The Comparative Law Yearbook of International Business · people preferred to submit their disputes...

The Comparative Law Yearbookof International Business

The Comparative Law Yearbookof International Business

Volume 34, 2012

PUBLISHED UNDER THE AUSPICES

OF THE CENTER FOR INTERNATIONAL LEGAL STUDIES

General Editor

Dennis Campbell

Director, Center for International Legal Studies

Salzburg, Austria

Law & Business

A C.I.P. Catalogue record for this book is available from the Library of Congress

ISBN 978 90 411 38071

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International CommercialArbitration in Italy

Roberto Ceccon

ACLAW Ceccon & Associati

Padua, Italy

Introduction

In General

In Italy, arbitration is an institution that has been in existence since theRoman law, and all periods of Italian history have been influenced bythis alternative means of dispute resolution. In particular, arbitrationwitnessed major development during the era of the city-states, due tothe increase of guilds and commerce and primarily because of the mis-trust in justice as administered by the Imperial Courts. This motivatedtraders to resolve their disputes outside the courts.

Moreover, the proliferation of new laws resulted in substantialuncertainty about their application. Consequently, traders looked atarbitration as the appropriate solution to resolve their disputes byapplying the rules created by their business practice, which were moreunderstandable than the laws. In other words, arbitration representeda direct answer to the needs of the trader class by applying a set ofsubjective rights as the rules to resolve disputes. This led to the devel-opment of the ius mercatorum. As an eminent scholar stated, "Onceupon a time the cases submitted to arbitration were more frequent thanthe cases submitted to the ordinary judges".1

The development of arbitration took place pari passu with thecrumbling of the Roman Empire and its legal system. The Germanpeople preferred to submit their disputes to a private judge, becausesuch a judge would have applied their laws and customs in place of theRoman laws.

1 Pertile, Storia del Diritto Italiano (1903).

The mercantile system progressively developed, and with it the rules

to govern the contractual relationships among merchants (mercatores)

that transpired very often at the fairs and on a transnational scale. The

curiae mercatores became the institutions having the power to solve

disputes by applying customs and usages of a specific art or craft with-

out the intervention of a state court.2

Current Scenario

In the current scenario, particularly in terms of the development of

arbitration in the Italian legal system, companies and business people

in general no longer trust the ordinary justice system. One of the major

reasons for this mistrust is that the inordinately long time it takes to

obtain a final judgment has superseded any reasonable expectations

from the court system.

Moreover, it is no longer possible to only trust the laws or to wait

for the enactment of laws by the competent legislative bodies, because

laws are very often delayed and often do not meet the real needs of

people operating in the business sector on a daily basis. In other

words, the law as well as the ordinary courts as traditional means to

govern all business relationships may no longer be sufficient to pro-

vide a prompt resolution to urgent market needs.

As a result, business operators are increasingly seeking recourse in

alternative means of dispute resolution that can provide them with cer-

tainty and trustworthiness. Arbitration is once more becoming the

appropriate remedy to meet the new needs of the market by guarantee-

ing users a flexible and speedy procedure, competent arbitrators, and

the finality of an arbitration award.

Currently, arbitration is a clear point of reference in domestic and

international disputes — it is a sort of "technology" adopted by almost

all countries, which have enacted specific laws on arbitration in line

with the general accepted practice as developed in the transnational

community. Any country, in fact, faces a global system of relation-

ships in today’s world, and it must therefore offer market operators a

mechanism for dispute resolution that is generally accepted and able

to coalesce different cultures.

4 Comparative Law Yearbook of International Business

2 Marrella and Mozatto, "Alle origini dell’arbitrato commerciale internazionale.L’arbitrato a Venezia tra Medioevo ed Età moderna", Collana della Rivista didiritto internazionale privato e processuale (2001).

The Italian law on arbitration has long fostered this goal. Thirty

years ago, an eminent scholar wrote:

"It is no longer sufficient, in a technological society, to have a

technique operating on the basis of crystallized values able to

restore the order by securing the proper right, as happens

through the legal technique and the judicial technique; a new

and different technique is necessary, a technique able to take

into consideration all different elements, particularly the

economic element, and capable of superseding the pending

conflict not only through the most appropriate manner to

re-establish the harmony between the parties, but also to restore

the system to its proper functionality.

"This new technique is now represented by arbitration and, in

particular, by administered arbitration that is organized and

operates in connection with the bodies presiding over eco-

nomic activities. This is the only way it possible to restore

cooperation by overcoming any contingent disagreement."3

Factors Motivating International Arbitration

Today, arbitration is probably the best way to not only avoid costly liti-

gation in the courts and to solve disputes quickly and cost-effectively,

but also to avoid complex problems caused by the presence of parties

following different — and often contrary — legal systems, such as the

civil law system and the common law system. In the Italian context,

recourse to arbitration may be sought for many reasons.

One of the most important reasons is the growing mistrust of the

justice system, especially due to the long time spent before the courts

to obtain a final decision. Under the Italian procedural law, this long

wait may involve three degrees of jurisdiction: first degree before the

tribunal, second degree before the court of appeal, and the third degree

before the Supreme Court.

Arbitration is certainly resorted to more in the international arena

than domestically, because international commercial relationships

require more attention to the needs of the parties pertaining to different

(and often contrary) legal systems or because they involve interests

which supersede domestic boundaries.

Roberto Ceccon 5

3 Ferri, "La Funzione Dell’Arbitrato Nella Societa Moderna", Rivista di dirittocommerciale (1974).

Origin of International Commercial Arbitration

Development of International Arbitration Culture

It is important to investigate the historical origins of the institution of

arbitration in order to understand its salient features in both the

domestic and the international settings. The argument that the historical

background of arbitration is of no relevance to current practice is not

acceptable. In the author’s opinion, the historical investigation of the

origins of arbitration is an essential starting point to understand the

development of an arbitration culture, which has evolved to foster an

educated and appropriate professional practice that is able to meet the

needs of today’s business community.4

The origins of international commercial arbitration can be traced to

ancient Roman law, with a revival in the Middle Ages; today, even

more than in the past, this form of dispute resolution represents an

operative means very commonly used in the business community. As

such, international commercial arbitration constitutes "a species of

arbitration", particularly developed during the intensification of trade

in the era of the city-states.5

In that period of history, the commercial branches arising out of the

mercantile class caused the emergence of the "arbitrator" alongside

that of the "arbiter". An arbitrator was considered to be a person called

upon to resolve a dispute pursuant to equitas (arbitration in equity)

and the common principles recognized by practice; an arbiter was

strictly linked to the application of the rules of law.6

In other words, the mercantile sector was looking for a "private

judge" (as an alternative to an ordinary judge), who was to be chosen

from among the guilds and the cliques and endowed with a specific

competence. The initial need was to achieve the speedy resolution of

small disputes regarding specific terms of a contract or the determina-

tion of the price or the quality of a product, through people having

first-hand and specialized knowledge of these matters. It was not nec-

essary to decide on all legal relationships arising out of the contract,

but rather to have direct intervention for the quick resolution of the

dispute in accordance with the rules of common practice or customs.


