Arbitration in the time of CoViD-19

CoViD-19 pandemic also has an impact on arbitration proceedings.

The relevant issues were addressed by Italian lawmaker, that enacted provisions which require careful thought for their construction.

In the beginning were the Law Decrees Nos. 11/2020 and 18/2020, which provided for two different phases: a first phase (from 9 to 22 March 2020 under Law Decree No. 11/2020, until 15 April 2020 pursuant to Law Decree No. 18/2020), and a second phase (until 31 May 2020 according to Law Decree No. 11/2020, until 30 June 2020 pursuant to Law Decree No. 18/2020).  During the first phase,  procedural terms in civil proceedings were stayed and the hearings postponed, except for certain proceedings distinguished by particular reasons of urgency.  During the second phase, each Court would take the most appropriate measures to deal with the pandemic.

Law Decree No. 18/2020 shyly mentioned dispute resolution tools alternative to proceedings in State Courts, providing for the stay of terms for some of these tools, the ADR procedures that under Italian law the parties are required to initiate before filing a claim in Court.

No provision was enacted with reference to arbitration.

In the meantime, arbitral institutions in Italy and overseas provided guidance to Arbitral Tribunals and parties, adopted guidelines or identified specific solutions.

For instance, Milan Arbitration Chamber stayed the terms for filing any submission in its arbitration proceedings and the terms for the issuance of arbitral awards; similar measures were also taken by the Bologna Arbitration Chamber.

On 16 April 2020, sixteen leading arbitration centres issued a joint statement (available here), also inviting Arbitral Tribunals and parties to identify the most appropriate measures to ensure the efficiency of arbitration proceedings despite the pandemic.

Here comes Italian lawmaker.  Under Italian Constitution, in cases of extraordinary necessity and urgency, Government is entitled to issue provisional measures, having the force of law, subject to subsequent transposition into law by the Parliament.  Law Decrees Nos. 11/2020 and 18/2020 were issued on the basis of this constitutional provision.  Law Decree No. 18/2020 was transposed into law by the Italian Parliament, which enacted Law No. 27 of 24 April 2020, and that law sets forth that the provisions of Law Decree No. 18/2020 also apply to arbitration proceedings, as far as compatible.

While the Parliament was examining the bill for the transposition into law of Law Decree No. 18/2020, the Government issued Law Decrees Nos. 23/2020 and 28/2020: under Law Decree No. 23/2020 the first phase provided for by Law Decree No. 18/2020 was extended until 11 May 2020, and under Law Decree No. 28/2020 the second phase was extended until 31 July 2020.

How to make sense of all these provisions?

It could be reasonably argued that the provisions concerning the stay of procedural terms and the adjournment of hearings apply to arbitration proceedings from 30 April 2020 (date of entry into force of the law whereby Italian Parliament transposed Law Decree No. 18/2020) until 11 May 2020 (final term of the first phase as extended by Law Decree No. 23/2020).

The activities carried out from 9 March to 30 April 2020 should be valid, on the basis of tempus regit actum principle, whereby the validity of procedural activities is assessed on the basis of the law in force when they were carried out.  Nonetheless, cautious Arbitral Tribunals would consult the parties to understand if it is appropriate to adopt some specific measure.

In addition, even though the said Italian provisions only apply to arbitration proceedings seated in Italy, very cautious Arbitral Tribunals seated abroad in arbitration proceedings involving Italian parties would also consult the parties to assess whether to adopt specific measures, in order to minimise the risk that in the future a party could, with or without merit, argue that the award cannot be enforced in Italy since that party was prevented from presenting its case.

However, in this respect, it is worth noting that, according to the principles laid down by Italian case law, the party claiming that it was prevented from presenting its case has to satisfy the Court that specific defensive activities were actually precluded (Italian Supreme Court, I Civil Chamber, decision No. 2984 of 16 February 2016, Italian text available here,  and Court of Appeal of Genoa, decision No. 1215 of 27 August 2019, Italian text available here, while my comment is available here).

What would happen during the second phase (from 12 May to 31 July 2020)? As regards  proceedings in State Courts, the Chairperson of each Court would take the most appropriate measures.  Arbitration proceedings do not have Court’s Chairpersons.  As a consequence, it could be maintained that arbitral institutions and tribunals would exercise, during the second phase, the powers they already had before the enactment of the said law provisions, and that in some cases they had already exercised.

Flexibility is a major feature of arbitration proceedings under Italian law: also because of this flexibility, Italian Arbitral Tribunal would be able to face the challenges posed by CoViD pandemic.

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