Arbitrators’ fees

In its decision no. 17956 of 11 September 2015, the Supreme Court applied for the first time Article 816/septies of the Italian Code of Civil Procedure concerning the arbitrators’ fees. In this decision, the Court examined the scope and conditions of application of the above mentioned provision. The Italian full text of the decision is available here.

Pursuant to article 816/septies(1) of the Italian Code of Civil Procedure: “The arbitrators may make the continuation of the proceedings subject to the advance payment of the foreseeable expenses (…).” The second paragraph of that Article also provides that “Should one party fail to pay the requested advance, the other may advance the totality of the expenses. Should the parties fail to provide for the advance within the time limit established by the arbitrators, they are no longer bound by the arbitration agreement with regard to the dispute out of which the arbitral proceedings originated.” 

Because of the parties’ failure to pay the requested advance (which also included the arbitrators’ fees), an Arbitral Tribunal held that the parties were willing to terminate the arbitration agreement and, consequently, the Arbitral Tribunal ruled that the arbitration could not proceed.

The Court of Appeal of Naples was requested to set aside the award and it did so. Its decision was later confirmed by the Supreme Court.

First, the Supreme Court found that article 816/septies of the Italian Code of Civil Procedure did not apply to this case as the arbitrators only requested the parties to pay an advance and the parties failed to do so. On the contrary, according to the Supreme Court “the arbitrators should clearly state that the continuation of the proceedings is subject to the advance payment.”  And this clear statement was missing in the case at hand.

The Supreme Court also added that the reference to “foreseeable expenses”, contained in Article 816/septies of the Italian Code of Civil Procedure, cannot be broadly construed. This provision only covers the arbitrators’ expenses (and therefore it does not cover their fees). The scholars agree with this reading, although some Arbitral Tribunals use a broader construction of “foreseeable expenses”, including the arbitrators’ fees.

In this respect, it could be useful to analyse the Arbitration Rules of the Chamber of Arbitration of Milan. The relevant provision is Article 38, which states: “where a party fails to lodge an advance as requested, the Secretariat may direct the other party to make a substitute payment, setting a time limit therefor, or may divide the value of the dispute, if it has not already done so, and direct each party to deposit an amount based on the value of its claim, setting a time limit therefor.  If any of the advances directed is not made within the time limit set therefor, the Secretariat may suspend the entire proceedings or only the proceedings related to the claim to which the lack of payment relates. The Secretariat shall lift the suspension when the payment is made.  Where the parties do not deposit the amount within one month of the notice of the order of suspension under paragraph 2, the Secretariat may declare the closing of the entire proceedings, or the proceedings related to the claim to which the lack of payment relates, without affecting the arbitral agreement.” 

The provision of the Rules of the Chamber of Arbitration of Milan has some broader scope of application than Article 816/septies of the Italian Code of Civil Procedure. This provision, in fact, concerns all the costs of the proceedings, including the fees of the Chamber of Arbitration, those of the Arbitral Tribunal and the possible experts. This broader scope is counterbalanced by the less serious consequences arising out of the lack of payment. Indeed, the failure to pay does not determine the termination of the arbitration agreement (albeit only with respect to the dispute out of which the arbitral proceedings originated), but the mere closing of the arbitration proceedings.

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