4 Schizzerotto, Dell’Arbitrato (1982).5 Enciclopedia Italiana Treccani, Voce Comune, Volume XII.6 d’Aurillac, "Tractatus de arbitri et arbitratoribus, in Tractatus illustrium" in

Martone (ed.), Arbiter — Arbitrator: forme di giustizia privata nell’età del dirittocommune (1984).

The Origin of the Ius Mercatorum

Very soon after the emergence of the arbitrator and the arbiter, the

distinction between the two was superseded by the higher function of

the arbitrator — aggrieved parties began submitting the entire dispute,

and not only decisions regarding a specific term of the contract, for the

arbitrator’s decision.

From the twelfth century onward, many new juridical and eco-

nomic interests arose in Europe, demanding more direct protection of

the related rights and offering greater flexibility to new users of this

means of dispute resolution.7 This is when a new body of law arose in

response to the commercial needs of the day: the ius mercatorum8 was

created as a set of usages and customs having universal application

and formed within the clique of merchants, guilds, and craftsmen.9

This new "law" offered the arbitrator the legal data to solve any mer-

cantile dispute in compliance with the needs of international trade. Due

to the crumbling of the Roman Empire, the Roman law and the canonic

law made room for this new legal reality, which became the arbitrators’

main point of reference, as confirmed by a French legal scholar:

"Merchants did not want their disputes to be resolved by the

courts, which were only familiar with local customs, and to

avoid it they had recourse to arbitration. The jurisdictions that

they approached to resolve their disputes according to their

own customs (lex mercatoria) were the origin of true arbitra-

tion jurisdictions, authorized by the charter that had enabled

the establishment of a fair or a market."10

In this era, particular influence in the affirmation of arbitration was

exercised by the notaries public, who were the depositary of the "for-

mulas" used in contractual practices, such as the forms for drafting the

arbitration agreement (compromissum) or the arbitration clause.11

Roberto Ceccon 7

7 Goldschmidt, Storia universale del diritto commercial (1913).8 So named by Baldo and Bartolo da Sassoferrato.9 Martone, Arbiter — Arbitrator: forme di giustizia privata nell età del diritto

commune (1984).10 David, L’arbitrage dans le commerce international (1982).11 Roberti, Le magistrature giudiziarie veneziane e i oro capitolari fino al 1300

(1906/1911); Banti, "Ricerche sul notariato a Pisa tra il secolo XIII e il secoloXIV", XXIII–XXXV Bollettino Storico Pisano (1964–1966), at pp. 131–186;Pecorella, Studi sul notariato a Piacenza nel secolo XIII (1968); Costamagna,Il notaio a Genova tra prestigio e potere (1970); Sbarazzini, Statuti notarili diBergamo/secolo XIII (1977).

The development of arbitration during the Middle Ages ran parallel

to a general mistrust in the institutional system, and it was seen as a

preferential way to bypass the intervention of the Imperial Courts.

In choosing arbitration as the proper intervention for disputes, the

mercantile class followed the same route as church members did with

the episcopalis audientia (bishop’s tribunal). Episcopalis audientia

was the jurisdiction of bishops to the extent recognized by the state.

Originally limited to spiritual matters and religious disputes

among church members on most important civil matters,12 episcopalis

audientia also was applied by bishops for resolving disputes for

non-members of the church. In effect, by introducing the episcopalis

audientia, the church offered believers a new court to which they

could submit their disputes and obtain a judgment alternative to the

judgment rendered by the state courts.13 Similar to the contraposition

between the church and the state, arbitration became the means to

affirm a jurisdiction other than the Imperial Courts.

In this historical context, Italy had several laws regarding arbitra-

tion. The Capitolare Nauticum of Venice issued in 1255 introduced

arbitration as a means to resolve maritime disputes involving trade

traffic along the routes of four continents, where Venice acted as a real

mercantile power.

The Genoese laws provided for an arbitration venue with a panel of

250 arbitrators, boni viri de tabula; fifteen arbitrators were first chosen,

and two were finally picked by drawing lots. Once the two arbitrators

were appointed, they had to appoint a third one; in case of disagree-

ment, the third arbitrator was appointed by the judge. As is evident, the

procedure introduced around the twelfth century represents the same

procedure which is now usually applied in any arbitration.

Another interesting distinction appeared in this period between

compulsory arbitration and voluntary arbitration. Compulsory arbi-

tration was imposed to solve specific disputes, such as disputes

between husband and wife, father and son, masters and employees,

and artisans and workers, and this form of arbitration was vested with

jurisdictional power: the arbitral tribunal could issue the award and

make it enforceable.


12 Banti, "'Civitas' e 'Commune' nelle fonti italiane dei secoli XI e XII", Critica storica(1972), at pp. 568–584; Ennen, Storia della città medioevale (1975); Renouard,Le città italiane dal X al XIV secolo (1975).

13 Vismara, Episcopalis audientia (1937).

This jurisdictional effect was not permitted in voluntary arbitration,

which could ascertain the existence of a right but could not enforce it. It

was only with the development of the jurisprudence that voluntary

arbitration had the same capability to render an award with the force of

a judgment rendered by an ordinary court and to prevent an ordinary

procedure before the court when the parties had agreed to submit their

dispute to arbitration.

Impact of French Revolution and French Law

The evolution of arbitration continued during the following centuries.

Between the sixteenth and seventeenth centuries, the local regulations

showed a progressive hostility against arbitration, because it was seen

as a means that could erode the public power exercised by the state

courts. A new positive stimulus was only witnessed at the beginning of

the eighteenth century.

It was the revolutionary impetus coming from France which

restored the original function of arbitration, which was almost politi-

cal and that was found in the Middle Ages in the form of episcopalis

audientia. The French Revolution, in fact, affirmed arbitration as the

expression of the new people’s (citoyens) power as opposed to the

power of the state.

The disputes between citoyens became a prerogative of arbitration

instead of the ordinary courts, and the Revolution granted arbitration a

legislative status, recognizing it as "the most reasonable way to end

disputes between citizens, as legislators cannot make provisions that

would tend to diminish the award itself or compromise the effective-

ness of the decision".14

This particular connotation of arbitration did not survive for long in

France. On 10 July 1843, the Cour de Cassation declared as null and void

any arbitration clause contained in a contract.15 This principle is the same

as the provision that was introduced by French law in Article 2061 of the

French Civil Code, which stated, "the arbitration clause is void unless

otherwise provided by law" and which has now been repealed.

