a sole location in Rome. The jurisdiction of Courts of First Instance is selected on the basis of the Italian civil procedural law criteria for the selection of territorial jurisdiction.

Courts of First Instance

Courts of First Instance are split into small claim courts (giudici di pace) and District Courts (Tribunali).

Honorary judges preside over small claim courts. Their jurisdiction is limited to minor claims over specific matters (eg, claims on real estate boundaries or minor rental and co-habitation disputes) and claims which have a value up to EUR5,000. In the case of claims relating to damage caused by motor vehicles or boats, the maximum claim value is up to EUR20,000. Starting from 2021, these threshold claim values will be increased to EUR30,000 and EUR50,000, respectively.

District Courts are presided over by ordinary judges. All the claims which do not fall within the jurisdiction of lower courts are to be dealt with before District Courts. Depending on the complexity of the matter discussed, judges in District Courts sit either solo or as a panel of three.

Courts of Appeal

Judgments rendered by lower courts are appealed before District Courts. Judgments rendered by District Courts are appealed before the Courts of Appeal. Court of Appeal judgments are appealed, solely under a limited number of procedural grounds, before the Supreme Court.

Supreme Court

The Supreme Court (Corte Suprema di Cassazione) is the highest appellate court in Italy. Its main task is to protect the correct and uniform application of the law, thus the focus of Supreme Court review is the lawful application of law.

Special Judges and Other Courts

The establishment of extraordinary or special judges is forbidden by the Italian Constitution. Nevertheless, within the ordinary jurisdictional bodies specialised divisions dealing with specific matters have been established (eg, labour or family law divisions; or enterprises divisions (Tribunali delle Imprese) which were established in 2012 with jurisdiction over certain corporate claims and intellectual property rights).

Administrative Courts – having jurisdiction over claims between citizens and public entities – are split between Administrative Regional Courts (Tribunale Amministrativo Regionale) and the Administrative Appellate Court (Consiglio di Stato).       

The Constitutional Court only deals with matters concerning breaches of the Italian Constitution and the compliance of ordinary laws and regulation with the Constitution.

Court filings, judgments and proceedings, in general, are open to the public. The public can therefore apply to have access to documents which are deposited within the court clerk's office. Court hearings are similarly public as a general rule. Further, when the public disclosure of a judgment can amount to the reparation of damage, the court can order that the judgment is published on websites and/or in newspapers.

Upon a specific interest to preserve confidentiality or secrets, however, parties can request that the court render an order to secure confidentiality and protect proceedings or particular documents from public disclosure.

Rules on data protection and privacy govern the treatment of parties' data enclosed in court filings. Parties are allowed, at any time, to request that the court conceal their names and personal data before the issuance of a judgment.

As a general rule, only attorneys admitted to practice in Italy can represent parties and attend hearings before Italian courts; with the sole exception of small claims courts for claims up to a value of EUR5,000, where parties can attend in person, without the need of attorney representation. Representation before the Supreme Court is reserved to a limited number of authorised senior attorneys.

Also, in application of a European directive, lawyers who are admitted to practice in another EU member state are allowed to appear before Italian courts along with an Italian attorney. In order to do so, the foreign lawyer has to be registered in the national bar registry as an avvocato stabilito. In order to appear before the Italian Supreme Court, the avvocato stabilito is also requested to prove that they have at least 12 years of experience.

There are no specific rules governing third-party funding in Italy. While third-party funding is attracting more and more Italian companies involved in international litigation and arbitration proceedings, it is still under debate whether third-party funding agreements, as conceived of in common law jurisdictions, could be so construed under Italian law and fully enforceable in our jurisdiction.

Not applicable, see 2.1 Third-Party Litigation Funding.

Not applicable, see 2.1 Third-Party Litigation Funding.

Not applicable, see 2.1 Third-Party Litigation Funding.

Not applicable, see 2.1 Third-Party Litigation Funding.

Not applicable, see 2.1 Third-Party Litigation Funding.

Not applicable, see 2.1 Third-Party Litigation Funding.

Italian law imposes mandatory mediation before allowing the initiation of court proceeding in a number of matters:

  • condominium;
  • property rights (including usufruct, mortgage, pledge and the right to live in a house);
  • division of joint properties;
  • inheritance;
  • agreements made by the owner of a company or a business to transfer their shares in the company, or the entire business, to one or more of their heirs (patti di famiglia);
  • lease claims including business lease agreements;
  • tort claims deriving from medical and health liability, or defamation perpetrated through the media or other public means; and
  • insurance, financial and bank contracts.        

If the parties fail to comply with the mandatory mediation requirement the judge will defer the hearing to allow them to perform mediation first. Moreover, if a party refuses to take part in the mediation process, without any justification, the judge can take this behaviour into account and infer circumstantial evidence from it. This conduct can also be sanctioned by the judge by ordering the abstaining party to pay a fine equal to the upfront court tax (contributo unificato).

Since 2014, in disputes related to damages arising from motor vehicles or boats, and in all monetary claims for a value up to EUR50,000, the plaintiff has been required to first attempt to settle the claim through assisted negotiation (negoziazione assistita).

In all other matters there is no pre-action conduct required.

The ordinary statute of limitations for civil lawsuits is ten years, starting from the day on which the right can be exercised. The law establishes a shorter statute of limitations for tort claims, which is five years starting from the day on which the unlawful fact occurred.

Shorter statutes of limitations of one or two years are also provided by Italian civil law in further specific cases, such as for claims related to insurance agreements, or claims for payment of amounts due in instalments or related to specific contracts.

Under Italian law, statutes of limitations are interrupted by the filing of the initial complaint; also, upon the occurrence of certain events, statutes of limitations are stayed for a specific period of time. In the case of an interruption as a consequence of the filing of the initial complaint, the statute of limitations will start to run again upon the issuance of the final judgment.

As a general rule, Italian courts have jurisdiction over individuals and entities who are resident or domiciled in Italy, or when they have a legal representative in Italy with the authority to appear in court. Italian courts' jurisdiction is denied in cases of claims involving immovable assets located outside the Italian territory. Further, all jurisdiction criteria provided for by the Brussel I recast EU Regulation apply to Italian courts. 

Italian courts also have jurisdiction if the parties have mutually agreed to submit their lawsuit to the jurisdiction of the Italian courts and in cases where the defendant appears before an Italian court without challenging the relevant jurisdiction.

Legal proceedings before the Italian court are generally commenced by the plaintiff serving upon the defendant a writ of summons (atto di citazione). The main content of the writ of summons is the following:

  • the mention of the competent court;
  • the parties’ and the relevant legal representatives' personal data (necessary to identify them);
  • a description of the claims raised;
  • a complete explanation of the facts from which the dispute has arisen and the legal reasons supporting the claims;
  • a list of the forms of evidence and of the documents offered by the plaintiff; and
  • the summons to the defendant to appear before the court, on a specified date, for the first hearing; with the warning that a full defence must be offered by filing the statement of defence no later than 20 days in advance of that hearing date.

