The Ristori Decree: Impact on Italian procedural arbitrations and potential challenge of awards containing decisions based on remote hearings

 

Written by Andrea Salvemini

  1. The Ristori Decree

On 27 October 2020 the Italian Council of Ministers approved the Law Decree no. 137/2020 on “Further urgent measures regarding health protection, support for workers and businesses, justice and safety, related to the epidemiological emergency from COVID-19” (the so-called Ristori Decree), which was published in the Official Gazette on 28 October 2020 and came into force on 29 October 2020.

The Ristori Decree sought to provide “refreshments” for the economic sectors affected, directly or indirectly, by the new series of restrictive measures imposed by Prime Ministerial Decrees of 13, 18 and 24 October 2020, to contain the worsening of the pandemic in Autumn 2020. It should be pointed out that the Decree may be subject to amendments by the Parliament at the time of its conversion into law.

Among other things, the Decree introduced some provisions concerning civil justice, including domestic procedural arbitration (arbitrato rituale, i.e. the ordinary type of arbitral proceedings governed by the rules of the Italian Code of Civil Procedure).

In particular, pursuant to Article 23, paragraph 10, of the Ristori Decree, the provisions set forth by Article 23, paragraphs 1-9, of the Ristori Decree as well as by Article 221 of the Law Decree no. 34 of 19 May 2020 (as converted, with amendments, into Law no. 77 of 17 July 2020: the so-called Rilancio Decree) are applicable even to procedural arbitration proceedings “insofar as compatible.”

For our purposes, it should be noted that these provisions concern – in a nutshell – the following aspects:

  1. Public hearings may be held behind closed doors, to ensure health and safety (see paragraph 3 of Article 23 of the Ristori Decree).
  2. The judge may order that civil hearings on consensual separation and joint divorce matters may be held in writing (eg through exchange of written briefs only), subject to the express consent of the parties that would be entitled to participate in the same hearing (see paragraph 6 of Article 23 of the Ristori Decree).
  3. The judge may also attend the hearing by connecting from a place outside the court office (see paragraph 7 of Article 23 of the Ristori Decree).
  4. Collective deliberations in council chamber may be held through the use of remote connection, and the place from which the judges are connected is considered a council chamber for all legal purposes (see paragraph 9 of Article 23 of the Ristori Decree).
  5. The judge may order that hearings to be attended only by counsel be held in writing (eg through the exchange of written briefs only) (see paragraph 4 of Article 221 of the Rilancio Decree).
  6. Participation in civil hearings of one or more parties or counsels may take place, upon a party’s request, through remote audio-visual connection (see paragraph 6 of Article 221 of the Rilancio Decree).
  7. The judge, with the prior consent of the parties, may order that the civil hearing to be attended only by counsel, parties and/or court-appointed experts, be held through videoconference tools (see paragraph 7 of Article 221 of the Rilancio Decree).

 

  1. The question of the compatibility of the Ristori Decree’s provisions with Italian arbitral proceedings

Pursuing the interpretation suggested by the scholars who first studied the recent provisions of the Ristori Decree, the rule implemented by Article 23, paragraph 10, of the new regulation is pointless and threatens to give rise to dangerous misunderstandings.

In fact, none of the provisions set out in paragraphs 1-9 of Article 23 of the Ristori Decree are compatible with the arbitral proceedings. And even the rule provided in paragraph 9 – regarding the possible collegial deliberation of civil courts’ members through remote audio-visual connection (see point iv above) – would hardly be applicable in the context of arbitration, where the current legal framework already enables arbitrators to hold deliberations over the phone or videoconference. On the contrary, the new rules may jeopardise the typical flexibility that arbitration offers, as the recent provisions allow the use of remote connections only through tools “identified and regulated” by the Ministry of Justice, and only within the application period of the same paragraphs 2-9 of Article 23 of the Ristori Decree (i.e. 31 January 2021).

The same applies to the majority of provisions set out in Article 221 of the Rilancio Decree, whose rules regarding civil proceedings concern aspects in relation to which the arbitrators already have a high degree of autonomy and discretion pursuant to Italian regulatory framework (with the limit of respect for the adversarial principle, as per Article 816-bis of the Italian Code of Civil Procedure). Accordingly, absent any (unlikely) parties’ agreement or provision to the contrary, the arbitrators may, at any time and regardless of specific legal provisions, provide that arbitration hearings are conducted through remote connections even in the absence of the “prior consent of the parties,” or to ensure that such hearings be held in writing.

Paragraph 6 of Article 221 of the Rilancio Decree, which provides for the parties’ and their counsels’ right to participate by way of a videoconference in the in-person hearing set by the state court (see point vi above), might be the only provision applicable in the context of domestic arbitral proceedings. Thus, in the event that an in-person hearing is set by an arbitral tribunal during the period of application of the Rilancio Decree, the parties and their counsels shall have the same right to conduct the hearing through remote audio-visual connection, and the arbitrators cannot deny this prerogative (even when, for example, an agreement between the parties or the legal framework prevent remote hearings).

