Italian Courts set forth peculiar rules concerning the assignment of the arbitration agreement in case of assignment of credit. In this respect, a recent decision issued by the Court of first instance of Milan (Court of first instance of Milan, VII Civil Chamber, decision no. 8379 of 5 July 2016, Italian text available here) is worth a mention.
A recent decision of the Court of first instance Naples (decision no. 4874 of 19 April 2016, Italian text available here) follows the (outdated) line of cases, according to which two different types of corporate arbitration would be possible: on the one hand, corporate arbitration pursuant to article 34(2) of Legislative Decree 5/2003 (which states that "the arbitration clause shall specify the number of the arbitrators and how to appoint them. In any case, the arbitrators shall be appointed by a third party unrelated to the company; otherwise, the clause shall be deemed as null and void (…)”); and on the other hand, common arbitration pursuant to Article 808 of Italian Code of Civil Procedure. This is the so-called "twin-track", which has already been discussed in this post.
An arbitration clause stipulates that all the disputes arising out of the agreement may be referred to an Arbitral Tribunal. Is that an optional arbitration, in the sense that the claimant may choose between the Court and the Arbitral Tribunal? Does the jurisdiction exclusively rest with the Arbitral Tribunal? Or is it a void or ineffective arbitration clause?
I already talked about this issue in this article, when analysing an order rendered by the Court of first instance of Milan. Recent rulings of the I Civil Chamber of the Court of Appeal of Bologna (decision no. 1884 of 12 November 2015, Italian text available here) and the VI Civil Chamber of the Supreme Court (decision no. 22039 of 28 October 2015, Italian text available here) have shed light on this issue again.
Decision no. 22008 of 28 October 2015 of the I Civil Chamber of the Supreme Court (Italian text available here) followed the line of cases opposing the so-called "twin-track approach" to corporate arbitration. This judgment ruled that the only arbitration clause that may be stipulated in the Articles of association of an Italian unlisted company is the one pursuant to Article 34 of Legislative Decree no. 5 of 17 January 2003.
It is quite usual that, when inserting an arbitration clause in an agreement, a party would like to preserve its right to file with the Court a request for a payment order (which is an ex parte order). The purpose would be to attain a temporarily enforceable payment order, since it would be an effective and fast solution to protect its rights.
Nonetheless, the outcomes of such choice could be different from those expected. The VI Civil Chamber of the Supreme Court, in its order no. 21666 of 23 October 2015 (Italian text available here), analysed the possible consequences.
A recent judgment of the Supreme Court (decision no. 18707 of 22 September 2015, Italian text available here) dealt with a very peculiar case. A party objected that an arbitration clause was unenforceable, since it included an additional preposition (more precisely the preposition “di”, which in Italian means "of").
In this case, the Supreme Court, as well as the Court of first instance, avoided a formalistic excess. The Court did not repeat the old case, referred to by Gaius, in which a party lost the case due to a lexical mistake.
The Court of first instance of Rome (decision no. 19215 of 28 September 2015, Italian text available here) ruled in a complex case concerning the relationship between a limited liability company and its former director. First of all, the company sued the former director before the Court, claiming his liability. In a second case (the case of the decision at hand), the former director requested the Court to issue a payment order against the company, in order to obtain the amounts allegedly owed to him. The parties did not take into account the arbitration clause stipulated in Article 26 of the Articles of association. This provision notes that “all controversies arising among the quotaholders or among the quotaholders and the company, the directors, liquidators and statutory auditors shall be settled by a sole arbitrator appointed by the President of the Certified Public Accountants Register of the place where the company has its registered office (….).” In the judicial proceedings commenced by the company, the former director objected that the Court did not have jurisdiction, due to the above mentioned arbitration clause. On its turn, the company raised this objection when challenging the payment order issued in favour of the former director.
Did the parties waive their right to arbitrate, by initiating Court proceedings?
Two recent rulings of the Italian Supreme Court analysed the relationship between arbitration and insolvency proceedings.
The first ruling (decision no. 13089 of 24 June 2015 of the of the I Civil Chamber of the Supreme Court, Italian text available here) established that “claims against a bankrupt party may not be brought before an Arbitral Tribunal. Indeed, the jurisdiction of the arbitrators is in any case prevented due to the prevailing jurisdiction of the Insolvency Courts on such claims.”
The second ruling is more interesting (decision no. 15200 of 21 July 2015 of the Supreme Court sitting en banc, Italian text available here). This judgment focused on the issue of the relationship between arbitration and insolvency when an arbitration procedure is pending abroad and therefore EC Regulation no. 1346 of 29 May 1999 concerning insolvency proceedings applies.
If an arbitration clause is stipulated in the company’s Articles of association, disputes between a former shareholder and the company, concerning the repayment of a shareholders’ loan, shall be referred to an Arbitral Tribunal. This is, in a nutshell, the rationale of decision no. 18316 of 17 September 2015 of the Third Civil Chamber of the Court of first instance of Rome (the Italian full text is available here).
The wording of the arbitration clause should be carefully selected, as it constitutes the basis of the jurisdiction of the Arbitral Tribunal. A possible wrong wording will not always be emended, once the dispute has arisen.
Nevertheless, it is commonplace that due attention is not devoted to this clause, either because it is inserted at the last minute in an agreement (known as the “midnight clause” effect), or because the agreement is reached after long negotiation on its commercial terms, underestimating the risk of a possible dispute.