This discussion on French law is not incidental; in the development

of international arbitration, the role of the French system has been

vital, and all systems of law have benefited from it. For instance, the

principle of the international public order as a valid limitation to

Roberto Ceccon 9

14 Decree Number 16 of 24 August 1790 of the Revolutionary Assembly, n. 16.15 Cour de Cassation, Chambre Civile, 10 July 1943, S. 1843I.561. D. 1843.I.343.

recognize and enforce a foreign arbitral award, as well the principle of

autonomy of the arbitral clause, came out of French jurisprudence.16

The qualitative leap in the field of arbitration happened in the

twentieth century, when the promulgation of international treaties and

model laws entered into the national legal systems as points of reference

to ameliorate or introduce, ex novo, the domestic laws on arbitration

and favor a common practice in transnational affairs.

This happened in Switzerland through the Federal Code on Private

International Law of 18 December 1987, in the United Kingdom

through the Arbitration Act 1996, in Germany through the Act on the

Reform of the Law relating to Arbitral Proceedings of 22 December

1997, and in many other countries. Italy started to reform its legisla-

tion on arbitration in 1983, followed by a second reform in 1994 and a

third reform in 2006. These reforms are discussed in detail in the

following sections.

International Commercial Arbitration

Contextual Definition of "Commercial"

The business community usually considers international commercial

arbitration the best means to resolve international trade disputes, and

it is totally different from international arbitration, which refers only

to the resolution of disputes between states. This means that the basis

of reference in international arbitration is always an international

treaty and the relative dispute regards the non-fulfillment by a state of

the obligations arising out of such a treaty. On the other hand, interna-

tional commercial arbitration regards disputes arising out of contracts

pertaining to the fields of commercial law.

To better understand the meaning of "commercial" in this specific

context, it may be useful to consider the definition suggested by the

United Nations Commission on International Trade Law (UNCITRAL)


16 Cour de Cassation, Req., 17 July 1989, S.1900.I.339, D.1904.I.225; Cour d’Appelde Paris, 10 April 1957, JCP.1957.II, 10078, note by Motulsky; Revue Critique deDroit International Privè, 1958, 120, note by Loussouarn; Revue Arbitrage,1957, 16; Clunet, 1958, 1002; Cour de Cassation, 14 June 1960, Revue Critiquede Droit Internationale Privè, 1960, 393; Cour de Cassation, Req., 27 July 1937,JCP.1937.II, 449, D.1938.I.25; Cour d’Appel de Paris, 21 February 1964, Rev. Arb.,1964, 543; Cour de Cassation, 12 November 1968, Rev. Arb., 1969, 59; Courd’Appel de Paris, 25 January 1972, Rev. Arb., 1973, 158, note by Fouchard.

Model Law on International Commercial Arbitration (MLICA).17

Footnote 2 of Article 1 (Scope of Application) of the MLICA states:

"The term ‘commercial’ should be given a wide interpretation

so as to cover matters arising from all relationships of a

commercial nature, whether contractual or not. Relationships

of a commercial nature include, but are not limited to, the

following transactions: any trade transaction for the supply

or exchange of goods or services; distribution agreement;

commercial representation or agency; factoring; leasing;

construction of works; consulting; engineering; licensing;

investment; financing; banking; insurance; exploitation agree-

ment or concession; joint venture and other forms of industrial

business cooperation; carriage of goods or passengers by air,

sea, rail, or road."

It is clear that this definition embraces all types of businesses and it

may be considered as the best and most useful definition to qualify a

commercial transaction, but it is not sufficient to precisely understand

when a dispute arising from these contracts may generate an "interna-

tional" arbitration. To that extent, the MLICA provides further

guidance by defining, in Article 1(3), when an arbitration may be

considered international:

"An arbitration is international if:

"(a) The parties to an arbitration agreement have, at the time

of the conclusion of that agreement, their places of business

in different States; or

"(b) One of the following places is situated outside the State

in which the parties have their places of business;

"(i) The place of arbitration if determined in, or pursuant

to, the arbitration agreement;

"(ii) Any place where a substantial part of the obligations

of the commercial relationship is to be performed or the

place with which the subject matter of the dispute is most

closely connected; or

"(c) The parties have expressly agreed that the subject matter

of the arbitration agreement relates to more than one country."

Roberto Ceccon 11

17 As adopted by the United Nations Commission on International Trade Law(UNCITRAL) on 21 June 1985, and as amended by the UNCITRAL on 7 July 2006.

The MLICA provides a comprehensive meaning of the terms

"commercial" and "international", but these definitions need to be

placed within the Italian system.

Legislative Framework in Italy

Code of Civil Procedure

Under Italian law, arbitration is governed by the rules contained in the

Code of Civil Procedure (CCP),18 Book Four, Title VIII, Articles 806

to 840, as amended in 1983, 1994, and 2006.

Before the reform of 1983, the Italian law limited the autonomy of

the parties in Articles 2 and 812. Article 2 stated:

"The Italian jurisdiction cannot be derogated by mutual

agreement in favor of a foreign jurisdiction nor of arbitrators

sitting abroad, save when the dispute regards obligations

between foreigners or between a foreigner and a citizen not

having a residence or domicile in the Republic and such a

derogation is in a written form."

Article 812 stipulated that arbitrators had to be Italian citizens. It

appears from such rules that, in principle, Italian law did not permit

derogation of Italian jurisdiction by a written agreement executed

between an Italian entity having its place of business in Italy and a

foreign entity. Consequently, an arbitration clause providing for inter-

national arbitration was forbidden under Italian laws until alternative

regulations came into force.

At the same time, even if the CCP set forth the rules governing arbi-

tration, the parties to an international agreement were not permitted to

appoint foreign arbitrators in Italy, according to Article 812. It is easy

to understand that such rules were a severe impediment to the develop-

ment of international arbitration as well as the choice of Italy as a seat

of arbitration.

The ratification of the New York Convention19 and the Geneva Con-

vention20 opened the Italian system to the acceptance of the derogation


18 Royal Decree Number 183 of 28 October 1940.19 New York Convention on the Recognition and Enforcement of Foreign Arbitral

Awards of 1958, ratified on 19 January 1968.20 European Convention on International Commercial Arbitration, done at Geneva

on 21 April 1961, ratified on 10 May 1970.

of Italian jurisdiction by means of an arbitration clause contained in an

international contract and providing for an international arbitration

abroad.

Abrogation of Limitations

The CCP, which was enacted in 1940, did not consider international

arbitration at all, although many other domestic systems did. During

that period, arbitration was generally not well accepted. It was only

after the first important multilateral treaty on international commercial

arbitration (the New York Convention) that commercial arbitration,

both domestic and international, gained awareness.

The mention of domestic arbitration with reference to the New

York Convention is not strange; in fact, the tendency to supersede

local restrictions in favor of the liberalization of arbitration as a means

to solve international commercial disputes determined a different

approach in domestic systems as well. The acceptance of the arbitra-

tion clause as a valid means to internationally recognize the

competence of the arbitrators in place of the ordinary courts weakened

the resistance of those systems interested in having full control over

jurisdiction. In this context, the content of Article 2.1 of the New York

Convention is particularly relevant. According to Article 2.1:

"Each Contracting State shall recognize an agreement in

writing under which the parties undertake to submit to arbi-

tration all or any differences which have arisen or which may

arise between them in respect of a defined legal relationship,

whether contractual or not, concerning a subject matter

capable of settlement by arbitration."

