The Italian Council of Ministers, through the recent reform known as “Cartabia”, introduces significant innovations in the field of arbitration by reorganising various institutions of civil procedure. The purpose of the Reform, in accordance with the Recovery Plan for Europe, is to simplify and increase the overall efficiency of the Italian legal system. In particular, the amendments to the Fourth Book of the Italian Code of Civil Procedure (ICCP) aim to bring the arbitral decision (“lodo arbitrale”) as close as possible to the judicial judgment (“sentenza”). In this respect, the Reform constitutes the first major change to the Code since 2006, when the Italian system was, for the first time, partially aligned with the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Commercial Arbitration. However, the last intervention is limited to specific aspects of the arbitral discipline, such as translatio iudicii, the principle of impartiality and independence of arbitrators, and the power to issue precautionary measures. It also pertains to corporate arbitration, which is now governed by the ICCP. As will be shown below, the convergence with the Model Law is now almost complete, the result being that Italy now has a more coherent, complete and modern arbitration law. It remains to be seen whether the interventions will have a positive impact, including promoting wider awareness of the institution. Only objective evaluations will determine their effectiveness.
table of contents
1. Appointment of the arbitrator
Legislative Decree No.1491 of October 10, 2022 introduces a new provision in para.3 of art.810 ICCP. The provision requires the President of the Court to appoint an arbitrator based on transparent, rotating2, and efficient3 criteria. To achieve this, the judicial office website must provide notice of the appointment of each arbitrator to prevent the same individuals from being chosen too frequently. However, this rule seems to be ineffective as there are no consequences for violating it.
2. Declaration of independence and impartiality of arbitrators
A second innovation concerns the strengthening of guarantees for the independence and impartiality of arbitrators. This is in line with international best practice.4
The Reform introduces a new ground for challenge (art. 815.6 bis ICCP) in cases where serious grounds of convenience may affect the independence and impartiality of the arbitrators.5
The amended art. 813 ICCP now requires that each arbitrator, when accepting the appointment, must disclose, under penalty of nullity, all circumstances that could affect their independence and impartiality.
The arbitrator must therefore point out facts that do not stand in the way of their acceptance, but which must be brought to the attention of the parties in the context of complete transparency.
This is not an absolute innovation, as the obligation to disclose was already contained in many rules of administered arbitration6 and was considered a duty in terms of legal ethics7 but there was no time limit on its exercise.8
The amendment now requires the appointee to reveal prior relationships and facts9 and to renew their declaration if circumstances arise that could justify their recusal.
If the appointment declaration is omitted, the acceptance or assumption of the appointment is not complete. As a result, the concerned party10 may request the arbitrator’s disqualification under art.813 bis ICCP within 10 days of the acceptance made without the declaration or the discovery of the relevant circumstance not declared.
Unless otherwise agreed or there is an agreement on its replacement, the concerned party must notify the arbitrator by registered letter to obtain the missing disclosure. The reform has equated the omission of disclosure with the failure to perform an act relating to the functions of the arbitrator under art. 813 bis ICCP. As with any other due and omitted act, amnesty is possible after the warning.
If the arbitrator fails to make the missing declaration, the party may appeal to the president of the court after 15 days, in accordance with art.810 ICCP, to have the arbitrator disqualified for repeated negligence.
If the declaration is made after the warning and the disclosure highlights potentially critical circumstances, it may be considered as an “omitted indication of circumstances legitimising the objection”. As a result, within the following 10 days, the arbitrator may request disqualification or object, according to art.815.3 ICCP.11 Finally, if the declaration is not requested and the acceptance remains undisclosed, the arbitrator’s invalid appointment will ultimately invalidate the award under art. 829.1.2 ICCP, provided that the nullity has been raised in the arbitration proceedings.
3. Translatio iudicii
The Reform introduces a new provision in the Code of Civil Procedure (art. 816 bis.1 ICCP), which extends all possible substantive effects of a judicial request to an arbitral one.12
This rule must be coordinated with the new regulation of translatio between ordinary and arbitral proceedings (art.819 quater ICCP),13 which states that the effects of the request remain even after the case is resumed.14.
