“Irrituale” arbitration in corporate matters

The Court of first instance of Salerno recently heard a complex corporate case and its decision (No. 3296 of 21 October 2019, Italian text available here), together with the decision issued by the Court of Appeal of Salerno with reference to the same dispute (No. 1311 of 14 September 2018, Italian text available here), provides the perfect opportunity to carry out a brief analysis of the issues concerning “irrituale” arbitration in corporate matters, that is to say the relationship between the “irrituale” arbitration as governed by Italian Code of Civil Procedure and arbitration in corporate matters under Italian Legislative Decree No. 5 of 17 January 2003 .

As a matter of fact, Italian law provides for two different kinds of arbitration proceedings: on the one hand, “regular” (“rituale”) arbitration, resulting in an enforceable award; on the other hand, “irrituale” arbitration, whose award has the effect of a binding contract.

In addition, “irrituale” arbitration has certain other peculiarities: concerning, for instance, the recourse for its setting aside.

The case heard by the Court of first instance and the Court of Appeal of Salerno concerned certain resolutions passed by a simple partnership (“società semplice”). Indeed, a dispute arose between two groups of members; and each group had excluded the other from the partnership by the said resolutions.

The articles of association of the partnership provided that “Any dispute concerning or consequent to these articles and to the relations arising out of them will be referred to a sole ‘irrituale’ arbitrator who will decide the dispute according to the law, hearing the Partnership and the relevant Member, without any procedural formality – except those that she will set forth – and without appeal. The arbitrator will be appointed by mutual agreement of the parties; failing this agreement, the arbitrator will be appointed by the Chairperson of the Court of first instance of Salerno (…).

It should be noted that, despite the provision of the clause, the arbitration did not involve the partnership, but only its members.

In addition, the said clause does not comply with the requirements set forth by Article 34 of Italian legislative decree No. 5/2003 (whereby the arbitrators in corporate matters have to be appointed by a third party unrelated to the company). Is it enforceable or not?

The issue of the enforceability of the clause was addressed by the Arbitral Tribunal during the arbitration proceedings, and the Tribunal held that the said clause is enforceable.

I assume that the Arbitral Tribunal decision was (also) based on the argument that Legislative Decree No. 5/2003 does not apply in that particular arbitration, which as said concerned a simple partnership (“società semplice”).

In fact, Legislative Decree No. 5/2003 is a piece of legislation enacted by the Italian Government on the basis of a delegating law (“legge delega”) of the Parliament. While the said Legislative Decree concerns arbitration in case of disputes related to partnerships and companies, without any distinction, the delegating law (Article 12, para. 3, law No. 366 of 3 October 2001) only empowered the Government to enact legislation on arbitration of “commercial partnerships and companies”.

Taking into account that the simple partnership is not a commercial partnership (it  is forbidden from carrying out commercial activities: Article 2249 of the Italian Civil Code), it can be argued that corporate arbitration rules set forth by Legislative Decree No. 5/2003 do not apply to disputes concerning simple partnership (as indeed was actually argued by several learned authors).

The award, on the merits, rejected the arguments of a group of members and accepted those of the other group. The losing group seised the Court of Appeal of Salerno (in the proceedings leading to the decision No. 1311/2018) and the Court of first instance of Salerno (in the proceedings leading to the recent decision No. 3269/2019), requesting both Courts to set the award aside.

The Court of Appeal rejected the request, noting that it concerned an award issued in “irrituale” proceedings, which cannot be challenged before the Court of Appeal pursuant to Article 829 of the Italian Code of Civil Procedure.

The request brought before the Court of Salerno was also rejected since the alleged grounds for the setting aside were other than the grounds provided for by Italian law with respect to an award issued in “irrituale” proceedings (having this award the effects of a contract, the said grounds, in a nutshell, are those concerning alleged defects of contractual consent, in addition to those arising out of a violation of due process).

As a matter of fact, the grounds rejected by the Court of first instance of Salerno were reasons in law. That circumstance, irrespective of the possible application in the case at hand of the rules concerning corporate arbitration, raises the question whether “irrituale” arbitration and corporate arbitration might coexist. A question of great relevance, taking into account that, according to a statistical analysis carried out by Assonime (available here, although in Italian), about a quarter of arbitration clauses in Italian companies’ articles of association provide for “irrituale” arbitration.

The law apparently maintains that “irrituale” and corporate arbitration might coexist (as a matter of fact, Article 35, para. 5, of Legislative Decree No. 5/2003 expressly refers to “irrituale” arbitration); but certain law provisions lead to the opposite conclusion.

For instance, Article 36 of Legislative Decree No. 5/2003 provides that, in case of dispute concerning a resolution passed by the partnership/company, the review on the merits of the award is always allowed if a violation of the law rules concerning the merits is claimed (I have already examined the issue of the relationship between this provision and the new Italian law on arbitration: see, for example, this post). However, this ground (violation of the rules of law concerning the merits) is never allowed in the case of “irrituale” award.

