Pre-contractual liability and arbitration

Pre-contractual liability, under Italian law, is a form of tort liability.  In a nutshell (and with some degree of approximation), it concerns cases similar to those provided for by English Misrepresentation Act 1967, as well as other cases falling outside the scope of the said Act involving a breach of the duty to act in good faith during the negotiations aimed at entering into a contract.

In this respect, a topic of great interest is that of the enforceability of the arbitration agreement possibly contained in the contract in case of pre-contractual claims (or tort claims related to the negotiation, the execution and the fulfilment of the contract).

I have already written some posts concerning that topic (available, for example, here and here) and an article of mine will be published soon in the Italian law review Danno e Responsabilità.

A recent decision issued by the Court of first instance of Milan (No. 58 of 8 January 2020, Italian text available here) addressed the same topic.  In my opinion, such decision is really impressive, both for its detailed and thorough grounds and for the conclusions it reached.

In short, the case heard by the Court of Milan concerned a post-acquisition claim raised by the purchaser of a going concern (transferred to a newco) against the sellers (and the professional who had estimated the value of the transferred going concern).

In particular, the purchaser claimed the sellers’ fraud / bad faith, both before and after the execution of the SPA and, as a consequence, the fraudulent misrepresentation (“dolo incidentale“) and the sellers’ tort liability (as well as their liability for breach of certain representations and warranties contained in the SPA).

As far as we are concerned, the sellers objected to the Court’s jurisdiction, on the basis of the arbitration clause contained in the SPA.

The crucial issue was, therefore, the enforceability of such clause with respect to the claims raised by the purchaser.

The Court of Milan considered that the said clause was enforceable, as mentioned based on detailed and thorough grounds.

First of all, the Court found that the clause had a particularly broad content. In hindsight, it did not even mention the contract, so that it could refer to all the disputes concerning the relationship that resulted in the execution of the contract.

This interpretation is also confirmed by the construction rule provided for by Article 808-quater of the Italian Code of Civil Procedure, whereby “in case of doubt, the arbitration agreement shall be construed in the sense that the arbitral jurisdiction extends to all disputes arising from the contract or from the relationship to which the agreement refers“.

This interpretation is further confirmed by the otherwise paradoxical State Courts and Arbitral Tribunals distributed jurisdiction over closely related matters (in this respect, the Court of Milan referred to the decision of the Italian Supreme Court, VI Civil Chamber, No. 26553 of 22 October 2018, Italian text available here).

The Milan Court added that the said construction of the arbitration clause cannot be contrasted by the fact that a subsequent clause of the same contract provided for the exclusive jurisdiction of the Court of Milan over disputes that cannot be referred to arbitration: in fact, tort claims may be referred to arbitration pursuant to Article 808-bis of the Italian Code of Civil Procedure.

The Court further observed that, in a case such as that it heard, the contract represents a crucial element of the claim and not a mere chronological antecedent of it: in doing so, the Court essentially excluded the application of the restrictive principles laid down by the Italian Supreme Court’s case-law (which I briefly analysed in this post).

Finally, the Court of Milan concluded its reasoning noting that Article 808-bis of the Italian Code of Civil Procedure (that is to say, the Article providing for arbitration of tort claims) does not require (as maintained by the referred case-law of the Italian Supreme Court) that the arbitration clause expressly mention non-contractual disputes in order to have it heard by an Arbitral Tribunal.  In fact, the said law rule is only intended to dissolve the doubts arisen under the old law on the enforceability of an arbitration agreement concerning tort claims.

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