Finally, the mechanism of reciprocal transfer of the object of the dispute between arbitration and ordinary judgement is recognised. This guarantees the possibility of preserving the substantive and procedural effects of the claim through the performance of all necessary activities for the commencement of the proceedings, in all hypotheses where jurisdiction is denied by the judge in favour of the arbitrator and vice versa. To achieve this, within three months of the final declinatory pronouncement(of the ordinary judge or arbitrator),or the final completion of any appeals,the parties must take action to ensure that the arbitration panel is properly constituted or the case is formally15 resumed.16
The final paragraph of art. 816 bis 1 states that failure to comply with the three-month deadline for reinstatement has similar effects to those of the termination of proceedings.17 Late reinstatement or constitution of the board of arbitrators cannot result in the backdating of the application’s effects.18 Finally, it is important to note the fundamental and systematic significance of the rule, which confirms the jurisdictional nature of the arbitration proceedings.
4. Power to issue interim measures in the hands of arbitrators
The possibility for ritual arbitrators to adopt precautionary measures is of particular importance. This was previously the exclusive prerogative of ordinary judges19.
However, this recognition is not implemented in a generalised manner and is mitigated by a significant counterbalance mechanism. According to the new art.818 ICCP, arbitrators may only issue precautionary measures20 if there is an express will of the parties. This can be manifested in a specific arbitration clause, per relationem to an arbitration regulation that grants the power, or with a separate and subsequent contractual provision.21 However, this must always be done prior to the commencement of the arbitration proceedings22 to establish the perimeter and limits of the arbitrators’ powers.
The deadline for granting power to arbitrators coincides with the notification of the arbitration request, not with the constitution of the arbitration panel23.
However, these limitations may be of doubtful expediency and an obstacle to the diffusion of arbitral powers. In practice, it is highly unlikely that the parties will pose the problem in the arbitration agreement. Instead, it would have been preferable to provide arbitrators with a general precautionary power, as in many foreign legislations.2424 This would allow parties to deny the power by expressing their will to the contrary.
Article 818 ICCP now specifies that arbitrators have exclusive protective jurisdiction25 once they have accepted the assignment and constituted the arbitration panel.26 Concurrent jurisdiction27 is therefore prevented.
However,until that time,any precautionary applications must be brought before the competent court in accordance with art.669 quinquies ICCP.28 Otherwise, if conferring part of the powers to the court were deemed admissible, there would be a risk of “overlapping protections”.29 The court would inevitably be called upon to rule—albeit limited to the fumus—on the merits of the dispute, perhaps twice, if a complaint is lodged.
The protective measure can also be requested from the arbitrators inaudita altera parte, following the provisions of art.669 sexies ICCP.30
The issue of whether arbitrators can grant a penalty payment in protective measures upon request of a party is of little relevance since the amended art.614 bis ICCP now gives the enforcement judge the power to determine the amount of money owed by the obligor for any breach or delay in the enforcement of the measure. Therefore, even if the arbitrators were deemed to lack such power,31 the party in whose favour the protective measure was issued could still enforce it.
Article 818 bis ICCP allows for appealing against protective measures adopted by arbitrators before the court of appeal of the district where the arbitration is held.32
The grounds for complaint are limited to critical errors in procedendo, as referred to in art.829 ICCP on the nullity of the award.33 The provision also considers the possibility of contrariety to public policy.
The ordinary court can not consider the merits of the interlocutory controversy,34 due to a legislative choice that appears excessively restrictive. This limited scope of complaint does not allow for any dispute on the periculum in mora.
The time limit for submitting a complaint is 15 days from the decision’s pronouncement, if it takes place during a hearing, or from its communication if the order, whether upholding or rejecting, follows the dissolution of a reservation.
The court in whose district the seat of the arbitration is located has jurisdiction over the enforcement phase of any precautionary measures ordered by the board of arbitrators35 (Article 818 ter ICCP).36
If a precautionary measure issued as a result of a judgment rendered abroad needs to be enforced in Italy, the court of the place where the precautionary measure is to be enforced has jurisdiction. It is established that no exequatur procedure is necessary for the enforcement of protective measures rendered in arbitrations abroad.37
However, it should be noted that arbitral precautionary protection is not complete as arbitrators lack ius imperii and coercive powers. Therefore, it is always necessary to refer to the ordinary judge for the implementation and execution phase of the measure.38 Greater protection could have been provided if the arbitrators were responsible for outlining the procedures for implementing their measures, while leaving only the coercive activity to the ordinary judges.
5. Choice of law applicable to the merits of the dispute
The recognition of the depeçage is also important. According to art.57 of Law 218 of 31 May 1995, which deals with the reform of the Italian System of Private International Law, contracts with elements of internationality are governed “in all cases” by the Rome Convention of 19 June 1980. Article 3(1) of the Rome Convention allows the parties to subject the contract to several different national laws. This technique, known as “depeçage” or “morcellement”, involves dividing the contract into several parts, each subject to different national laws.
