Trick or treat?

Despite the Halloween season has now passed by, I cannot stop but wonder if our legislator is keeping on playing trick or treat with us: citizens and professionals that attempt enjoying the services of justice.

Foreign investors know well that beside ‟spaghetti, pizza and mandolino”, lengthy proceedings are just one of our jewels in the crown.

On 10 November 2014 the law introducing urgent measures aimed at alleviating the ordinary jurisdiction’s backlog was approved (Act no. 162/2014 – ‟162/2014 Act”). Interestingly, this law is informally referred to as ‟Decreto sblocca Italia” (in English, literally, ‟Unblocking Italy Decree”). One of the suggested ways aimed at speeding up the dispute resolution process would be devolving to, and continuing in, arbitration disputes currently pending before Italian first instance Tribunal and/or Court of Appeal.

Let’s see how, and if, this system would work.

Although the answer to the first question may seem rather easy (it may be found in the wording of the law, one could think), there are some aspects that appear rather blurry, to say the least.

A. Scope of application of the devolution to arbitration

Parties may devolve to arbitration disputes relating to civil proceedings that:

  1. are not already subject to the Judge’s decision making process;
  2. concern the parties’ disposable rights (i.e. rights that can be assigned and waived);
  3. do not concern labour or social security issues (except for disputes arising exclusively from collective labour agreements bearing arbitration clauses);
  4. if involve a private party and a public administration and concern tort liability or payments whose value is lower than Euro 50,000, the request to devolve the dispute to arbitration may be filed by the private party alone and the dispute shall continue in arbitration unless the public administration expressly disagrees within 30 days from the private party’s request.

So far, so good. Everything seems clear to me.

B. How does it work

1. Request of the parties: upon joint request of the parties to a dispute pending before the first instance Tribunal and/or the Court, the relevant Judge shall assess if the requirements set forth by art. 1 of the 162/2014 Act are met and, in that case, order the assignment of the case to the President of the bar association of the district in which the dispute is pending.

2. Appointment of Arbitral Tribunal: disputes whose value is equal or higher than Euro 100,000 shall be resolved by an arbitration panel. Disputes whose value is lower than Euro 100,000, if the parties jointly agree, shall be resolved by a sole arbitrator. The wording of this provision of the 162/2014 Act is not entirely clear to me. Literally, it reads as follows:

The Judge, once it has verified that the requirements set forth under paragraph 1, without prejudice of the barring and forfeiture of rights incurred, orders the assignment of the case to the President of the bar association of the district in which the Tribunal or the Court of Appeal is located for the appointment of the arbitration panel for disputes of value higher than Euro 100,000 and, if the parties jointly agree, of a sole arbitrator for the dispute whose value is lower than Euro 100,000. (…) [OMISSIS]” [emphasis added, editor’s note].

The provision could mean different things.

On one hand, it could mean that, as a general rule, all disputes should be referred to an arbitration panel instead of a sole arbitrator; parties may then agree to devolve the dispute to a sole arbitrator only if the dispute’s value is lower than Euro 100,000. This seems to be the interpretation of the Forensic National Council. I personally believe that this interpretation is debatable as it is not supported by the current wording of the law.

On the other hand, if the criteria to assign the dispute either to the arbitration panel or the sole arbitrator is the threshold of the dispute’s value, then the parties may agree to instruct a sole arbitrator even though the dispute’s value is higher than Euro 100,000.

Arbitrators shall be identified jointly by the parties or by the President of the local bar association, amongst attorneys registered at said bar for at least 5 years and that prior to the assignment of the case to the bar association have declared to be available to be appointed as arbitrators. Councillors of the bar association cannot be appointed as arbitrators.

3. Continuation of the proceedings: the case will continue before the Arbitral Tribunal from the same stage it has left the ordinary court, thus barring and forfeiture rights shall not be enabled to run afresh. In other words, the Arbitral Tribunal shall ‟pick up” the case where the ordinary Judge has left it. The set of rules concerning arbitration provided for by the c.p.c. shall apply, apart from the rules concerning the voluntary arbitration (in Italian ‟arbitrato irrituale”) – as opposed to the binding arbitration (in Italian ‟arbitrato rituale”) – provided that the award will have the same effects of a judgment.

4. Term for the awards: should the assignment to arbitrators come from the Court of Appeal, the award shall be rendered in 120 days from the constitution of the Arbitral Tribunal; upon agreement of the parties, the arbitrators may request a 30 days prorogation of said term. I assume, but the 162/2014 Act is silent on this, that the same term applies to the assignments coming from the first instance Tribunal.

5. Case’s dismissal: should the award not be rendered within said terms, the parties may summarise the proceedings before the competent court within the following 60 days, under the penalty of dismissal of the case. The same 60 days term for the resume of the case applies if the award promptly rendered has been declared null under the challenge procedure set forth by articles 828 and following of c.p.c. The 162/2014 Act is not expressly clear that the same principles apply to cases being assigned to arbitration from the first instance ordinary Tribunal.

6. Arbitrators’ fees: will not be borne jointly by the parties as currently set forth by article 814 of the Italian Code of Civil Procedure (‟c.p.c.”), hence each party will individually bear the payment obligation. Within 90 days from the entry into force of the 162/2014 Act (i.e. from 11 November 2014), the Ministry of Justice will adopt a regulation concerning, inter alia, the reduction of arbitrators’ fees.

7. Challenge of the award: the award may be challenged for nullity in conformity with article 828 c.p.c.

As much as I would love to welcome this attempt to be a real and effective way to ease the ordinary courts’ backlog and promote arbitration, I think that our legislator is just tricking us. Here is why.

First. The option of devolving the pending dispute into arbitration is not really a novelty that deserves to be framed as a ‟reform”. Even prior to the 162/2014 Act, the parties could decide to opt for the arbitration rather than the ordinary jurisdiction on the basis of Article 807 of the Italian Code of Civil Procedure, according to which the Parties may agree to arbitrate their dispute through the execution of a written agreement (in Italian ‟compromesso”).

Second. The devolution to arbitration is based on the joint request of the Parties. Obviously, I don’t argue this provision, as I am aware that it could not be otherwise unless to the detriment of the heart of arbitration, which is the parties’ will. I question the practical effects of this provision. To some extent, the length of the proceedings is, or may be, part of one party’s procedural strategy: will the parties be available to let it go? Unless persuaded by the Judge, my guess on this question would be ‟no”.

Third. Members of the arbitration panel or sole arbitrator shall be identified jointly by the parties or by the President of the local bar association of the district in which the dispute is pending amongst attorneys registered at said bar. It is not clear which is the role of the President of the bar association: will he/she enter the picture if the parties disagree on the arbitrators’ appointment thus, in practice, taking over the role that art. 810 c.p.c. reserves to the President of the Tribunal? If so, I find the provision rather scaring, since it leaves the appointment of the arbitrator/s in the hands of the President of a lobbying association, who may choose amongst his/her associates. Furthermore, the parties’ choice narrows down to attorneys of the local bar association, which, frankly speaking, it is a rather limited option especially in small size districts. Within the Italian scenario, I fear that this structure may be detrimental for the basic principles of equidistance and impartiality, as in the context of local bar associations it may well happen that the arbitrators’ mandate may be somewhat driven by political reasons.

I cannot hide that my expectations on the practical and side effects of this reform are rather low, however I will be more than happy to make up my mind. Let’s see how this legislative intervention will turn out in practice.