Once the writ of summons is served upon the defendant, the plaintiff shall file it with the court and the proceedings are commenced.

The Initial Complaint

The plaintiff cannot amend the initial complaint once filed, but only supplement it within certain boundaries. In particular, the claims raised in the writ of summons cannot be substantially amended, nor supplemented with new claims after the writ of summons; rather, they can only be clarified, or better detailed, within the first defensive brief following the first hearing. Forms of evidence and supporting documents can be supplemented and added to, up to the second written defensive brief the parties are allowed to file after the first hearing. After this time limit expires, the plaintiff has the right to present new evidence only in reply to the counterparty's evidence and it was not available before, provided that the court will ascertain that that justification is grounded.

The same conditions apply, mutatis mutandis, to the defendant; to the objections, arguments and counterclaims raised in the statement of defence; and to the evidence supporting them.

In certain proceedings the initial complaint is slightly different and is made through an application which is first filed with the court, for the court to schedule the first hearing. Once the first hearing is scheduled, the plaintiff will perform service of process upon the defendant with the application and the court order scheduling the first hearing.

The procedure to inform the defendants that they have been sued is to serve them with the initial complaint (writ of summons, see 3.4 Initial Complaint). Generally, service of process is the responsibility of the plaintiff and is performed either by the court's process server officers (upon the plaintiff’s instructions), or by the plaintiff’s lawyer, if authorised to do so.

Service of process within the Italian territory can be performed by hand delivery, delivery via postal service, or delivery via certified electronic mail (solely upon defendants, such as companies, who are provided with a certified electronic mail address). Lawyers can perform service of process only via postal services or certified electronic mail.

Specific rules apply where defendants cannot be located or are located outside the Italian territory.

As far as service of process abroad is concerned, the Italian system follows the rules provided for service of process by the relevant EU regulations or by relevant international conventions (eg, The Hague Conventions of 1954 and of 1965). As a residual means of service of process, service upon a defendant domiciled or resident outside Italy can be carried out through registered letter with acknowledgment of receipt (raccomandata con ricevuta di ritorno) and by delivering a copy of the initial complaint to the Public Prosecutor's office which shall take care of the transmission to the Foreign Office of the defendant's country.

In the event a defendant, duly served with the initial complaint, does not respond to a lawsuit and fails to appear at the first hearing, the court will declare that the defendant is in absentia (contumacia), provided that no irregularity in the service occurred. In the event service of process was not performed properly, the court orders the service of process to be performed again, and schedules a new first hearing. If the defendant fails to appear at the second hearing, then the court will decide the case in absentia.

The defendant is allowed to appear until the final hearing and keeps the right to reply to the plaintiff’s claims. However, the declaration of absentia entails the inability to file counterclaims and to raise objections (both procedural and substantial) which cannot be raised by the court of its own motion. If the defendant appears in the proceedings and proves that it couldn’t have appeared before because of irregularities in the service of process, the defendant will be allowed to produce evidence even beyond the expiration of the evidentiary time limits.

Class actions have been introduced into the Italian legal system for the first time in 2010 and are regulated by Article 140 bis of the Consumer Code. According to such law, consumers or end users, having homogenous collective or individual interests, may bring claims against companies or public organisations in order to obtain a declaration of liability and an order for damage compensation and restitution. Class actions may be brought also through associations or committees registered in a public list held by the Ministry of Justice.

In Italy, consumer class actions are provided on an opt-in basis: consumers who have interests similar to those of the plaintiffs are entitled to join the class action within a mandatory deadline which is, at the most, 120 days from the filing of the initial application.

It is important to highlight that, at the time of writing, the provisions currently governing class actions will soon be replaced. The new Articles 840 bis to 840 sexies of the Italian Code of Civil Procedure, setting forth the new provisions governing class action, will enter into force on 19 November 2020. The main changes introduced by the new provisions include the following:

  • not only consumers and users shall be entitled to bring class actions but also persons having "homogenous individual rights";
  • faster summary proceedings shall apply to class actions;
  • other members of the class shall be entitled to join the class action either after the publication of the initial application or after the publication of the judgement on the merits. In both cases, the deadline set by the court will be between 60 and 150 days.

According to Italian law, lawyers must provide the client with a cost estimate encompassing all the fees and expenses (depending on the complexity of the claim) which can be foreseen at the time of the engagement. If requested to do so by the client, the lawyer shall also provide the above cost estimate in written form, detailing the expected legal fees, litigation expenses and any other costs.

The Italian legal system does not provide for a pre-trial phase per se in the context of a civil lawsuit. However, each party can ask the judge to grant precautionary measures, before the discussion of the merits of the case, whenever the expected duration of the process is likely to prove detrimental to its rights.

In some cases, specifically provided for by the law, some parts of a civil dispute can be decided by means of an early judgment which can be either final or non-final. For instance, according to the Italian civil procedural law, early judgments can be issued on single claims or parts of a claim when they are severable, or a single part of a claim. Early judgment for a general order of payment or liability, leaving the quantification of that payment or liability for a second phase is also possible. Also, Italian courts can issue early judgment for an order of payment regarding unchallenged amounts due, or for injunctive relief in respect of the specific payment of delivery obligations.

Under the Italian Code of Civil Procedure, a party cannot, under any circumstances, apply for the other party’s case to be struck-out before the substantive hearing of the claim has been held.

In the Italian legal system, there are no dispositive motions that are commonly raised before trial.

There are multiple ways for a party, which is not named as plaintiff or defendant in the initial complaint but nevertheless has a material interest in the dispute, to join the lawsuit.

The Italian Code of Civil Procedure provides for three different cases of voluntary joinder of an interested third party in a civil lawsuit:

  • the intervento litisconsortile, by which the interested party can claim a right, which is related to and dependent on the subject of the dispute, towards only some of the parties;
  • the intervento principale, by which the interested party can claim a right, which is related to and dependent on the subject of the dispute, towards all the parties; and
  • the intervento adesivo (ad adiuvandum intervention), whereby the party joins the lawsuit only to support the allegation of another party, with no autonomous interests.

In all these cases the third-party joinder can be performed until the final hearing.

In addition, a third party can be also summoned to the proceeding by one of the parties (due to a general connection of the position of the third party to the matter in dispute or in light of a warranty relationship), or by the judge.

Applications for security for costs are not expressly provided for by the Italian Code of Civil Procedure.

See 4.1 Interim Applications/Motions.

See 4.1 Interim Applications/Motions.

Discovery is not provided in Italian civil proceedings. Nevertheless, under Italian law, upon the request of either party to the proceedings, the judge can order each party, or a third party, to produce one or more specific documents (a so-called exhibition order), provided that they are identified in detail by the requesting party and that they are relevant to the dispute.

See 5.1 Discovery and Civil Cases.

When ordering the submission of a document from a third party, the judge has to weigh the interests of the proceeding against the rights of the requested third party.

In the event that the requested third party does not comply with the exhibition order, and this is without justification, the judge can charge them with a fine (ranging between EUR250-1,500).

