Multiparty arbitration

Both from a historical point of view and in a number of its actual implementations, arbitration is a bilateral dispute resolution mechanism: in other words, it concerns disputes between two parties, a claimant and a respondent.

It is not by chance that, taking account of the above binary structure, the default rule on the appointment of the arbitral tribunal, contained in Article 810 of Italian Code of Civil Procedure provides that each party appoints an arbitrator and that the chair is jointly appointed by the party-appointed arbitrators.

However, disputes submitted to arbitration (in particular, to international arbitration) might have a more complex structure, either because there are more than two parties to the relevant relationship, or because after the execution of the arbitration agreement the parties increase in number: for instance, in case of succession or inheritance when two or more successors or heirs succeed a single party.

The rules concerning multiparty arbitration are set forth by Article 816-quater of Italian Code of Civil Procedure. It was introduced with the 2006 reform, which on the subject matter partly enacted the principles laid down by scholars and case law, aimed at safeguarding the parties’ intention to have their multiparty disputes referred to arbitration.

In a few words, the said provision allows multiparty arbitration proceedings, provided that: (i) all arbitrators are appointed by a third party; or (ii) all arbitrators are jointly appointed by all parties; or (iii) after a party has appointed one or more arbitrators, the other parties appoint the same number of arbitrators (or entrust a third party with the appointment). Otherwise, the proceedings are split into as many proceedings as there are respondents. Nonetheless, the proceedings cannot be split in the case of mandatory joinder (“litisconsorzio necessario“), that is to say, if the law requires that all parties are involved in the very same proceedings (for example, in case of a claim for termination of a multiparty agreement, or concerning the fact that a multiparty agreement is null and void). As a consequence, in that case the jurisdiction would lay with State Courts.

The above-mentioned provision entails several doubts over its proper construction. In addition, very few precedents dealt with its application. Therefore, two recent decisions on the point deserve to be commented on. They were issued, almost at the same time, by an arbitral tribunal (award of 15 January 2021, Italian text available here) and by the Court of Appeal of Milan (Court of Appeal of Milan, decision 29 January 2021, No. 286, Italian text available here).

It is worth starting with the latter.

The Court of Appeal was seised in proceedings aimed at having an award set aside.

The arbitration proceedings were commenced by some claimants against several respondents. The claimants appointed an arbitrator, two of the respondents, in turn, appointed another arbitrator, while the third respondents appointed a further arbitrator. The chair in the proceedings between the claimants and the two respondents that appointed an arbitrator was finally appointed by the Chairperson of the Court of First Instance. At this stage, the respondent that appointed a further joined in the proceedings and pointed out, amongst other things, that the arbitral tribunal was not properly appointed and that the proceedings cannot continue, due to the mandatory joinder set forth by the law.

The claimants were claiming compensation under Articles 1337 and 1440 of Italian Civil Code (which in a nutshell establish a particular kind of tortious liability connected to a contract and/or its negotiation). In turn, the respondents were counterclaiming that another agreement, entered into before the contract connected to the liability claimed by the claimants, was null and void. The second contract (the contract in connection with which the respondents’ alleged liability arose) only contained an arbitration clause, while no arbitration clause was contained in the first contract.

The Arbitral Tribunal held that the claimants’ claim under Articles 1337 and 1440 of Italian Civil Code did not result in a mandatory joinder and that the counterclaim, concerning a matter subject to State Courts’ jurisdiction, did not entail that arbitration proceedings cannot continue. As a consequence of these findings, the Arbitral Tribunal rejected the preliminary objections and examined the merits of the case.

The respondents lose the case and requested the Court of Appeal to set aside the award. The Court of Appeal dismissed their request.

On the one hand, the Court confirmed that, in the case of claims under Article 1337 and 1440 of Italian Civil Code, there is no mandatory joinder.

On the other hand, the Court noted, concerning the respondents’ counterclaim, that the mere fact that it was raised did not imply that the arbitration proceedings cannot continue. Indeed, although that counterclaim resulted in mandatory joinder of all the parties of the agreement allegedly null and void, the Arbitral Tribunal could (as in the case did) render a decision capable of res judicata effects with respect to the claimants’ claim and an incidental decision (“decisione incidentale”), which is not capable of res judicata effects, with respect to the respondents’ counterclaim, as this course of action is expressly allowed by Article 819 of Italian Code of Civil Procedure.

The decision issued by the Court of Appeal seems correct in the present case, as the decision issued by the Arbitral Tribunal, both from a strictly legal point of view, concerning the application of Articles 1337 and 1440 of Italian Civil Code and Articles 816-quater and 819 of Italian Code of Civil Procedure, and from the point of view of its possible consequences. As a matter of fact, that decision deters filibustering tactics, consisting in defending against a claim that does not imply mandatory joinder by raising a counterclaim that causes it, solely for the purpose of creating a procedural objection, so as to prevent the issuance of a decision on the merits. However, further elaboration might be required on the point, and on the application of Article 819 of Italian Code of Civil Procedure, in particular with respect to cases involving a more tight connection between the claim not involving mandatory joinder and the counterclaim involving it.

The above-mentioned award is also interesting and somewhat untypical.

In that case, a claimant commenced arbitration proceedings against two respondents, which were the heirs of her original contractual partner (the situation was more complex, but its complexity is not relevant), claiming in essence that the commitments entered into had not been fulfilled.

Only one of the respondents appointed an arbitrator, and the claimant requested the Chairperson of the Court of First Instance to appoint an arbitrator in lieu of the other respondent. The Chairperson appointed the same person already appointed by the first respondent.

The respondents objected that the arbitration proceedings cannot continue, because the claim raised by the claimant involved a mandatory joinder.

On the contrary, the Arbitral Tribunal held that the proceedings were to be split, under Article 816-quater of Italian Code of Civil Procedure, taking into account that the claimant’s claim did not entail a mandatory joinder.

In other words, the award is amongst the rare decisions – Italian scholars even doubted they were possible, although appropriate – issued by an Arbitral Tribunal on the nature of the joinder (whether mandatory or not), and the split of arbitration proceedings.

However, apparently, an issue was not carefully examined by the Arbitral Tribunal: both the respondents – one by her choice and the other as a result of the decision of the Chairperson of the Court – appointed the same arbitrator. As a consequence, it could be maintained that this case fulfilled the conditions set forth by Art. 816-quater of Italian Code of Civil Procedure to have single arbitration proceedings. The cautious approach taken by the Arbitral Tribunal is obviously admirable; nonetheless, further elaboration on the very topic would have been appropriate, as well as particularly interesting.

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