Corporate arbitration

Italian law provisions on corporate arbitration (enacted by legislative decree no. 5 of 17 January 2003) entails a number of interpretative issues, possibly the reason for the limited recourse to arbitration in corporate matters.

At first, doubts were cast on the relationship between corporate arbitration and ‘ordinary’ arbitration. Some Courts and scholars maintained that Italian companies’ articles of association may contain an arbitration clause providing for ‘ordinary’ arbitration, while other authorities suggested that only corporate arbitration could be provided for. That issue does not amount to a purely nominal matter, since in ‘ordinary’ arbitration the parties to the proceedings are allowed to appoint the arbitrators, while in corporate arbitration they are required to entrust a third-party appointing authority. Eventually, the issue was settled by Italian Supreme Court, clearly stating that arbitration clauses contained in Italian companies’ articles of association may only provide for corporate arbitration, while arbitration clause otherwise providing are null and void (Italian Supreme Court, III Civil Chamber, decision No. 15892 of 20 July 2011). Even after Italian Supreme Court laid down the said doctrine, some authorities took a different stance (for example, in 2016 the Court of first instance of Naples held that ‘ordinary’ arbitration could be allowed in corporate matters: decision No. 4874 of 19 April 2016), but this mostly happens in rare decisions issued with respect to peculiar cases, from which it is difficult to draw principles applicable to cases other than those heard by the Court.

Other doubts concern the jurisdiction to issue interim measures in case of corporate arbitration since Italian law grants corporate arbitrators (unlike ‘ordinary’ arbitrators) with the power to issue such measures. Several lower Courts maintain they have the said jurisdiction, notably before the constitution of the arbitral tribunal (the decisions issued by the Court of Milan are particularly clear on this point: see for example Court of Milan, order 22 December 2015). Nonetheless, a handful of lower Courts holds that, in case of corporate arbitration, State Courts do not have jurisdiction to issue interim measures, the relevant power being in any case vested in the arbitral tribunal (see for instance Court of Catania, decision No. 4041 of 19 July 2016).

Moreover, further doubts were cast with respect to the scope of arbitral tribunal jurisdiction in corporate matters. Italian law (legislative decree No. 5/2003) expressly provides that arbitral tribunals may hear disputes concerning resolutions passed by the company and, as a general rule, all disputes concerning negotiable rights relating to the corporate relationship.

However, Italian law does not define the disputes concerning negotiable rights relating to the corporate relationship. As a consequence, a number of interpretive hypotheses have been proposed.

The main doctrine laid down by Italian Courts on the matter is that whereby non-negotiable rights – that is, the rights in relation to which arbitral tribunals do not have jurisdiction – are only the rights arising out of mandatory law rules, whose violation triggers a reaction regardless any party initiative.

The said doctrine partly confuses non-negotiable rights and mandatory law rules (a negotiable right may indeed arise out of a mandatory law rule); nonetheless, it provides for a useful test to be applied: arbitral tribunals do not have jurisdiction over disputes concerning rights whose violation triggers a reaction regardless any initiative by the interested parties.

However, that doctrine is forcibly used to hold that arbitral tribunals do not have jurisdiction over disputes where the claimant claims that the company’s financial statements are not true or accurate, while those specific claims are subject to a specific (and tight) limitation period. In other words, the violation of the relevant rights does not trigger a reaction regardless of the parties’ initiative; on the contrary, that initiative is required, and it has to be expeditious.

The said construction is contrasted by another, applied by the Court of first instance of Catania in a recent decision (Court of Catania, decision No. 3598 of 30 October 2020, Italian text available here).

First of all, the Court of Catania points out that non-negotiable rights and mandatory rules are different legal notions. In fact, in the case of non-negotiable rights, the law restricts private autonomy, while mandatory law rules in root preclude private autonomy.

Non-disposable rights are therefore those rights that can be claimed without any limitation period: inaction would otherwise allow disposing of those non-disposable rights, and that would be self-contradictory.

The decision of the Court of Catania was not issued per incuriam of the decisions of Italian Supreme Court; on the contrary, the Court is conscious of those decisions, but it prefers to rely on other decisions issued by the same Italian Supreme Court, holding that the legal notion of non-negotiable rights overlaps that of cases of legal instruments that are irretrievably null and void (Italian Supreme Court, decisions Nos. 15890/2012 and 3975/2004).

The Court concludes its detailed and thorough reasoning holding that arbitral tribunals do have jurisdiction over claims concerning alleged untruthfulness or inaccuracy of Italian companies’ financial statements.

 

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