No information has been provided for this jurisdiction.

The evidence gathering in Italian civil proceedings is managed differently depending on the forms of evidence in question.

As a general rule, parties are responsible for filing and gathering all forms of evidence that they wish to present to support their case, whereas the judge does not have, in principle, investigatory powers (see 1.1 General Characteristics of the Legal System). Nevertheless, the judge retains some discretion in requiring the production of documents from the public administration and to seek clarifications from witnesses and parties’ representatives.

As far as documentary evidence is concerned, documents do not require any particular form in order to be filed with the Court; parties shall only have to file documentary evidence within the time limits provided for evidentiary allegations.

Any other forms of evidence (the hearing of factual witnesses, expert reports, document production, inspection, formal examination of party representatives) shall be authorised by the court before being included in the case file. To do this, the parties shall raise their evidentiary requests within the deadline set forth for this purpose by the Code of Civil Procedure and afterwards, a hearing will be scheduled for the judge to assess and decide upon these evidentiary requests. Afterwards, the judge will also set the procedural calendar for the evidence gathering phase.

Attorney-client legal privilege in Italy is a confidentiality rule that covers all information, correspondence and documents exchanged between a party and its lawyers, to the extent that they are related to the proceedings and the relevant engagement. According to the legal privilege rules, a lawyer is authorised to refuse to comply with a court order – to produce specific documents or to provide answers to a witness examination – when it concerns documents or information covered by legal privilege (see 5.2 Discovery and Third Parties).

Attorney-client legal privilege applies only to lawyers enrolled in the bar registry, not to in-house counsel. 

Under Italian law, legal privilege also covers correspondence exchanged between parties’ counsel, and correspondence and documents concerning settlement negotiations.

When discussing legal privilege, however, it must be taken into account that the Italian system does not provide for the common law concept of “privilege”, pursuant to which privileged documents can never be presented in court. Italian legal privilege rules only bind attorneys; therefore, as a general rule, legal privilege is not enforceable toward a third party in possession of a privileged document.

Where documents are not covered by attorney-client legal privilege (see 5.5 Legal Privilege) or by any legal secret, a party cannot refuse to disclose them, if ordered to do so by the court. Not complying with this order means that the judge is allowed to infer elements of proof from this behaviour. Regarding the consequence for a non-complying third party, see 5.2 Discovery and Third Parties.

The Italian Code of Civil Procedure provides for different ways to obtain injunctive relief. It sets forth the misure di istruzione preventiva, aimed at granting the early acquisition of evidence and, by doing so, ensuring the fundamental right to evidence belonging to each party in a proceeding.

Italian law provides for several types of typical and atypical precautionary procedure, all commonly intended to protect the plaintiff’s claims from any damages that may arise from the duration of the ordinary proceedings on the merits. Further, Italian law provides for two different forms of seizure:

  • judicial seizure – aimed at seizing the asset, which is the object of the dispute over the title of ownership, and at granting custody to a neutral third party; and
  • conservative seizure – aimed at freezing all or part of the debtor’s rights and assets in order to ensure the satisfaction of the credit claim of the plaintiff.

Among the atypical measures, mention must be made of the provision set forth by Article 700 of Italian Code of Civil Procedure, which allows the judge to grant any urgent precautionary protection of the applicant's case and right to evidence by ordering any measures, the contents of which are discretionary and decided from time to time by the judge in light of the circumstances of the case.

Aside from the above, Italian law does not provide for injunctive relief for preventing parallel proceedings in another jurisdiction; rather, this matter is regulated by the applicable legal provisions on lis pendens.

The time needed for a precautionary measure to be granted by the judge is extremely variable and is influenced by several factors: the caseload of the competent court, the danger of delay and the likelihood of the application’s success (periculum in mora and fumus boni iuris), the degree of urgency of the application and the complexity of the main dispute.

The Italian legal system does not provide for “out of hours” judicial service; all disputes are therefore discussed and decided only during ordinary working hours.

According to the provision set forth by Article 669 sexies, paragraph 2 of the Italian Code of Civil Procedure, a precautionary measure can be obtained on an ex parte basis whenever the summoning of the defendant might damage the execution of the precautionary measure. However, even in this case, the judge is still required to schedule a hearing of the parties within the following 15 days at the latest and the applicant must perform service of process upon the defendant within a compulsory deadline of eight days. At this hearing, the measure granted ex parte can be confirmed, modified or revoked.

The applicant can be held liable, under the provision set forth by Article 96, paragraph 2 of Italian Code of Civil Procedure, when the applicant, acting without the due professional diligence required, obtains and execute a precautionary measure related to a right that, after the final judgment, is decided to be non-existent or ungrounded.

Pursuant to Article 669 undecies of the Italian Code of Civil Procedure, the judge can impose a security upon the plaintiff in connection with the possible damages related to the execution of the precautionary measure.

Generally speaking, injunctive relief over the defendant's assets, such as seizure orders, are not ordered with regard to single assets, but rather with regard to all the assets of the defendant party, up to a specific seized amount, irrespective of where they are located. As a consequence, for this type of injunctive relief to be enforced abroad, the relevant court order should be first recognised and enforced in the state where the relevant assets are located.

Only in a very few, and exceptional, cases can injunctive relief be obtained against third parties. More precisely, seizure orders can be enforced against third parties, but only in respect of goods and assets belonging to the defendant, and not the third party itself.

The potential consequences of a respondent’s non-compliance are regulated by Article 388 of the Italian Criminal Code, according to which the breach of a judicial order is punishable with the penalty of imprisonment for up to three years or with a fine from EUR103 to EUR1,032.

Civil proceedings in Italy are conducted mainly through the exchange of written pleadings. However, in complex cases, or when many evidentiary requests are raised, the evidence gathering phase may take place through a number of oral hearings, as per the procedural calendar which shall be ordered by the judge.

As a general rule, Italian civil proceedings are structured as follows:

  • before the first hearing the plaintiff serves the writ of summons providing a first description of the claims, and the defendant (if duly served) submits its full statement of defence;
  • at the first hearing the judge assesses and resolves any preliminary and procedural issues, in the event that one (or more) procedural requirements is not met, the first hearing is rescheduled, and the parties are ordered to rectify and procedural gaps;
  • upon the request of at least one party, the judge grants a new exchange of three defensive briefs where both parties shall raise all evidentiary requests and put forward all of their allegation and objections;
  • a further hearing follows for the judge to render a decision on the evidence requests filed by the parties, on this occasion the judge may also decide, on his or her own motion, to appoint a court-appointed expert to assist him or her in technical determinations;
  • if any evidence request is upheld, the judge schedules further hearings for the evidence gathering (see 7.5 Expert Testimony);
  • at the end of the evidence gathering phase the judge sets the final hearing where the parties summarise their conclusions, in this hearing the parties are prevented from introducing new facts, although they can raise new legal reasons to prove their claims; and
  • finally, a double round of written conclusive briefs takes place before the judge reserves the case for the issuance of the final judgment.