This provision of the New York Convention opened the door for a new

approach to arbitration, resulting in substantial equalization between

domestic and international arbitration.

Fifteen years from the date of ratification of the New York Conven-

tion, Italy made its first legislative intervention on arbitration through

Law Number 28 of 9 February 1983. The law was enacted to put such

institutions in line with the new legislative trends as reflected in the

English Arbitration Act of 1979 or in French Decree Number 81-500 of

14 May 1980 on domestic arbitration, followed by Decree Number

81-500 of 12 May 1981 on international arbitration.

Before Law Number 28 of 1983, the jurisprudence of the Italian

Supreme Court recognized the importance and value of the New York

Roberto Ceccon 13

Convention, affirming the validity of an arbitration clause agreed by

the parties in the form set forth by Article 2 of the New York Conven-

tion, despite the limitation posed by Article 2 of the CCP.21

The abrogation of the limitation set forth by Article 812 of the CPP

only came about after the first Italian reform on arbitration, permitting

the appointment of foreign (non-Italian) arbitrators. By removing this

limitation, Italy complied with the terms of the Geneva Convention by

introducing a rule in keeping with Article 3 of the Geneva Convention,

stating that "in arbitration covered by this Convention, foreign nationals

may be designated as arbitrators". Law Number 218 of 31 May 1995

formally abrogated Article 2 of the CCP excluding the derogation of

Italian jurisdiction in favor of arbitrators sitting abroad.

Binding Nature of an Arbitral Award

Another important innovation introduced by the reform of 1983 was

the binding nature of the arbitral award, expressly stated in the last

clause of Article 823 of the CCP. With this provision, the arbitral

award became immediately binding on the parties from the moment of

the last signature appended by the arbitrators to the award.

In the previous law, the arbitral award had to be deposited by the

arbitrators before the competent court (Pretura) of the place of arbi-

tration within five days from the final signature of the arbitral tribunal,

sub poena of the nullity of the award itself. After that, the judge, after

having ascertained the regularity of the deposit and of the award, rec-

ognized and enforced the arbitral award (exequatur). This meant that

the arbitral award could become binding between the parties only by

way of the recognition granted by the judge and not before.

The reform of 1983, by affirming the binding character of the arbi-

tral award only as a consequence of the signature by the arbitrator or

arbitrators, recognized the content of Article 3 of the New York Con-

vention and gave an award the power to circulate abroad without

obtaining the preliminary exequatur in Italy.

This reform put the Italian system in line with many other systems

in which arbitration is simply the judgment issued by private judges

(the arbitrators), duly appointed by the parties pursuant to an arbitra-

tion clause or an arbitration agreement, who are legally empowered to

solve the dispute between the parties with binding effect.


21 Corte di Cassazione Civile, Sezioni Unite, 19 September 1978, Number 4167,Juris Data; Giardina, "La nuova disciplina dell’arbitrato in Italia", Rassegnadell’arbitrato (1983).

The only difference was that, in Italy, a challenge to the arbitral

award had to be filed within one year from the date of the last signa-

ture, while in many other countries there was no limit for the challenge

except for the time-bar limit normally applied for contracts. In other

words, arbitral awards rendered in Italy could be immediately binding,

but not challengeable in absence of the exequatur.

The binding effect of arbitral awards, as recognized by the 1983

reform, permitted the winning party to obtain the enforcement of the

arbitral award abroad even after the expiry of the term to challenge it.

Provisions on International Arbitration

In General The first Italian arbitration reform certainly marked a

step forward in modernizing arbitration, but it was not yet sufficient

to convey the willingness to create an institution that truly addressed

the needs of the business community. It took another ten years for the

Italian legislator to adopt a wider approach.

The reform enacted on 5 January 1994 is the first important reform

on arbitration, particularly international arbitration. For the first time,

Italian law provided a specific regulation regarding international arbi-

tration. Law Number 22 of 5 January 1994 introduced a set of rules

governing international commercial arbitration in line with the choice

made by countries such as France and Switzerland.

Although domestic and international arbitration is substantially

characterized by the same procedure, the Italian legislator preferred to

set forth a specific discipline for international disputes to be submitted

to arbitration.

Accordingly, the 1994 reform to the CPP provided a definition of

international arbitration,22 defined the content of the arbitration

clause,23 determined the criteria to choose the rules applicable to the

merits,24 and set forth the language of the arbitration.25 The reform

also regulated the grounds for challenging the arbitrators,26 deliberation

of the arbitral award,27 and, finally, classified the grounds to challenge

the arbitral award.28

Roberto Ceccon 15

22 Code of Civil Procedure, Article 832.23 Code of Civil Procedure, Article 833.24 Code of Civil Procedure, Article 834.25 Code of Civil Procedure, Article 835.26 Code of Civil Procedure, Article 836.27 Code of Civil Procedure, Article 837.28 Code of Civil Procedure, Article 838.

Definition Starting with the first innovation introduced by Article

832 of the CPP in the 1994 reform, according to Italian law an arbitra-

tion could be considered international:

". . . if , at the date of signing the arbitral clause or the arbitral

agreement, at least one of the parties resides or has its effec-

tive place of business abroad, or even if just a relevant part of

the obligations arising from the disputed relation must be

performed abroad."

The content of Article 832 clearly showed traces of the MLICA, which

provides a definition of international arbitration using a reference to

the place where the parties reside or a substantial part of the perfor-

mance has to be performed. This means that the 1994 reform complied

with the criteria proposed by the MLICA, at least in terms of the defi-

nition of international arbitration. Of course, this definition is not

accurate, because the term "commercial" has been omitted, but this is

not of particular relevance.

The most interesting observation is that, according to the 1994

reform, an arbitration also could be considered international when

"just a relevant part of the obligations arising from the disputed rela-

tion must be performed abroad". In other words, an arbitration could

be international even if the parties to the contract were both Italians.

Only the place where the relevant part of the obligations had to be per-

formed was relevant to qualify the arbitration as international.

Immediately after the introduction of this new rule, there was an

attempt by the jurisprudence to deny such a definition in a case con-

cerning an international construction contract. The Court of Appeal of

Rome affirmed, rather audaciously, that in this kind of contract the

relevant part of the obligations of the contractor was not the execution

of the works but the payment of the compensation to be effected in

Italy.29 This was, in fact, a very conservative and negative reaction to a

rule that was very innovative, but was in line with that part of the juris-

prudence that did not look favorably upon extending the role of

arbitration to meet the new needs of the business community.

