Arbitration and consortia

The recent publication of two decisions issued by different national courts of first instance (Court of Civitavecchia, decision No. 2 of 7 January 2021, Italian text available here; and Court of Brindisi, decision No. 22 of 5 January 2021, Italian text available here) offers the opportunity to examine the ‘state of the art’ regarding the applicability of the corporate arbitration law to consortia (consorzi).

Bearing in mind that art. 34, legislative decree No. 5 of 17 January 2003 indicates in the ‘companies’ the entities which are governed by the corporate arbitration law, the following question then arises: does the scope of application of the said law encompass certain entrepreneurial collective entities, such as the consortia? 

In its decision No. 2/2021, the Court of Civitavecchia ruled on an arbitration objection raised by a ‘urbanisation consortium’ (consorzio di urbanizzazione), in proceedings initiated against the latter by some of its members.  The claimants argued that the arbitration clause contained in the articles of association of the consortium was unenforceable, since it provided that each party of the dispute (that is, one or more members of the consortium) had the right to appoint one arbitrator.  According to the claimants’ position, the said arbitration clause was in breach of Article 34, para. 2, legislative decree No. 5/2003, under which the appointment of all the arbitral tribunal’s members shall be made by third parties unrelated to the entity.  The Court of Civitavecchia granted the arbitration objection and declared the enforceability of the arbitration clause, since the latter was not deemed to be subject to the corporate arbitration law.  As briefly explained by the Court, the urbanisation consortia are not governed by the laws applicable to incorporated companies, but by the rules applicable to associations (associazioni) and communion of properties (comunione).    

In another shortly motivated decision, the decision No. 22/2021 of the Court of Brindisi seemed to adopt a different perspective towards the applicability of the corporate arbitration law to consortia.  In the said decision, the Court dismissed the arbitration objection raised by a member of a consortium, in proceedings initiated against the said member and against the consortium by other members of the latter.  The Court has declared the unenforceability of the arbitration clause contained in the articles of association of the consortium for violation of Article 34, para. 2, legislative decree No. 5/2003, since such clause did not granted third parties unrelated to the consortium with the power to appoint the arbitral tribunal.  The Court grounded its decision on the assumption that the consortium at hand (which had not a corporate structure) fell within the scope of application of legislative decree No. 5/2003.  However, such theory is at odds with the case law.

In order correctly to construe the mentioned decisions in the wake of the judicial precedents on the subject, it is worth pointing out the types of consortium taken into consideration in this comment, as well as the applicability to such entities of the corporate arbitration law.

First, the ‘consortium with internal activity’ is governed by Articles 2602-2611 of Italian civil code and represents an association of two or more entrepreneurs, based on a multilateral agreement, with the aim of participating in a common activity or pooling the resources to achieve a common goal.  Such type of contractual consortium is subject to the laws governing the association and, therefore, it is excluded from the scope of application of the corporate arbitration law.  Since the nature of the relationship among the entrepreneurs is similar to a multilateral agreement, this type of consortium is subject to the arbitration law set forth in the code of civil procedure under Article 806 and ff. of Italian Code of Civil Procedure.

Second, the ‘consortium with external activity’ is governed by Articles 2612-2615-bis of Italian Civil Code.  The distinctive feature of the association at stake consists in the establishment of an office specifically designed for the management of the commercial relationships with third parties.  There is no consensus among scholars on the thesis that legislative decree No. 5/2003 does not apply to consortia with external activity.  In this regard, a scholar argued that there are no significant differences between an entity with a corporate structure (undoubtedly subject to corporate arbitration law) and an organisation which carries out a commercial activity with third parties (see Cerrato, Dalle «società» alle «organizzazioni collettive»: una possibile traiettoria evolutiva dell’«arbitrato societario»?, in Riv. arb., p. 329 ss.).  However, in recent rulings, the Italian Supreme Court excluded consortia with external activity from the scope of application of legislative decree No. 5/2003 (see decision No. 20462 of 28 September 2020).

Third, the so-called consortium companies (società consortili) are governed by Article 2615-ter of Italian Civil Code.  Such entities consist in companies, which pursue the purpose of the consortia under Article 2602 of Italian Civil Code, through the adoption of any corporate structure.  In this regard, suffice it to say that there is a unanimous consensus among scholars and in case-law on the applicability of legislative decree No. 5/2003 to the arbitration clauses included in the articles of association of consortium companies (Italian Supreme Court, decision No. 27736 of 31 October 2018; Dalmotto, L’arbitrato nelle società, Bologna, 2017, p. 75).

Lastly, the ‘atypical consortium’ is defined by contractual autonomy and governed by the will of its members.  This type of entity includes the urbanisation consortium, which is a group of real estate owners (not necessarily qualified as entrepreneurs), aiming at performing certain works or at providing certain services in favour of their real estate properties located in a specific area.  The Italian Supreme Court (decision No. 9568 of 13 April 2017) has recently clarified the legal nature of such entity, stating that the latter is subject to the rules applicable to the non-recognised associations (associazioni non riconosciute).  Consequently, it is undisputed that the corporate arbitration law does not govern this atypical type of consortium.

Having said all the above, the reasoning underlining the decisions of the courts of first instance at stake can now be construed more properly.

The Court of Civitavecchia ruled in line with the majority opinion according to which the urbanisation consortia (in absence of any different agreement among its members) shall be governed by the rules applicable to the non-recognised associations.  As an indisputable consequence of such thesis, the urbanisation consortia are not subject to the strict provisions set forth under Article 34, para. 2, of legislative decree No. 5/2003, with regard to the appointment of the arbitral tribunal.  Bearing this in mind, the ruling of the Court of Civitavecchia appears to be coherent with the recalled precedents, by declaring the validity of the arbitration clause and declining its jurisdiction in favour of the arbitral tribunal.  

On the other hand, the correctness of the decision rendered by the Court of Brindisi might be questioned.  The said Court apparently disregarded the consensus view, which denies the applicability of the corporate arbitration law to the consortia without corporate structure.  The Court applied Article 34 of legislative decree No. 5/2003 to the arbitration clause contained in the articles of association of the consortium and declared the invalidity of the arbitration clause for breach of the provision set forth in the said article.   Moreover, the reference made by the Court to a recent ruling of the Italian Supreme Court (decision No. 23485 of 9 October 2017) seems to be contradictory and misleading.  It is true that, in the mentioned decision, the Italian Supreme Court declared the unenforceability of an arbitration clause for violation of Article 34 of legislative decree No. 5/2003, but its ruling was based on the assumption (which is not the case in the dispute arose before the Court of Brindisi) that the said arbitration clause was contained in the articles of association of a limited liability company (società a responsabilità limitata).

The contrast between the ruling of the Court of Brindisi and the majority opinion described above, together with the briefness of the Court’s motivation, raises doubt about the fact that such decision will represent the milestone of a new wake of case law.

In conclusion, the analysis carried out about the applicability of the corporate arbitration rule to the consortia may be summarized as follows.  The corporate arbitration law under legislative decree No. 5/2003 is applicable to the consortium companies, but not to the consortia with internal or external activities.  The urbanisation consortia are organisations, which may be construed as non-recognised associations; therefore, they are not subject to the corporate arbitration law, but to the arbitration rules set forth under art. 806 and ff. if Italian Code of Civil Procedure.

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