Italian civil procedural law does not provide for pre-defined case management hearings in civil proceedings. Usually, case management decisions are taken by the judge at any hearing, depending on the specific needs of the particular case. When there are numerous evidentiary requests, the hearing scheduled for the admission of evidence requests is also dedicated to the definition of the procedural calendar for the evidence gathering phase.

There are no juries in Italian civil proceedings.

The rules governing the admission of evidence vary depending on the forms of evidence considered.

Parties are freely allowed to submit any documentary evidence they deem fit, and there are no specific rules for their admission; apart from legal privilege, trade secrecy and the evidentiary time limits to be complied with.

Witness testimony shall be requested by a party by identifying the witness offered, and detailing each of the questions that the party wishes to raise to that witness. In this respect it is important to highlight that under Italian law only leading questions can be raised to witnesses (the traditional formula being “Is it true that…”) and they cannot concern negative circumstances. Witness examination is rendered under oath, and it is governed by the judge while parties’ lawyers, as a general rule, cannot raise questions directly to the witness.

Each party has the right to request the formal examination of the other party in order to obtain a confession. As with witness testimony, the judge can admit this examination to the extent that it relates to specific circumstances which are relevant to the decision; such circumstances must be indicated by the requesting party. The formal examination, if admitted, is always conducted by the judge.

The judge has the power to order the parties, or a third party, to produce documents which are considered to be relevant to the proceedings (see 5 Discovery).

See 5.4 Alternatives to Discovery Mechanisms for the rules governing the admission of evidence.

In Italian civil proceedings expert testimony is traditionally rendered through a court-appointed expert (consulente tecnico d’ufficio). Parties can file expert reports as documentary evidence, but they are not granted the same evidentiary value as those in common law jurisdictions are. When, instead, a court-appointed expert is appointed by the judge, each party can appoint its own expert who shall attend the expert meetings and investigations and who shall render comments on the draft expert report to be filed by the court-appointed expert with the court.

Following the filing of the expert report with the court, the court-appointed expert can be heard by the judge for clarification or for supplementary investigation.

As a rule, hearings are public. The hearing records, which are not a verbatim transcription, are enclosed in the judge’s order and, upon a specific request, can be accessed by the public.

The main role of the judge in civil trials is to govern the proceedings, to evaluate and weigh the evidence offered, assess its admissibility and relevance to the case. The judge has also some discretion to further investigate the evidence offered and to request further evidence. 

Judgments are seldom rendered directly at the hearing. The general rule is that the final judgment is issued following the final hearing and the final two rounds of conclusive written briefs. However, upon a party's request, or even on his or her own motion, a judge can decide to issue the final judgment orally after the oral discussion of the case.

Any decisions other than the final judgment, can be delivered at any time – during a hearing or outside a hearing – with an order which is notified to the parties by the court clerk's office.

The duration of legal proceedings is very much dependent on the workload capacity of the relevant court, since there can be an appreciable difference, in terms of lengthiness, among the various Italian courts. On average, before the most efficient courts, legal proceedings encompassing a standard taking of evidence phase can last around one to two years in the first instance, and around two to three years for the appeal proceedings. Ordinary proceedings before the Supreme Court last, on average, around three years.

The Italian legal system and the Italian Code of Civil Procedure allow parties to settle any lawsuit without court approval.

The settlement negotiation correspondence is confidential under the Italian Lawyers Bar Code of Ethics. Furthermore, settlement agreements have traditionally included confidentiality clauses, which are enforceable under Italian law.

Settlement agreements are enforceable contracts. Therefore, enforcement is primarily granted through the co-operation of the parties; when such co-operation is lacking and one party is in breach, the other party must activate the relevant dispute resolution clause as provided in the settlement agreement or commence ordinary court proceedings, as the case may be, or it may also proceed for direct enforcement, depending on the contents of the settlement agreement.

A settlement agreement can be set aside in a number of cases set forth by the applicable provisions of the Italian Civil Code including, but not limited to, cases in which:

  • the parties did not have the capacity to dispose of the rights under the settlement or when those rights were not legally disposable by the parties;
  • one of the parties acted in bad faith in signing the agreement;
  • the settlement concerns a void contract;
  • the settlement is based on false documents;
  • the relationship that is the subject of the agreement is regulated by a previous judgment issued by a court of which the parties were not aware; or
  • one of the parties fails to comply with a material provision of the settlement agreement.

The awards available to a successful litigant are divided into the following three main categories:

  • an award ascertaining the existence of the right claimed by the plaintiff and their entitlement to it;
  • an award ascertaining the existence of a breach and ordering a party to perform, or not to perform, an action, or to pay a certain amount of money; and
  • an award creating, modifying or extinguishing a right, interest or legal position.

The compensation of damages can derive from breach of a contract or a tort.

Damage compensation for contractual liability:

  • must cover the actual loss and the loss of profit, if these losses are directly consequential to the breach of contractual obligation;
  • is quantified ex aequo et bono by the judge, if it is impossible to assess a specific damage figure; and
  • is limited to foreseeable damages when the liability is based on negligence.

The compensation for tort liability is limited to the direct economic damage. In certain specific circumstances, Italian law also allows compensation for non-economic (moral) damage.

Punitive damages are not provided by Italian civil law. Nevertheless, for commencing a judicial action in bad faith or defending a judicial action in bad faith, the judge can order the losing party to pay damages, even in the absence of a party’s request, up to an amount that can be discretionally assessed by the judge.

Claims for payment of amounts of money which are immediately collectable accrue default interest at a legal interest rate, which applies starting from the day after which payment is due, and until the day of payment. Default legal interest also accrues after a judgment is rendered, at the same interest rate. The legal interest rate is established each year by the Ministry of Economics and Finance; this rate applies unless the parties have agreed otherwise.

A specific and higher legal interest rate applies during judicial proceedings and in relation to commercial claims. 

The winning party has the right to start enforcement proceedings (esecuzione forzata) if the losing party refuses or fails to comply voluntarily with the judgment. These enforcement measures include:

  • attachment over movable or immovable assets, or over third-party claims or bank accounts; and
  • specific means of enforcement of an obligation to perform or to act, including the possibility of having a substitute perform the debtor’s obligation and the debtor paying the cost for performance.

Unless a specific convention is in force between Italy and the state where the foreign judgment has been rendered, Article 64 of the Law No 128 of 1995 applies. According to Italian law, foreign judgments are automatically recognised in Italy provided that the following requirements are met:

  • the foreign court had jurisdiction, according to Italian civil procedural law;
  • the writ of summons was served in compliance with the applicable foreign law and the fundamental rights;
  • the parties appeared before the foreign court in accordance with that country’s procedural rules, or – in cases of absentia – the declaration of absentia was rendered pursuant to the applicable procedural rules;
  • the judgment cannot be challenged anymore before an ordinary appellate court according to the foreign procedural rules;
  • the judgment is not inconsistent with a judgment rendered by an Italian court;
  • there are no proceedings between the same parties and relating to the same matter pending before an Italian court and commenced before the foreign proceedings; and
  • the foreign decision is not contrary to Italian public policy.

