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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.