Regarding arbitration, art.82239 ICCP allows parties to indicate the rules or foreign law as the applicable law for the substance of the dispute in the arbitration agreement or in a written instrument prior to the commencement of the arbitration proceedings. If the conflict criteria are not met, the applicable rules or laws shall be used.
The amendments specify when and where the parties can indicate the relevant foreign sources. The choice of substantive law that will be used for adjudication must be made before the dispute arises, usually in the arbitration clause, or at least before the arbitral proceedings begin. Prior to serving the arbitration request or filing the application with the designated arbitration chamber, arbitrators must assess whether they possess the necessary legal skills to accept the appointment.40 This provision aims to prevent procedural activity waste that could occur with an unsuitable panel for the case being decided.41
The second part of the new provision states that if the parties do not make a choice, the arbitrators must apply the rules or substantive law identified according to the conflict criteria deemed applicable. This avoids the mandatory operation of the Italian rules of private international law.42 Therefore, it is possible to use the “safeguard clause” to refer to customary sources, such as the lex mercatoria, the UNCITRAL model, or the Unidroit principles.
6. Reduction of time limits for challenging the award
Finally, it is important to note a significant change regarding the terms for challenging an arbitral award. According to art.828 ICCP, an award must be challenged within six months (previously one year) from the date of the last signature. This change aligns the time limit for challenging the award with that provided for in art.327 ICCP for ordinary appeals.43 However, the time limit for the award notification remains unchanged at 90 days from the date of notification.
7. Corporate arbitration
The new Ch.VI-bis, containing arts 838 bis-838 quinquies ICCP,44 includes provisions on corporate arbitration without altering the provisions contained in the now-repealed Legislative Decree 5/2003. The correctives are minimal,45 except for one novelty: the complainability, before the ordinary judge, of the ordinances by which corporate arbitrators suspend the effectiveness of shareholders’ meeting resolutions.46 In the area of precautionary measures, it is important to consider interpretative uncertainties.
The newly amended art.818 of the Code of Civil Procedure now requires that precautionary jurisdiction be conferred on the arbitrators before the proceedings are instituted. It can be inferred from the general rule that an express provision must also be included in the arbitration clause of the company’s bylaws47 to suspend the challenged company resolution.
This conclusion, however, does not seem to me to be agreeable, as it would entail an obvious “backward step” from what was already provided for in art.35, Legislative Decree No.5/2003, which did not require a further specific statutory provision to that effect.
When the validity of a resolution is delegated to arbitrators, they also have the authority to suspend its effects upon request and in accordance with the conditions provided by law.48 For any other precautionary petition, an express statutory provision is required in accordance with the rules and limits indicated in general by art.838 bis.49
In conclusion, the reform aims to standardise corporate arbitration with common arbitration through the adjustments mentioned above. However, it lacks a connecting rule to clearly indicate that the provisions of arts 806 ff. ICCP should be applied where not otherwise regulated and to the extent that they are compatible.
8. Immediate enforceability of the exequatur decree to the foreign award
Other profiles of interest include the procedure for recognising arbitration awards issued abroad. The new art.839 para.4 ICCP resolves an interpretative contrast50 and provides for the immediate enforceability of the decree of exequatur. This is where the President of the Court of Appeals declares the effectiveness of foreign awards with condemnation content. In cases of opposition to the decree recognising or denying the effectiveness of a foreign award, it is possible to suspend enforcement or execution upon request of the opponent, if there are serious reasons (art.840 para.1). Additionally, the provision allows any “interested party” to request the imposition of a security, not just the party that has requested enforcement of the award. The amount of this security is determined by the judicial authority and cannot be appealed, revoked, or modified.
9. Conclusions
The Reform has the undeniable merit of bringing Italian arbitration closer to international best practices. It streamlines rules that are often considered disincentivising by commercial operators. The changes that have finally allowed arbitrators to issue interim measures, and those related to disclosure and recusal of arbitrators, should certainly be interpreted. However, there was a missed opportunity to intervene more decisively in areas that were previously identified as having weaknesses or gaps in practical application. Despite the innovations introduced, achieving widespread use of the arbitration procedure may still prove to be challenging.
The full text of the article is published in International Arbitration Law Review, 3/2024.
Author: Francesco Tedioli
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