In order to be enforced, the Court of Appeal (of the district where the foreign judgment has to be enforced) has to deliver a judgment in which it ascertains whether the aforementioned requirements are met. The judgment can be appealed before the Supreme Court.

The Italian legal system provides for various mechanisms ensuring a full review of judgments of first instance.

All decisions rendered by the Courts of First Instance can be appealed before the Courts of Appeal (save for decisions issued ex aequo et bono pursuant to Article 114 of the Italian Code of Civil Procedure and cases of revisio per saltum according to Article 360 of the Italian Code of Civil Procedure).

Decisions by the Courts of Appeal, unique level judgments and, in general, all decisions other than formal judgments, which nevertheless decide on subjective rights and are not otherwise subject to review, can be challenged before the Supreme Court.

Any decisions of first instance or appeal, under certain limited extraordinary circumstances (including, but not limited to, the case in which the decision is the consequence of fraud of one of the parties; the case in which the decision is issued on the basis of false evidence or the case in which the decision is the consequence of factual errors) are also subject to revocation and third-party opposition, as the case may be.

Decisions concerning procedural issues of jurisdiction and competence can be challenged separately in this respect before the Supreme Court with an ad hoc challenge.

Appeal against first instance judgments is always allowed, save for a few exceptions expressly provided by the law. The fundamental requirement for successfully filing an appeal is that the appealing party is the total or partial loser in the judgment of first instance and that the appeal complaint identifies the sections of the first instance judgment that are challenged. The appeal shall also overcome an admissibility test whereby the Court of Appeal, at the first hearing, can dismiss appeals if they do not have any reasonable prospect of success.

The procedure for appealing a decision of first instance is regulated by the applicable provisions set forth by the Italian Code of Civil Procedure under Articles 339 et seq.

The term for filing an appeal is two-fold: if the decision of first instance was served by the winning party, the losing party has a short term of 30 days from the service to appeal; if the first instance judgment was not served, the losing party can appeal within the longer term of six months, starting from the date of issuance of the judgment.

Under Italian law the appeal consists of an impugnazione devolutiva, which means that the object of the appeal is not a mere review of the judgment of first instance, but rather a complete review of the proceedings and the rendering of a new decision in the dispute. However, this feature of the appeal is not without limits: indeed, in light of the prohibition on filing new forms of evidence, the review of the dispute is limited to the issues expressly brought before the Court of Appeal and it is forbidden for the parties to introduce new elements not already introduced and discussed during the judgment of first instance.

Courts cannot impose any conditions on the granting of an appeal.

Upon the filing of an appeal against a first instance judgment, the court can either reject the appeal (on procedural reasons or on the merits) or grant it. In this second instance, the decision issued by the Court of Appeal fully replaces the decision of first instance, save for a few cases in which the judgment of the Court of Appeal sets aside the judgment of first instance and return the parties and the dispute to the first instance judge for a new decision (appello rescindente).

In exceptional circumstances, the Court of Appeal is also entitled to order the total or partial renewal of the acquisition of evidence pursuant to Article 356 of the Italian Code of Civil Procedure.

The plaintiff has to pay the upfront court tax (contributo unificato) at the time of filing the initial complaint. The value of the upfront court tax depends on the value of the claim and it is doubled when the lawsuit is brought in second instance or before the Supreme Court. In fast-track proceedings and in labour disputes, the upfront court tax is reduced by half.

Litigation costs are traditionally settled according to the “losing party rule”: within the final judgment the judge orders the losing party to pay the court’s expenses and the attorney’s fees (ie, the litigation costs) in favour of the winning party. Nonetheless, the judge has a wide discretion in the allocation of costs and, therefore, in specific circumstances, they can decide to set off the litigation costs or can allocate costs according to a different ratio.

The recoverable costs encompass the expenses and the costs borne by the parties during the proceeding and the lawyers’ fees. The recoverable lawyers’ fees are not assessed on the basis of hourly rates but on the basis of the standard quantification of attorney’s fees as provided in a Decree of the Ministry of Justice.

The decision on costs can be appealed.

The judge establishes the amount of costs to be awarded on the basis of the value and the complexity of the claim, as well as on the basis of what the parties have declared in the note on costs and their procedural behaviour, making reference to rules and parameters established by the Ministry of Justice.

If the judge assesses that some of the costs and expenses faced by the successful party are redundant or unnecessary, these costs will not be recoverable.

According to recent case law, legal interest also accrues on litigation costs, starting from the date on which the judgment becomes final.

In recent years the Italian legislature has shown a growing interest in the use of alternatives to the ordinary proceedings set out by the Code of Civil Procedure, in order to resolve civil or commercial disputes. Even if court litigation remains the most frequent channel to decide a dispute, the described trend has led to the proliferation of many laws opening up the possibility of alternative dispute resolution (ADR). For instance, mediation, as established by Legislative Decree 28/2010; assisted negotiation procedure, introduced by Law 162/2014; and compulsory attempt at conciliation in the medical field, introduced by Law 24/2017.

Though ADR procedures form part of the legal system, in the majority of cases they are not compulsory. However, in some cases, ADR tools are mandatory (for instance, ex lege mediation, the assisted negotiation procedure related to disputes regarding the payment of sums of money smaller than EUR50,000, and the compulsory conciliation in matters of medical liability, see 3.1 Rules on Pre-action Conduct) and in these cases the consequences of non-compliance with the ADR requirements are mainly represented by the inadmissibility of the claim before the ordinary court.

The institutions that provide ADR services are well organised in the Italian legal system. The main institutions are the mediation institutes within the Chambers of Arbitration at the Chambers of Commerce located throughout the Italian territory and the heterogeneous category of further private organisations that manage mediation procedures.

Under Italian law arbitration is regulated under Articles 806 et seq of the Italian Code of Civil Procedure. The applicable provisions have been modified most recently by Legislative Decree 40/2006. Arbitration in Italy is either ritual (and the arbitral award has the same value as a court’s ruling) or non-ritual (where the arbitral decision is, instead, of a contractual nature).

In the Italian legal system, all civil and commercial disputes are capable of being referred to arbitration, with the exception of the following matters:

  • disputes concerning non-disposable rights;
  • employment disputes except for cases in which arbitration is permitted pursuant to the applicable collective bargaining agreements; family law disputes; criminal proceedings;
  • tax disputes;
  • disputes concerning the status and capacity of persons; and
  • disputes in which the presence of the Public Prosecutor is required.

The circumstances that allow a party to challenge an arbitral award before a domestic court differ depending on the nature of the arbitration.

In cases of ritual arbitration, the grounds for challenging the arbitral award are set out in Article 829 of the Code of Civil Procedure. These include (but are not limited to):

  • cases in which the arbitration award is void;
  • the arbitrator appointment is void;
  • the arbitration award goes beyond the scope of the arbitration agreement;
  • the arbitration award is issued beyond the agreed deadline; or
  • non-compliance with the adversarial principle during the arbitration proceeding.