Fortunately, the Supreme Court set aside the decision of the Court

of Appeal, affirming that an arbitration is international according to

Article 832 of the CCP when a relevant part of the obligations have to

be executed abroad and that relevance must be understood by the

nature of the contract executed by the parties. In a construction


29 Court of Appeal of Rome, 6 October 1997, Juris Data.

contract, the relevant part of the obligations to be performed is strictly

linked to construction, and not to its payment. In this manner, the

Supreme Court reaffirmed the innovative value of Article 832 of the

CCP and the broadmindedness toward the new concept of interna-

tional arbitration.30

Form of the Arbitration Clause Article 833 of the CCP introduced

a specific rule regarding the form of the arbitration clause and

acknowledged the guidance expressed by the Supreme Court in its

decisions. In particular, Article 833 stated that the arbitration clause

contained in the general terms and conditions of contract, standard

applications, or standard commercial forms is not subject to specific

approval provided for in Articles 1341 and 1342 of the Civil Code.

According to Italian law before the 1994 reform, any clause con-

tained in the general terms and conditions of contract, in standard

applications, or in standard commercial forms had to be specifically

approved in writing, and this included the arbitration clause. Very

often, parties involved in international arbitrations based on arbitra-

tion clauses contained in the general terms and conditions of contract,

standard applications, or standard commercial forms exchanged by

telex or telegram or other means of communication, tried to object to

the validity of the arbitration clause, on the basis of the lack of specific

approval in writing.

The jurisprudence invariably responded to this objection by affirming

that an arbitration clause in an international contract containing general

terms and conditions, or standard applications, or standard commercial

forms exchanged by telex or telegram is valid despite the lack of the

express signature of the parties. The reason was that such a clause

complied with the international rules accepted by Italy, and in particular

with Article 2.2 of the New York Convention, according to which "the

term ‘agreement in writing’ shall include an arbitral clause in a con-

tract or an arbitration agreement, signed by the parties or contained in

an exchange of letters or telegram".

This means that the validity of an arbitration clause contained in an

international contract does not require specific endorsement when

there is an exchange of telexes or telegrams. This concept was elabo-

rated by the jurisprudence and finally transfused by the legislator into

Article 833 of the CCP.

Roberto Ceccon 17

30 Corte di Cassazione, 13 October 2000, Number 13648, Juris Data.

The second paragraph of Article 833 contained a further provision

regarding the validity of the arbitration clause. It stated that an arbitration

clause was valid and legal when contained in the general conditions of

a contract executed in writing by the parties, if it was provided that the

parties were aware of the existence of the clause or should have been

aware of it by using ordinary diligence. The meaning of this new rule

clearly indicated the willingness of the Italian legislator to protect the

validity of an arbitration clause contained in an international contract

to the best extent possible, and showed a new willingness to support

arbitration.

Rules Applicable to the Merits A matter of particular importance

when dealing with international arbitration is the moment at which

the arbitrators must decide about the law to be applied to the merits of

the dispute. If the parties to the dispute have failed to agree on the

applicable law, the arbitrators will apply the private international law

in force at the place where the arbitration is conducted.

Accordingly, at the time of the 1994 reform, an arbitral tribunal sitting

in Italy had to apply the private international law in force in Italy,31

pursuant to which the law applicable to contractual obligations was

that indicated by the Rome Convention.32

The possibility existed that this criterion regarding the application

of Italian private international law might not be acceptable to all the

arbitrators or to the parties or a party, considering that there was no

specific rule in the CCP governing this aspect of the arbitral proceed-

ings. Due to this uncertainty, arbitral proceedings could encounter a

serious obstacle. The 1994 reform solved this problem by introducing

Article 834, stating:

"Parties may either decide by agreement what rules the arbi-

trators are to apply to the merits of the dispute or authorize the

arbitrators to decide in accordance with what is just and fair.

Failing such choice by the parties, arbitrators shall apply the

law with which the relationship has the closest connection.

"In both cases, arbitrators shall take into account any indica-

tion contained in the contract and in trade usages."


31 Law Number 218 of 31 May 1995.32 Rome Convention on the law applicable to contractual obligations of 19 June

1980.

The Italian legislator, after having reaffirmed the willingness of the

parties as the essential factor in the choice of law, expressly obliged

the arbitrators to apply to the merits of the dispute the law with which

the relationship had the closest connection. Notably, this rule differen-

tiated between the willingness of the parties having the freedom to

decide "what rules . . . are to apply" (including the authorization to

decide the case "in accordance with what is just and fair") and the

limitation imposed on arbitrators to apply "the law with which the

contractual relationship has the closest connection".

The distinction between "rules" and "law" is of particular impor-

tance in arbitration, because it introduced the concept that only the

parties may apply to the merits of dispute any rule, including the law

of a determined legal system as well as lex mercatoria or any other rule

deemed proper. The modern version of the lex mercatoria ("law of

merchants") consists of rules and practices that have evolved within

international business communities. Professor Goldman, who named this

new "law" and who contributed greatly to its development, apparently

does not consider this legal order a new branch of international law,

but rather an autonomous third legal order that is equally appropriate

for State contracts and contracts between private parties.

However, arbitrators cannot autonomously decide on the applica-

tion of a set of rules not pertaining to a legal system, because such a

choice could disorientate the parties and make the right of defense all

the more difficult. In the absence of a choice of the law applicable to

the merits of the dispute, the plaintiff or defendant may reasonably

expect and consider that some law of a determined legal system will be

applied instead of unknown rules freely chosen by the arbitrators.

On this basis, the Italian legislator chose to provide for a distinc-

tion between rules and the law, with the aim of protecting the right of

defense of the parties involved in international arbitral proceedings.

At the same time, Article 834 of the CCP set forth the recourse to

"any indication contained in the contract" and to "trade usages", both

in case of application of the "rules" and "the law". This means that

the new discipline of international arbitration contained in the 1994

reform wished to underline the fundamental importance of the content

of the contract as a direct expression of the willingness of the parties to

govern their relationship.

Equal importance was given to trade usages as the terms of refer-

ence in a specific field of activity. In this way, the arbitral tribunal was

indirectly authorized, despite the absence of the willingness of the

parties, to apply the lex mercatoria as a subsidiary system of rules

applicable to the merits of the dispute.

Roberto Ceccon 19

Language of the Arbitration In line with the needs of international

arbitration, the 1994 reform introduced rules regarding the language

of the arbitration.

Article 835 set forth that, if the parties failed to specify the lan-

guage of the arbitration, it would be chosen by the arbitrators, taking

into account the specific circumstances of the case. The approach of

the Italian legislator reflected the arbitration practice as demonstrated

in many arbitration rules of arbitral institutions as well as in Article 22

of the MLICA.

Deliberation of the Award A particular innovation as regards the

making of the award was set forth in Article 837 of the CPP, which

also authorized the arbitrators to decide on the award by video

conference, unless the parties had agreed to a different procedure.

This provision facilitated the consultation between arbitrators who

normally reside in different countries.

