Construction of the arbitration clause contained in the Articles of association

In its decision no. 10610 of 22 September 2015, the Court of first instance of Milan declared its lack of jurisdiction on the challenge of a resolution of a cooperative company. The Court used a broad construction of the arbitration clause contained in the company’s Articles of association. The Italian full text of the decision is available here.

A member of a cooperative company challenged, before the Court of Milan, the resolution whereby she had been excluded from the company.

The company objected to the jurisdiction of the Court of first instance of Milan, and claimed that the jurisdiction rested with an Arbitral Tribunal according to Article 35 of its Articles of association. This provision held that “any dispute arising between the members and the company, or among the members themselves, concerning negotiable rights related to the corporate relationship, as well as the disputes brought by the Directors, the Supervisory Body and the liquidators, or against them, pursuant to Article 34 of Legislative Decree no. 5 of 17 January 2003, shall be settled by an Arbitral Tribunal of three members. The arbitrators shall be appointed by the President of the Court of first instance where the company has its registered office. The arbitration clause is binding on the directors, the members of the supervisory body and the liquidators, after their acceptance of the appointment.” 

In the claimant’s opinion, the arbitration proceedings under Article 35 of the Articles of association did not preclude the Court’s jurisdiction for two reasons. First of all, arbitration would be purely optional in the disputes between the members and the company, since the arbitration clause in the Articles of associations was expressly binding on the directors, the members of the supervisory body and the liquidators after their acceptance of the appointment. However, it was not binding on the members of the company. In addition, arbitration would be optional because, pursuant to Article 12 of the Articles of association, “the member may challenge his/her exclusion before the Arbitral Tribunal (…).” Therefore, the member would have the choice between proceedings in Court and arbitration proceedings.

The Court of first instance of Milan rejected both of these arguments.

First of all, the stipulation whereby the arbitration clause should be binding on the directors, members of the supervisory body and liquidators only after their acceptance represents “a principle recognised by the settled case law and unanimously recognised by the scholars.” This principle does not preclude that the arbitration clause was binding on the company’s members. Indeed, it was binding on them because it was included in the Articles of association.

The Court of first instance of Milan acknowledged that the wording of Article 12 of the Articles of association could give rise to doubts. This provision uses the auxiliary “may” (“the member may challenge his/her exclusion before the Arbitral Tribunal (…).”) Therefore, it could be construed as allowing the members to commence arbitration proceedings, without imposing on them an obligation to do so. In fact the Court of first instance of Milan has recently held that an arbitration clause (which provided that “any dispute (…) may be referred to a sole arbitrator“) merely attributed to the shareholders the right to commence arbitration proceedings, without imposing any obligation to do so (we talked about it here).

In the case at hand, the Court adopted a broad construction of the scope of application of the arbitration clause, pursuant to Article 808/quarter of the Italian Code of Civil Procedure (“In case of doubt, the arbitration agreement shall be in the sense that the arbitral jurisdiction extends to all disputes arising from the contract or from the relationship to which the agreement refers.”)

Therefore, the Court of first instance of Milan declined its jurisdiction in favour of the Arbitral Tribunal, pursuant to the arbitration clause contained in the Articles of association.