In cases of non-ritual arbitration, the grounds for a challenge are set forth by Article 808-ter of the Code of Civil Procedure. These include cases in which:

  • the arbitration agreement is void or the arbitration award goes beyond the limits set out in the arbitration agreement;
  • the arbitrators are not appointed pursuant to the provision set forth by the agreement;
  • the award is issued by someone who cannot be legally appointed as arbitrator;
  • the arbitrators fail to comply with a compulsory provision set out by the parties in the arbitration agreement; or
  • there is non-compliance with the adversarial principle during the arbitration proceedings.

In all the above case, the arbitration award cannot be challenged on points of law, save for the case in which the parties expressly provided for such a challenge.

With regard to the enforcement of domestic arbitration awards, ritual arbitral awards have the same value as court’s judgments and, therefore, to be enforced they shall simply be filed with the court to obtain the enforcement seal. In the event of non-ritual arbitration, non-compliance with the arbitral award requires the other party to start ordinary proceedings before a judicial court of first instance to obtain enforcement.

As far as the enforcement of foreign arbitral awards is concerned, the procedure is set forth by Articles 839 and 840 of Italian Code of Civil Procedure, which is an exact transposition of the relevant provisions of the New York Convention of 1958.

A proposal for dispute resolution reform was presented by the government at the end of 2019. The reform was aimed to remove bottlenecks and speed up judicial proceedings by introducing, among others, the following measures:

  • elimination of the different kind of proceedings and implementation of one faster procedure applicable to all cases;
  • improving and widening the scope of ADR;
  • elimination of the writ of summons and introduction of a shorter simplified application;
  • strengthening of the e-civil process (Processo Civile Telematico); and
  • widening the powers and scope of activities of the legal counsel of the parties.

In September 2020, the government issued guidelines for the reform of the whole judicial system, in the context of the Recovery Plan requested for European countries to be eligible for the EU post-COVID-19 Recovery Fund. The guidelines include, among others, the the following measures:

  • shortening of the civil proceedings; and
  • reform of the Court system 

The timeline indicated by the government in the guidelines provides for the completion of the reform process in 2022.

COVID-19 has affected significantly the operation of the courts and court hearings.

In particular, for the first period of the COVID-19 pandemic (from 9 March to 11 May 2020), legislation approved by the government introduced, among others, the following measures:

  • postponement of all the hearings (except for those cases in which a delay may cause serious detriment to the parties);
  • suspension of all the procedural deadlines, including the time-limits for the appeal proceedings; and
  • suspension of the statutory limits of those rights whose exercise was affected by the above measures.

For the second period of the COVID-19 pandemic (from 12 May to 30 June 2020, extended a first time to 31 October 2020 and then to 31 January 2021), the legislation approved by the government has introduced, among others, the following measures:

  • further postponement of the hearings after 30 June 2020;
  • holding of the hearings by remote means; and
  • holding of the hearings by exchange of written briefs.
Legance – Avvocati Associati

Via Broletto, 20
20121 - Milan

+39 02 89 63 071

+39 02 896 307 810

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.

Jurisdiction in Proceedings for Provisional Measures under EU Regulation 1215/2012

LCA has acted in a number of recent cases concerning provisional measures, in which the Italian courts have declined jurisdiction under EU Regulation 1215/2012. There seems to be a common path in these decisions: the principle of mutual trust embodied in the EU legislation on the European judicial space, together with other considerations, leads Italian judges to block forum shopping tactics. These cases will be described below.

Actions brought by Italian contractors against a Polish governmental entity

Facts

Certain Italian contractors won several tenders for the construction of highways in Poland. The contractors delivered performance bonds and advance payment bonds to the employer, the General Directorate for National Roads and Highways of Poland. All such bonds were demand guarantees within the meaning of ICC Uniform Rules for Demand Guarantees.

As is customary, the guarantors were banks or insurance companies based in Poland, while the counter-guarantors were Italian entities. The main contracts, the guarantees and (almost all) the counter-guarantees were governed by Polish law and were subject to the Polish jurisdiction. However, the contractual relationship between the counter-guarantor and the contractor was governed by Italian law and all disputes were to be decided by Italian Courts.

In 2019, disputes ensued between the contractors and the employer, and this latter called the guarantees. The contractors, therefore, commenced precautionary injunction proceedings before the Italian Courts, seeking orders restricting the guarantors from making any payment and calling the counter-guarantees,and also restricting the counter-guarantors from making any payments and taking actions against the applicants.

Applicable law on jurisdiction

Under EU Regulation 1215/2012, persons domiciled in a member state shall be sued in the courts of that member state and may be sued in another state only under certain provisions of the same Regulation. In the case at hand, relevant provisions were:

  • Article 25, providing that if the parties have agreed that the courts of a member state are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, those courts shall have jurisdiction, moreover, such jurisdiction shall be exclusive unless the parties have agreed otherwise; and
  • Article 8 (1), providing that a person may also be sued, if they are one of a number of defendants, in the courts for the place where anyone of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.

The contractors contended that, despite the choice of jurisdiction in the contract agreements and in the guarantees, the Polish entities were subject to the jurisdiction of the Italian Courts under Article 8 (1) of the Regulation. The Polish employer, represented by LCA,argued for the lack of jurisdiction of the Italian Courts.

Four different decisions, one issued by the Court of Turin and three issued by the Court of Rome (one of which on appeal), held that Article 8 (1) could not be applied and ruled that the Italian Courts had no jurisdiction in the claims arisen from the agreements which provided for the Polish jurisdiction. The latest decision of the Rome Court, rendered in the appeal proceedings, held that also the claim arising from the legal relationship between the applicant and the counter-guarantor, though contractually subject to the Italian jurisdiction, had to be decided by the Polish Courts, based on the principle that the main relationship attracts the incidental one.

Reasoning

The Italian Courts based their reasoning on the principles inspiring the Regulation:

  • the rules on jurisdiction should be highly predictable and based on the principle that jurisdiction is generally linked to the defendant’s domicile – jurisdiction should always be available on this ground save in a few well-defined situations in which the subject-matter of the dispute or the autonomy of the parties contemplate a different connecting factor (“whereas” No 15 of the Regulation);
  • the autonomy of the parties to a contract, except in a few matters where only limited autonomy to determine the courts having jurisdiction is allowed, should be respected subject to the exclusive grounds of jurisdiction laid down in the Regulation (“whereas” No 19 of the Regulation); and
  • there should be alternative grounds of jurisdiction based on a close connection between the court and the action or to facilitate the sound administration of justice - the existence of a close connection should ensure legal certainty and avoid the possibility of the defendant being sued in a court of a member state which they could not reasonably have foreseen (“whereas” No 16 of the Regulation).