For these reasons, within the limits indicated above, the inherent freedom and flexibility of arbitration proceedings compared to traditional litigation reveal the inadequacy of the possible application in arbitral tribunals of the exceptional procedural rules set forth by the Ristori Decree, which have been designed for the rigid system of national courts.

 

  1. The potential challenge of awards containing decisions based on remote hearings: Austrian Supreme Court’s decision of 23 July 2020

This being said, we should now scrutinise a recent decision of the Austrian Supreme Court on 23 July 2020 – to our knowledge, the first rendered on holding a remote hearing against the objection of a party – which is of particular interest.

According to the summary of the case facts made by the authors who commented on the above-mentioned ruling (see Scherer, Schwarz, Ortner, Jensen, In a ‘First’ Worldwide, Austrian Supreme Court Confirms Arbitral Tribunal’s Power to Hold Remote Hearings Over One Party’s Objection and Rejects Due Process Concerns, Kluwer Arbitration Blog, 24 October 2020), in that case an evidentiary hearing was originally scheduled for March 2020, and in January 2020 the arbitral tribunal rescheduled the same hearing for 15 April 2020. In a case management conference call held in early March, the parties discussed the possibility of holding the hearing remotely in light of the outbreak of the COVID-19 pandemic and ensuing travel restrictions. The respondents rejected this option and proposed that the hearing be conducted in person at a later time. On 8 April 2020, the arbitrators decided that the hearing would proceed as scheduled, on 15 April 2020, and, due to the COVID-19 pandemic, by way of a videoconference. The start time was moved to 3pm Vienna time. As the respondents’ counsel and one of their witnesses to be examined at the hearing were based in Los Angeles, California, the hearing would begin at 6am local time.

During the hearing, the respondents complained about the remote nature of the hearing and the early start. And, after the hearing, they filed a challenge with the Vienna International Arbitral Centre (VIAC) Board against all three members of the arbitral tribunal and, subsidiarily, against the co-arbitrator appointed by the claimant alone. After the challenge was rejected by the VIAC Board, the respondents filed their challenge with the Austrian Supreme Court. The respondents claimed, inter alia, that holding a remote hearing amounted to a violation of the tribunal’s duty to treat the parties fairly because the tribunal did not put measures in place to prevent witness tampering. Specifically, the respondents claimed that neither the arbitral tribunal nor the parties were able to ascertain which documents witnesses would have access to; whether there were other people present in the witness’s room; and whether witnesses would receive chat messages while being examined.

Regarding the tribunal’s decision not to postpone the hearing and to conduct it remotely, the Austrian Supreme Court rejected the respondents’ challenge, stating that the duty to treat parties fairly applies to all stages of the arbitral proceedings, including the determination of the date of the hearing and decisions on requests to postpone. This includes an obligation to ensure that both parties have a fair opportunity to participate in the hearing. However, the Supreme Court ruled that, in the circumstances of the case, the tribunal’s decision not to postpone the in-person hearing in light of the current COVID-19-related restrictions, but to conduct the hearing remotely at the scheduled date, did not amount to a breach of the tribunal’s duty to treat the parties fairly.

In particular, the fact that the tribunal decided that the hearing would be conducted remotely also did not violate the fundamental principle that both parties be treated fairly or their right to be heard. Indeed, videoconferencing technology (both for the taking of evidence and the conduct of hearings) is widely used in judicial proceedings before state courts (citing a range of procedural laws on the domestic and European level) and this is also relevant for arbitral proceedings. The Supreme Court emphasised that the Austrian legislature has expressly promoted the use of videoconferencing technology during the COVID-19 pandemic to ensure that judicial proceedings could be advanced; and it recognised that commentators have similarly endorsed the use of remote hearings in arbitral proceedings during the pandemic.

Finally, the Supreme Court expressly confirmed that, as a general rule, remote arbitration hearings are not only permissible if both parties agree, but also over the objection of one of the parties. For this, the Court relied on Article 6 of the European Convention on Human Rights, which provides for a party’s right to get effective access to justice and to be heard. In circumstances like the COVID-19 pandemic, in which insisting on an in-person hearing would lead to a standstill of proceedings, videoconferencing provides a useful tool to ensure both effective access to justice and the right to be heard. According to the Supreme Court, this general conclusion in favour of remote hearings could only be reversed by sufficiently strong countervailing factual considerations in a particular case. The court did not find any in the case at dispute.

In conclusion, according to the Austrian Supreme Court, as a general rule, there is no violation of the parties’ fundamental procedural rights to be heard and to be treated fairly if an arbitral tribunal decides to hold a hearing remotely, even over the objection of one of the parties.

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