In the light of the above, I consider that there are two possibilities: in the case of disputes concerning company’s resolutions, the “irrituale” award is also subject to recourse for violation of the rules of law concerning the merit (although this conclusion is ill-founded on the basis of Italian law); as a more likely alternative, these disputes cannot be referred to an “irrituale” Arbitral Tribunal. In this latter case, another question arises: that concerning the scope of an arbitration clause only providing for “irrituale” arbitration. Is that clause unenforceable in the case of dispute concerning company resolutions (and, as a consequence, the jurisdiction over these disputes lies with the State Courts)? Or is it possible to maintain that the Arbitral Tribunal has jurisdiction over these disputes and it shall act as a “rituale” Tribunal, despite the provision of the arbitration clause? Further, what could happen in case of related actions (only some of them allowing “irrituale” arbitration)?

I maintain that the issues arising out of the relationship between “irrituale” arbitration and corporate arbitration are quite serious and should discourage the provision of “irrituale” arbitration in companies’ articles of association. Except, maybe, in the articles of association of simple partnerships, as in the case heard by the Courts of Salerno.

Leave a Reply

Your email address will not be published.

 

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Browsing this website you accept the use of cookies. more info

PRIVACY POLICY
The following information is provided in accordance with Article 13 of Regulation (EU) 679/2018 ("GDPR"), to users who access the services available at https://www.arbitratoinitalia.it (“Site”). When consulting the Site, information concerning users may be collected that constitutes personal data under the Privacy Code. This information is provided exclusively for the Site and does not affect any other web sites accessible by the user through links provided on the same.
DATA CONTROLLER AND DATA PROCESSOR
Data Controller (Titolare del trattamento) is Arbitration in Italy Ltd, a company incorporated under English law, registered at No. 12459814, with registered office in 61 Bridge Street, Kington, HR5 3DJ, UK ("Company"). Data Processor (Responsabile del trattamento) is the Company's present legal representative.
PLACE OF DATA PROCESSING
The processing of data related to the web services on this Site is carried out at the premises of the Company set out above and is performed by internal personnel duly appointed as Persons in charge of processing (Incaricati del trattamento).
TYPES OF DATA PROCESSED
Surfing Data
During the normal operation, the computer systems and software procedures used to operate the Site acquire some personal data whose transmission is implicit in the communication protocols of the Internet. This information is not collected to be associated with identified persons, but by its very nature could, through processing and association with data held by third parties, allow identification of users. This category of data includes IP addresses or domain names of computers used by users who connect to the Site, URI (Uniform Resource Identifier) of requested resources, the time of the request, the method used to submit the request to the server, the size of the file obtained in reply, the numerical code indicating the status of the response from the server (successful, error, etc.) and other parameters regarding the operating system and computer environment. These data are used only to obtain statistical information about the site and its use and to check its correct functioning and are deleted immediately after processing. The data could be used to ascertain responsibility in the event of possible computer crimes committed against the Site: except in this case, the data on web contacts are kept for a maximum period of seven days.
Data provided voluntarily by the user
The sending of optional, explicit and voluntary e-mails to addresses shown on this Site, and the filling in of forms specifically provided involve the subsequent acquisition of the sender’s e-mail address and the additional personal data provided in the electronic communication, together with the sender/user’s data necessary to respond to requests as well as to provide the service. Specific summary information will be provided in relation to specific services.
COOKIES
Cookies are data files which some websites, while visited, can send to the user with the scope of tracing its path inside the site and collect data in anonymous form, in order to enhance the offer and the use of the site. The Company does not use information technology for the direct acquisition of personal data by which the user can be identified. Cookies for the transmission of personal information or systems for the tracing of users are not used. The Company uses so-called technical cookies only with the scope of rendering browsing the Site possible and to make it possible for the user to use its functions. Some technical cookies are necessary in order to optimize the use and have the user accredit itself with the Site, for example in order to enter a restricted area (so-called browser cookie). The browsing cookies are session cookies and are deactivated automatically once the browser is closed. For the installation of these cookies it is not necessary to collect the consent of the user. The Company uses furthermore analytic cookies of thirds parties by which information on the interaction of the visitor with the content of the Site is obtained (most frequently used pages, time of use, etc.) and which thereby provide statistic information which makes it possible to optimize the Site and to enhance its use.
OPTIONAL DISCLOSURE OF DATA
Unless specified for surfing data, the user is free to provide personal information in the application forms or otherwise indicate them in order to request any information packs or other communications. Failure to provide personal information may, however, make it impossible to fulfill the request.
MODALITY OF PROCESSING
Personal data are processed by automated tools for the time necessary to achieve the purposes for which they were collected. Specific security measures have been taken to prevent loss of data, unlawful or incorrect use and unauthorized access.
PURPOSE OF PROCESSING - COMMUNICATION AND DISSEMINATION OF DATA
The personal information provided by users who request dispatch of information packs or rendering of services is used only to provide the service requested and may be disclosed to Company’s employees and consultants, duly appointed as Persons in charge of processing, as well as third parties that render ancillary or instrumental services to the activity of the Company and which are appointed as Data Controllers. There will not be any other communication of data to third parties, except upon request of public authorities. The data collected will not be disseminated.
RIGHTS OF DATA SUBJECTS
Data subjects are entitled, pursuant to Article 12 of the GDPR, to obtain, at any time, confirmation of the existence of the data and to know their origin, verify their accuracy or request their integration, updating or correction. Pursuant to this article data subjects shall have the right to request cancellation, anonymization or blocking of data processed in violation of the law, and in any case, to object on legitimate grounds to their processing. Requests should be sent to the Data Processor, at the above address or by email to privacy@arbitratoinitalia.it.

Close