Grounds for setting aside

Decision no. 22007 of the I Civil Chamber of the Supreme Court (Italian text available here) deals with the issue of the grounds for setting aside an arbitration award delivered in proceedings commenced pursuant to an arbitration clause stipulated before the entry into force of Legislative Decree no. 40 of 2 February 2006.

Before the reform, this issue was governed by the old article 829(2) of the Italian Code of Civil Procedure. This provision held that “A request for setting aside may also be filed where the arbitrators did not decide according to rules of law, unless the parties have authorised them to decide ex aequo et bono or they have declared that there may be no recourse against the award.

On the contrary, now, according to article 829(3) of the Italian Code of Civil Procedure, “The recourse for violation of the rules of law relating to the merits of the dispute shall be admitted if so expressly provided by the parties or by the law (…).

The purpose of the reform is to achieve further stability of the arbitration awards, limiting the grounds for their setting aside. In order to do so, the lawmakers used the natural tendency to avoid changing the status quo (in this respect, see this article and this one on law and economics).

The transitional provisions contained in article 27 of Legislative Decree no. 40/2006 seem to require that the new rule, which exclude the recourse for violation of law relating to the merits, applies even to arbitration proceedings commenced pursuant to arbitration clauses stipulated before the reform. That is, arbitration clauses stipulated when the silence of the parties had a totally different meaning.

A similar option could be justified according to the procedural principle “tempus regit actum” (whereby the legal regime applicable is that in force at the time of the relevant activity). Simultaneously, this principle would determine a modification of the arbitration clause and the retrospective application of the new grounds for setting aside.

The Supreme Court is starting a new line of cases, which concerns the analysed transitional provisions.

The Supreme Court ruled that “legislative decree no. 40 of 2 February 2006 modified article 829 Code of Civil Procedure in order to restrict the grounds for setting aside an arbitration award. According to this provision, the arbitration clauses stipulated before its entry into force shall continue to be governed by the laws previously in force, which allowed the recourse for violation of the rules of law relating to the merits of the dispute. The only exception is that the parties agreed otherwise. In the absence of a provision that determines the nullity of the arbitration clause or establishes the obligation of the parties to adapt to the new model, the validity of those clauses must be considered implicit, despite the absence of a transitional provision thereof.

This ruling refers to other precedents, such as decision no. 6148 of 19 April 2012 of the I Civil Chamber of the Supreme Court (Italian text available here); decision no. 12379 of 3 June 2014 of the I Civil Chamber of the Supreme Court, (Italian text available here); decision no. 13898 of 3 June 2014 of the I Civil Chamber of the Supreme Court (Italian text available here), and decision no. 745 of 19 January 2015 of the Supreme Court. Furthermore, the Supreme Court also mentioned another precedent that contradicts this line of cases (decision no. 21205 of 17 September 2013 of the Supreme Court, Italian text available here).

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