The return of the twin-track approach

A recent decision of the Court of first instance Naples (decision no. 4874 of 19 April 2016, Italian text available here) follows the (outdated) line of cases, according to which two different types of corporate arbitration would be possible: on the one hand, corporate arbitration pursuant to article 34(2) of Legislative Decree 5/2003 (which states that “the arbitration clause shall specify the number of the arbitrators and how to appoint them. In any case, the arbitrators shall be appointed by a third party unrelated to the company; otherwise, the clause shall be deemed as null and void (…)”); and on the other hand, common arbitration pursuant to Article 808 of Italian Code of Civil Procedure. This is the so-called “twin-track”, which has already been discussed in this post.

The case heard by the Court of Naples is in short as follows.

A general partnership had only two members. Upon the death of one partner, the partnership did not continue with the heir, who accordingly sued the partnership to have it declared dissolved (given the lack of plurality of partners), and for the heir to receive his liquidation of shares. The partnership appeared in Court and pleaded the lack of jurisdiction of the State Court, given that Article 13 of its own Articles of association provided for an arbitration clause, according to which “any dispute arising between partners, or between them and their heirs, and the partnership, concerning the construction and fulfillment of these Articles, the jurisdiction on which does not rest with the State Courts, shall be settled by a sole arbitrator, to be chosen by the parties, or failing the parties to do so, by the Chair of the Court of first instance of L’Aquila.” 

The Court of Naples held that this clause – although inconsistent with Article 34 of Legislative Decree 5/2003 – was nevertheless enforceable, and therefore declared its lack of jurisdiction.

My impression is that this ruling was erroneous and what surprised me is that the Court of Naples deemed the aforementioned arbitration clause was enforceable, stating that: “what appears more convincing is the line of cases followed by lower Courts, according to which the rules on corporate arbitration set forth by the new law should be considered peculiar and alternative to the rules of the Code of Civil Procedure and the parties are allowed to choose which set of rules applies.” 

In other words, the Court of Naples contradicted the settled case law of the Supreme Court (according to which the twin-track approach is wrong and the only arbitration clause that may be validly included in the Articles of Association is a clause pursuant to Article 34 of Legislative Decree 5/2003). Moreover, the Court of Naples did so without even indicating the reasons which led it to “revive” the twin-track approach.

The result is to bring back uncertainty on an issue (“twin- track” or “single-track”), which had apparently been solved (in favour of the “single-track”). And this uncertainty cannot but bring about unfavourable consequences on corporate arbitration.

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