Challenging the Award The need to satisfy the certainty of the

award rendered by the arbitrators in an international arbitration was

better underlined in Article 838 of the CPP, which limited the grounds

for challenging an award. In fact, in order to give credibility to the new

Italian law on international arbitration, the legislator decided to pre-

vent, subject to any contrary agreement between the parties, any form

of challenge of an arbitral award rendered in an international arbitra-

tion if it was based on an incorrect application of the rules of law.

Moreover, the award could not be revoked or challenged by third

parties indirectly affected by the award. Consequently, an award

issued in an international arbitration held in Italy could be challenged

only for errores in procedendo — that is, only for procedural mistakes

made by arbitrators during the conduct of the arbitral proceedings.

These specific rules on international arbitration were repealed by

the last reform of 2006, apparently creating a lacuna in the governance

of international arbitration. However, as the next section demonstrates,

this is not the case.

2006 Arbitration Reform

In General

The arbitration reform introduced by Law Number 40 of 2 February 2006

(the 2006 Reform) applied the same philosophy followed, inter alia,


by the German legislator. The 2006 Reform eliminates the specific

rules dedicated to international arbitration and provides for a unique

discipline of arbitration.

In particular, no specific rule governs the definition of interna-

tional arbitration, the law applicable to the merits of a dispute, the

language of the proceedings, or the setting aside of an award. This

means that the arbitrators will decide, on a case-by-case basis, which

criteria will be applied to resolve such issues.

In general terms, this new approach acknowledges the fact that an

arbitration procedure, domestic or international, is usually the same,

except for the different nationalities of the parties involved, the choice

of law to be applied to the proceedings, the merits of the dispute, or the

language of the procedure. In all cases, arbitrators acting in an interna-

tional arbitration may have some problems deciding on these aspects

of the dispute when the procedural law to be applied does not provide

for any solution.

For instance, the 1994 reform tried to clarify certain problems

faced by the jurisprudence, such as the applicability of Articles 1341

and 1342 of the Civil Code to the arbitration clause. The abrogation of

Article 832 of the CPP (providing a definition of international arbitration

using a reference to the place where the parties resided or where a sub-

stantial part of the performance had to be performed) raises the risk

that a party not interested in a speedy solution to the case may find

grounds to delay the normal conduct of arbitration.

In other words, the arbitration clause contained in an international

contract needs to be subscribed twice in order to be valid and effective

(i.e., the parties must expressly repeat the arbitration clause at the end

of the contract and sign it for acceptance), and this represents a step

backward.

But apart from this, the 2006 Reform has, in some way, rationalized

arbitration by maintaining it within the framework of internationally

recognized best practices.

Language and Definition

Article 816 bis of the CPP gives the parties the right to indicate the lan-

guage of the arbitration; failing such indication, the arbitrators will

have full freedom to rule on this matter.

Article 830 states that an international arbitration is an arbitration

in which one party has its place of business abroad, so limiting the

definition contained in the previous Article 832 of the CPP.

Roberto Ceccon 21

Rules Applicable to Merits

As to the law applicable to the merits of the dispute, the arbitrators

will follow the usual rule of the lex fori by applying the private interna-

tional law of the seat of the arbitration, in case the parties have failed

to choose a law. According to Italian law, the arbitrators will apply

the criteria set forth in the Rome Convention, as now substituted by

Rome I.33

Challenging Arbitral Award

Regarding a challenge to an arbitral award, the 2006 Reform has

submitted the setting aside of an international arbitral award to the

general rules applied to challenging a domestic award, but extending

the domestic rule to also include the rule previously applied to interna-

tional arbitration under Article 838 of the CCP.

Currently, according to the third paragraph of Article 829, the set-

ting aside of an arbitral award for violation of the rules of law is

admissible only if agreed on by the parties or foreseen by law. This

means that, as in the case of an international award, a domestic award

cannot be challenged for erroneous application of the rules of law to

the merits of the dispute.

Furthermore, the 2006 Reform abrogates the rule contained in

Article 838 of the CCP that prevented any third party from challenging

an arbitral award or prevented any party from asking for its revoca-

tion. The arbitral award may now be revoked in the cases set forth in

Article 395 of the CPP, which states:

"The awards issued by the Court of Appeal or by the sole judge

may be challenged for revocation:

"1) if such awards were obtained through the willful misconduct

of one party against the other;

"2) if the award was made pursuant to evidences recognized

or in any way declared false after the award or if the party

ignored that such evidences were recognized or declared false

before such award;


33 Regulation (EC) Number 593/2008 of 17 June 2008 on the law applicable tocontractual obligations (Rome I), OJ 2008 L 177/6–16.

"3) if, after the award, the existence of one or more material

documents was discovered, which the party could not have

submitted to the judge due to force majeure or as a result of the

counterpart’s fault;

". . .

"6) if the award is based on the willful misconduct of the judge

and such conduct has been ascertained by a final award."

In terms of case law, according to several decisions of the Cour de

Cassation after the 2006 Reform,34 revision on the merits of an award

is not allowed in Italy. The request for setting aside an award may be

proposed before the court of appeal at the seat of the arbitration, and

only on the grounds set forth by the CCP.35 After the 2006 Reform, the

grounds for setting aside the award are when:

(1) The arbitration agreement is invalid, provided that the objection

has been raised in the first submission after the arbitrators have

accepted the appointment;

(2) The arbitrators have not been appointed in compliance with the

provisions of the CCP, provided that the objection has been

raised during the arbitral proceedings;

(3) The award has been issued by a person who could not be

appointed as an arbitrator;36

(4) The award exceeds the scope of the arbitration agreement

(provided that the objection has been raised during the arbitral

proceedings) or the award decides the merits of the case when

the merits could not be decided;

(5) The award does not include the grounds on which it is based, the

arbitrators’ stated decision, and their signature;

(6) The award has been rendered after the time limit has lapsed,

provided that the party’s intention to set aside the award on this

ground had been notified to the other parties and the arbitrators

before the award was issued;

(7) The parties have not complied with the necessary formalities

that would render the award null, and the fault has not been rem-

edied;

Roberto Ceccon 23

34 Cour de Cassation, Section I: 8 June 2007, n. 13511; 16 May 2007, n. 11315; 9 January2008, n. 178; 15 March 2007, n. 6028; 20 January 2006, n. 1183; 7 February 2007,n. 2717; Section II, 12 April 2007, n. 8798.

35 Code of Civil Procedure, Article 829.36 As provided for under the Code of Civil Procedure, Article 812.

(8) The award is contrary to a previous award or judgment having

the force of res judicata between the same parties, provided that

the arbitrators have been made aware of the award or court deci-

sion during the arbitration proceedings;

(9) The arbitration proceedings were conducted without observing

the principle of due process;

(10) The arbitration proceedings concluded with the issue of the

award without deciding the merits of the case and the merits had

to be decided;

(11) The award contains contradictory provisions; and

(12) The award has not expressly decided on some of the claims and

counterclaims falling under the scope of the arbitration agreement.