These principles imply the need to give preference to the choice of jurisdiction made by the parties, the inadmissibility of derogations except when a conflicting choice is made by the same parties, the exclusion of an interpretation of “reasons of opportunity” that may ground the connection required by Article 8 (1) of the Regulation that could frustrate the choice made by the parties.

In the cases at stake, the intervention as guarantor of an entity established in the member state of the performance of the contract and the lack of any direct relationship of the guarantor with the contractor is aimed at ensuring the closest connection between the main guarantee and the Polish jurisdiction and to separate its fate from the relationship concerning the application for the issue of the guarantee and the counter-guarantee, existing between the contractor and the counter-guarantor. Therefore, the employer is completely unconnected with the conventional choice of jurisdiction’s provisions operating between the guarantor and the counter-guarantor and between the counter-guarantor and the contractor.

The choice of the contractor and the counter-guarantor to identify as competent court a court other than the one entrusted with jurisdiction on the main relationship denotes, according to these decisions, the conscious undertaking of the risk of submitting such relationships to different jurisdictions and of obtaining different decisions on whether or not the enforcement of the guarantees was lawfully made by the beneficiary.

In conclusion, the precautionary proceedings seeking for an injunction to stop the enforcement and payment of the main guarantees refer to a relationship for which the Italian Courts lack jurisdiction. This could potentially lead to a different assessment of the Courts involved on the proper call of the guarantees by the employer, but this is not sufficient to satisfy the close connection required by Article 8 (1) of the Regulation to derogate from the forum agreed by the parties.

Case brought by an Italian distributor against a German principal

In a 2020 case, an Italian distributor of chemical products instituted an action before the Court of Milan, alleging that its German principal was acting in breach of the exclusivity clause, and seeking a provisional order restraining the unlawful conduct of the defendant. In the distribution agreement the parties had chosen Frankfurt as the exclusive forum for dispute resolution, so the claimant stated that the subsequent action on the merits would be brought before said Court.

In light of the forum choice clause, the defendant, represented by LCA, contended that the Milan Court had no jurisdiction under Section 35 of Regulation 1215/2012.

In the first instance, the motion was held without merit and rejected, but the Tribunal disregarded the German company’s defence on jurisdiction. The Italian company appealed the decision, and the defendant restated its objection to the jurisdiction of the Italian Court. The Panel entrusted with the appeal upheld the objection and declined jurisdiction on the case.

The reasoning is quite instructive. The Court took into consideration “whereas” 33 and Article 35 of Regulation 1215/2012 and concluded that the so-called “exorbitant jurisdiction” could not apply in the case. The order requested was a prohibitory injunction, ie, an order “not to sell” the exclusive products; as such, the order can only be enforced in Germany, where the decision to sell is taken. Also, in the view of the Court, only the German Judge would be able to enforce such an order.

Comment

Traditionally, Italian Courts almost always held they had jurisdiction for provisional measures when the jurisdiction on the merits was of a foreign Court. Over time, this position has changed and weakened, and the decisions under comment seem to be a significant step forward in this kind of proceedings. It is expected that the Italian Courts will continue this process, and that other judges of the European judicial will follow the same path. As a matter of fact, the mutual trust principle is a call for their action (and, of course, for the action of the European lawyers).

COVID-19 and Potential Medical Malpractice Litigation

The unexpected spread of COVID-19 pandemic all over the world risks to seriously increase the number of medical malpractice claims before the Italian Courts, once the health emergency will finally come to an end.

Medical professionals, health care facilities, care homes, local public authorities and the government have been facing the state of emergency at their best, still they may have to defend themselves – once the storm is over - in relation to the many losses that the pandemic has caused. Though the emergency may have been unpredictable, most of the operators have had to face it with a general lack of structures, organisation and devices, due not only to the lack of financing by both central and local government authorities that in the past years has struck the public health sector, but also by disorganisation and delays in supplying all the instruments and devices necessary to protect patients and operators.

The expectation, therefore, is the uprising of medical malpractice claims by those who have lost a relative, seeking compensation. The expectation shall turn into certainty, by considering that during the lockdown in Italy, some lawyers started to gather families willing to file their claims against health facilities and professionals. Such an attempt was discouraged by the immediate disapproval of public community and most of all by the official stance of the Italian Bar Association, which censured the initiative threatening disciplinary sanctions. The legal actions were only delayed.

Anticipated claims

The claims are mostly expected to be addressed against health facilities and professionals, which are - according to the so-called Law Gelli-Bianco (the most recent law on medical liability in Italy) - jointly liable for medical malpractice towards the patients, or their relatives in case of decease, though respective liabilities are different: health facilities may be liable for contractual liability, whereas medical professionals for tort. The different type of liability affects the possible outcome of the legal action: the liability of medical professionals descends also from violation of guidelines, which have not been drafted yet, since COVID-19 is only a recent and still mostly unknown disease. It would be therefore unlikely to figure out misconduct of medical professionals, who have had to deal with such an aggressive and new epidemic, without any guidelines and/or experience rules gathered in the previous years.

However, the liability of the health facility lays inter alia on organisational faults, and it would not be hard to suppose that health facilities could have dealt with the emergency more effectively, by acquiring the necessary instruments, separating from the beginning the areas appropriate for COVID-19 patients or suspected to be such from those destined to all other patients, supplying all necessary personal protective equipment to medical staff, and those are only examples of what could have been made. Significant, in this respect, is the experience of care homes, where the epidemic spread at large and apparently without any controls, probably also due to the decision – by many of those structures – without taking the necessary precautions and, in many cases, without properly separating the COVID-19 patients from all the others. And indeed, home cares are expected to be the main subjects of COVID-19 related claims. Moreover, further claims may be commenced by patients who were not affected by COVID-19 and who have not received proper cares due to the pandemic.

Should the above considerations be correct, the subjects hit most by the incoming claims shall be the health facilities, which might soon have to deal with a large number of claims for damage compensation of significant amounts. In such a scenario, health facilities might also risk not to receive adequate insurance coverage for all the claims by the companies which have granted the coverage for malpractice related risks. Indeed, the insurance companies may claim for the termination of the insurance agreement, due to the risk aggravation, should the health facilities have failed to immediately communicate such circumstance to the insurance company.

Under Article 1898 of the Italian Civil Code, the insured has to inform the insurance company of any circumstances which may worsen the ensured risk, when – given such circumstances – the latest would have not entered into the insurance agreement or would have decided for a different, and higher, insurance premium. Any health facilities which failed to inform their insurance company – as it is likely to be, given the circumstances under which the same have had to operate – may now be refused insurance coverage in respect to all the claims they may be subject to.

The scenario described above, as disruptive as it appears, may take place once the pandemic will cease, as for the moment a further increase of COVID-19 cases is spreading all over Italy.

Contracts in the COVID-19 Era: Force Majeure and Duty of Renegotiation

Force majeure under Italian law

Can the emergency measures adopted by the government, which directly or indirectly prevent one of the parties from fulfilling its contractual obligations, be considered a force majeure event? This question has been widely discussed in nations all over the world. In Italy, the answer is peculiar, as there is no specific provision in the law about force majeure, but its effects, ie, supervening impossibility to perform and supervening excessive onerousness, are regulated by Articles 1256 and 1463-1468 of the Italian Civil Code.