Rule on Institutional Arbitration

The 2006 Reform also has introduced a specific rule regarding institu-

tional arbitration. Article 832 of the CPP states that the arbitration

agreement may include a predetermined set of arbitration rules. In

case of any discrepancy between the arbitration agreement and the

rules, the arbitration agreement will prevail. The arbitration rules in

force at the moment the arbitration proceedings begin will apply,

unless the parties have agreed otherwise. As an exception to the ordi-

nary rules on arbitration, the arbitration rules may contain additional

provisions regarding the substitution or challenge of arbitrators.

Finally, if an arbitral institution refuses to administer the arbitration,

the arbitration agreement will remain in force and all other rules gov-

erning arbitration pursuant to the law will apply.

These new provisions on institutional arbitration put the Italian law

in line with the content of the 1961 Geneva Convention, according to

which the parties to an arbitration agreement should be free to submit

their disputes to a permanent arbitral institution or to an ad hoc arbitral

procedure.

This does not mean that the Italian system did not recognize institu-

tional arbitration before the 2006 Reform, but only that the 2006

Reform has officially introduced institutional arbitration, which rep-

resents the most interesting and developed means of resolution of

international disputes, into the Italian system.

Arbitrators’ Powers

Despite the three Italian reforms of the law related to arbitration, there

is currently still a matter which remains outside the sphere of the powers


of the arbitrators. It is an accepted fact that the arbitral procedure is

governed by arbitrators who have full freedom to act, while respecting

the fundamental principle of the right of the parties to fully present

their case.

Moreover, in conducting arbitral proceedings, arbitrators also have

to respect the rules of law which cannot be voluntarily derogated; in

certain cases, they also may seek the intervention of the local courts to

solve problems encountered during the proceedings.

Under Italian law, the parties may file a petition with the local court

of the place of the seat of arbitration in case the arbitrator or arbitrators

to be appointed by each party have not been appointed (by either or

both parties) or if the third arbitrator has not been appointed.37 The

same provision also applies in case of substitution of an arbitrator or

arbitrators.38 A witness who refuses to appear before the arbitral tribu-

nal may be ordered to appear before it by the court.39

The only power that arbitrators cannot exercise under Italian law is

the power to grant provisional or interim measures of protection. In

fact, Article 818 of the CCP states that arbitrators "cannot grant any

order for seizure or any other provisional measure, save for any other

rule of law". This lack of power represents a quid unicum in the pan-

orama of the most advanced domestic laws on arbitration, because all

the most sophisticated domestic laws and arbitral institutions — such

as Swiss law, French law, English law, the International Chamber of

Commerce (ICC) Rules, the London Court of International Arbitration

(LCIA) Rules, the American Arbitration Association (AAA) Rules,

the Chamber of Arbitration of Milan (Camera Arbitrale di Milano —

CAM) Rules, the UNCITRAL Rules, and the MLICA — provide for

this kind of power in favor of the arbitrators. The next section focuses

on this matter.

Provisional Measures of Protection

In General

Provisional measures are often necessary in any type of legal proceed-

ings, but the need for such provisional measures should not be specific,

nor limited to state court proceedings. Even if all judicial proceedings

Roberto Ceccon 25

37 Code of Civil Procedure, Article 810.38 Code of Civil Procedure, Article 811.39 Code of Civil Procedure, Article 816 ter, third paragraph.

were rapid and efficient — which, unfortunately, does not happen in

practice — provisional measures would still be necessary in the event

of extreme urgency. Yet, the slower the proceedings are, the greater is

the need for provisional measures. This may be the reason why some

judicial systems have developed quite efficient provisional measures

in order to counter-balance the slowness of ordinary proceedings.

This aspect of legal proceedings is particularly relevant under Italian

procedural law. Articles 669 bis et seq of the CPP provide a set of rules

on obtaining a preliminary judgment ruling based not only on the

urgency of the matter to be protected by the provisional measure, but

also on the fumus boni juris of the case (i.e., the prima facie merit of

the dispute). This means that the judge, through a provisional

measure, anticipates in some way the final decision in the case. In

this way, the usual slowness of the ordinary proceedings is largely

restricted.

The problem of the slowness of proceedings is not limited to ordi-

nary proceedings, but also is spreading to arbitrations, particularly

international arbitrations, which are currently becoming increasingly

complex and time-consuming. This is due not only to a more aggres-

sive procedural and litigious attitude of the parties, but also to the

ever-growing complexity of international commercial relations and

the globalization of international commerce between parties coming

from opposite sides of the world (and not only in geographical terms).

International commerce itself proceeds at a steadily increasing

pace, combined with the rapid evolution of technical, political, and

economic environments. The financial situation of a debtor may

change more quickly than it might have changed in the past. It also is

easier than it was in the past to transfer assets around the world. The

changes in technologies, markets, prices, and similar dynamics are so

rapid and so crucial that an award rendered after some years may simply

come too late.

Moreover, the amounts at stake are often so high that there is an

overall economic interest and responsibility — beyond the direct

interest of a given party — to have certain decisions taken prior to the

final award. At other times, it is not only a question of money. For

instance, suppose the wrong or fraudulent termination of an exclusive

long-term distribution agreement by the principal results in stopping

the supply of goods that would make it possible for the distributor to

directly enter the market.

An interim measure would prevent the principal from pursuing its

fraudulent termination and causing irrevocable damage to the distrib-

utor. In this case, the damage would consist in the loss of the market


for the distributor, and possibly in its bankruptcy, if the principal is the

distributor’s main supplier.

Limitations in Granting Effective Interim Measures

Exclusive reference to a state judge is not a satisfactory solution. It is

sometimes difficult to find a state judge who is prepared to accept juris-

diction of the case. One such example is the famous "Channel Tunnel

case", during which — under the English law and prior to the English

Arbitration Act l996 — the English judges declined to hear the matter,

considering that the court of the place of arbitration, which was

Brussels, had jurisdiction in the matter.

Furthermore, state judges are generally limited by their respective

laws to a certain exhaustive (but not complete) list of types of provisional

measures, which do not always correspond to the needs of international

commerce.

Finally, even state court interim measures are often not enforceable

in other countries. Only very few enforcement conventions cover such

measures. Even within the framework of the Brussels Convention and

the Lugano Convention (now the Brussels I Regulation),40 the legal

situation is not — or at least not yet — satisfactory.

First, these Conventions do not apply to interim measures taken

unilaterally, although interim decisions taken unilaterally are some-

times the most efficient ones. In addition, these Conventions do not

cover the field of arbitration, and it is not yet known whether or not

interim measures taken by state courts on the merits of a dispute which

is governed by an arbitration agreement fall under these Conventions.

Some interim measures affect not only the parties to the main dispute,

but also third parties, such as in connection with a bank guarantee,

when one party seeks to obtain an order preventing the bank from pay-

ing the bank guarantee. Such a decision obviously can only be taken by

a state judge and not by an arbitrator, who does not have jurisdiction

vis-à-vis third parties who are not bound by the arbitration agreement.