What happens, therefore, when the force majeure event, ie, the pandemic crisis, turns into a set of measures adopted by the governmental authorities, the so-called “factum principis” (ie, the Prince's decision, now the government's decision)?

To be considered a force majeure event, the factum principis:

  • must be beyond the reasonable control of the debtor;
  • could not have been reasonably foreseen at the time of the conclusion of the contract; and
  • its effects could not have been reasonably avoided or overcome by the affected party.

With the introduction of Article 91 of Law Decree No 18 of 17 March 2020, the legislator has expressly qualified the containment measures adopted to face the COVID-19 pandemic as a “factum principis”.

The impact of a force majeure event

What is the impact, then, of a force majeure event? If the contract includes a force majeure clause, as typical in international contracts, no question: the clause shall apply. As to the contracts that provide no force majeure clauses, provisions of the Civil Code shall be applied.

The impossibility can be absolute, causing the automatic extinction of the obligation and the termination of the agreement, or temporary. In case of temporary impossibility, if the fulfilling party is not interested anymore in obtaining the performance of the other party, or the non-fulfilling party cannot be held obligated to fulfil its obligation anymore, the temporary impossibility will be considered equal to the absolute impossibility and will lead to the termination of the contract. In the other cases, instead, the temporary impossibility will cause a mere suspension of the performance of the obligation, and the non-fulfilling party will not be held liable for the delay. The Italian Civil Code distinguishes also between total impossibility and partial impossibility in synallagmatic contract.

Pursuant to Article 1463 (titled Total impossibility) when a total impossibility affects only the performance of one party, the party who has been discharged from their obligations cannot claim the other party's performance and, if they have received it in the meantime, they must return it. Pursuant to Article 1464 (titled Partial impossibility), when the performance of a party becomes partially impossible, the other party has the right to obtain a correspondent reduction of their performance but if they do not have any interest in receiving a partial performance, the party can decide to terminate the contract.

The other effect of force majeure may be a supervening excessive onerousness: in this case, the fulfilment would require a very high increase in the expenses necessary to discharge a party’s obligations.

In synallagmatic contracts, if the performance of one party only has become excessively onerous to perform due to an unforeseeable and unavoidable event, the affected party may demand the resolution of the contract if the supervening onerousness is not part of the normal risk of the contract (alea) (Article 1467 of the Italian Civil Code, titled “Synallagmatic contract”).

The other party, conversely, may avoid the termination by offering to modify the terms of the contract fairly. Such rights are enforceable.

Article 1468 of the Italian Civil Code (titled “Contract with obligations of only one party”) provides that the affected party may demand a reduction of their performance or a change in the implementation.

However, except in very specific circumstances, the party whose obligation became excessively burdensome can ask the other party to renegotiate but does not have an enforceable right.

Changes in the last year

While this is the traditional position, circumstances have changed over the past year, especially with regard to commercial leases. Law 69/2021 converting Law Decree 41/2021 (containing urgent measures connected with the emergency from COVID-19) introduced Article 6 novies, according to which "lessee and lessor are required to collaborate with each other in order to redetermine the rent". Therefore, is it now possible to state the full citizenship in the Italian legal system of the right of the commercial lessee to obtain an equitable redetermination of the rent, in the event of a significant decrease in the volume of business, turnover or fees, resulting from health restrictions aimed at containing the COVID-19 epidemic.

The duty of renegotiation in contracts different from commercial leases

Even though the Italian legal system lacks a rule establishing a general obligation to renegotiate a contract in the face of unforeseeable circumstances that have significantly altered the contractual balance, such an obligation can be inferred by principles of fairness and good faith (Articles 1175 and 1375 of the Italian Civil Code), which create collateral obligations of protection that may result in an enforceable obligation to renegotiate.

Before the introduction of the above-mentioned Article 6 novies of Law 69/21, even in the matter of commercial leases Italian case law affirmed the existence of an obligation to renegotiate and equitably reduce rents on the basis of these principles (Report No 56 of 6 July 2020, the Office of the Supreme Court; Court of Rome, 27 August 2020; Court of Milan, 21 October 2020).

Unexpected occurrences

Unexpected occurrences and risk of imbalance have long been felt also in International and EU stages. The Unidroit Principles expressly provide that the occurrence of circumstances involving a substantial alteration in the balance of the agreement (hardship) gives rise to the right for the disadvantaged party to ask the renegotiation of the clauses and restore the initial balance. Also, the Principles of European Contract Law, in addition to the obligation of the parties to renegotiate the unbalanced agreement, expressly provide for the power of the judge to order compensation for damages against the party who refuses to renegotiate or behaves in a manner contrary to good faith and fairness.

Obligations and agreements

The breach of such an obligation allows the non-breaching party to act for the termination of the agreement and to seek damages. If the Judge is satisfied that the relevant conditions occur, they may intervene on the agreement, modifying the contractual arrangements to rebalance them.

After all, some Civil Code rules allow the Courts to change the terms of an agreement which is or became unbalanced. Courts have already evolved in this respect, pointing to a duty of solidarity referred to in Article 2 of the Italian Constitution, in synergy with the general standard of objective good faith and fairness (Articles 1175, 1337, 1359, 1366, 1375 of the Italian Civil Code).

In 2009, a landmark decision of the Supreme Court held that the principles of fairness and good faith in the performance and interpretation of agreements “are relevant both in the identification of contractual obligations and in the balancing of opposing interests of the parties. Firstly, they require the parties to fulfil obligations even not expressly provided for in the agreement or the law [...]; secondly, they allow the judge to intervene also amending or adding contents to the agreement if this is necessary to ensure a fair balance of the interests of the parties”.

The pandemic will cause waves of litigations and the renegotiation of agreements will inevitably be involved in many of them. If in the area of commercial leases, the Italian Legislature has already settled the existence of a duty to renegotiate, for all other contractual relationships affected by the negative consequences of the pandemic it will be up to the courts to apply a duty to renegotiate.

LCA Studio Legale

Via della Moscova, 18
20121 Milan
Lombardy
Italy

+39 02 7788751

+39 02 76018478

milano@lcalex.it www.lcalex.it
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Law and Practice

Authors



Legance – Avvocati Associati is an independent law firm with offices in Milan, Rome, London and New York. Founded in 2007 with 84 lawyers, Legance currently employs more than 280 legal professionals. The firm is regarded as a pillar that amplifies each individual’s qualities and skills. The constant attention to clients, the careful evaluation of business objectives and an unconventional approach capable of anticipating legal requirements, as well as 24-hour availability have contributed to establishing Legance as a recognised leader in domestic and international markets. Due to its strong international practice, Legance can support clients over several geographical areas, and can organise and co-ordinate multi-jurisdictional teams whenever required.

Trends and Development

Authors



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.

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