Role of Arbitrators

In the light of these arguments, it is obvious that, as a matter of principle,

it is in the parties’ interests for arbitrators to be entitled to take interim

measures. The parties should be in the position to choose, according to

Roberto Ceccon 27

40 Council Regulation (EC) Number 44/2001 of 22 December 2000 on jurisdictionand the recognition and enforcement of judgments in civil and commercialmatters, OJ 2001 L 12/1–23.

the specific circumstances of the case, between the jurisdiction of the

arbitral tribunal and the jurisdiction of the state court.

This principle does not apply to Italian law because, according to

Article 818 of the CCP,41 arbitrators cannot order or issue any interim

measures of protection. These powers are expressly reserved to ordi-

nary judges and no choice is left to the parties to the proceedings.

Does this mean that an arbitrator sitting in Italy, for instance, and

acting under the rules of an arbitral institution permitting arbitrators to

grant interim measures of protection can under no circumstances grant

any interim or provisional relief? In principle, the answer is no, but, in

substance, there is a possibility which has been borrowed in some way

from Article 28 (formerly Article 23) of the ICC Rules.42

According to Article 28 of the ICC Rules, the arbitral tribunal may,

at the request of a party, order any interim or conservative measure it

deems appropriate, and any such measure will take the form of an order

or an award. Consequently, a possible solution to grant an interim

measure under Italian law within an arbitration proceedings could be

to grant such a measure not in form of an order, but as a partial award.

In fact, pursuant to Italian law, arbitrators may grant orders or awards.

This means that an arbitral tribunal sitting in Italy and acting under

the ICC Rules may only grant a valid provisional measure if it is made

in the form of an award. This solution permits a decision which may be

recognized pursuant to the New York Convention and that also is

acceptable under the Italian law.

The only problem that may arise under Italian law is that the partial

award may be immediately challenged before the competent court of

appeal. In this case, the proceedings may be stopped, with all the

related consequences in terms of time consumed and the possible dis-

satisfaction of the parties involved. At the same time, the partial award

granting the interim measure could be suspended by the competent

court of appeal if the losing party asks for the application of Article

351 of the CPP.

According to Article 351, the court of appeal, upon a party’s

request, may suspend the effectiveness of an award if there are urgent

and justifiable causes. In this case, there could be a conflict between

the urgent reasons that are the grounds for the partial award granting

the interim measure of protection and the urgent reasons that are the

grounds for the opposing party’ objection, asking for a suspension of

the partial reward.


41 Introduced by Law Number 25 of 5 January 1994 and still in force.42 International Chamber of Commerce, Arbitration and ADR Rules (2012).

In conclusion, Article 818 of the CCP represents a serious obstacle

in conducting arbitral proceedings, and any interim measure granted

by arbitrators sitting in Italy, whether in the form of a partial award or

as an order, may disappear at the moment of its enforceability.

In fact, the party subjected to the provisional measure granted by

the arbitral tribunal in the form of an order may raise the objection that

such a measure is against Article 818 of the CCP, which prohibits arbi-

trators from granting interim measures and may, therefore, refuse

execution of the arbitral order, with no substantial consequence on the

merits of the dispute. The only consequence could be the negative

evaluation of such conduct made by the arbitrators at the time of mak-

ing the award and, particularly, in the order regarding sharing of the

costs and expenses of the arbitration.

Contractual Arbitration

The 2006 Reform has tried to clarify the very Italian institution of the

so-called arbitrato irrituale or contractual arbitration. This form of

arbitration is little known abroad and has usually been problematic for

foreign lawyers and operators to understand.43

In the international scenario, if a distinction exists in forms of

arbitration, it is between domestic and international arbitration. Gen-

erally, domestic arbitration is arbitration between entities, natural or

legal, having their place of business in the same country, while inter-

national arbitration is arbitration between entities, natural or legal,

having their place of business in two different jurisdictions. In the

Italian system, a further distinction exists, which was created by the

jurisprudence since the beginning of the twentieth century in order to

justify a method of resolution of disputes outside the rules of the Code

of Civil Procedure.

The need to recognize this "free way" of arbitrating was linked to

the freedom given to the parties in dispute to agree on a dispute-solving

mechanism which did not oblige arbitrators to deposit the award within

a very strict time limit (i.e., five days from the date of the decision),44

under penalty of nullity, and to obtain an award not challengeable

before the ordinary courts.

Roberto Ceccon 29

43 Italy’s contractual arbitration has counterparts in other European countries, suchas the bindend advies (binding advice) in Dutch law and the Schiedsgutachten(arbitration report) in German law.

44 According to the Civil Code of Procedure in force until 1983, Article 825.

The parties agreed in writing, through an arbitration agreement, to

grant the arbitrators the power to resolve their dispute amicably and

without any formality, and this agreement was interpreted as the will-

ingness to give contractual weight to the settlement of the dispute. The

award rendered could not be enforced as an ordinary judgment before

any court, but only as a source of obligations previously accepted by

the parties but determined by the arbitrators.

In Italy, the doctrine has long discussed (and is still discussing) this

very peculiar domestic institution; in arbitrato irrituale, awards are

binding only at a contractual level. Now, however, the 2006 Reform

has further contributed to reaffirming the validity and existence of the

arbitrato irrituale by setting forth Article 808 ter of the CPP instead

of abolishing it. Before entering into a discussion on these new provi-

sions, the author wishes to voice his opposition to this unusual and

antediluvian institution, which is still largely incomprehensible

abroad and can only deter foreign parties from choosing Italy as an

arbitration seat.

It is common knowledge that, under the New York Convention,

every contracting state agreed to recognize an arbitration agreement in

writing. By such an agreement, the parties undertake to submit to arbi-

tration all or any differences which have arisen or which may arise

between them in respect of a defined legal relationship, whether con-

tractual or not, concerning a subject matter capable of settlement by

arbitration. The parties also agree that the arbitral award will be bind-

ing and capable of being enforced in accordance with the rules of

procedure of the territory where the award is relied upon.

In this regard, the existence in Italy of the peculiar form of arbitration,

the arbitrato irrituale, imposes the need to interpret the arbitration

agreement executed between the parties in order to consider if the

parties wished to obtain an award binding and enforceable and not a

simple contractual settlement of their dispute.

If the interpretation leads to an arbitrate irrituale, the parties will

have the problem of seeking enforcement of the award abroad accord-

ing to the New York Convention, in consideration of the fact that the

"award" coming out of an arbitrato irrituale is not an award in the

meaning set forth in the New York Convention, and therefore there is

the risk that the decision rendered by the arbitral tribunal will not be

recognized and enforced under the New York Convention.

In other words: is an arbitral award issued in Italy within an

arbitrato irrituale enforceable pursuant to the New York Convention?


The starting point is that the settlement of a dispute according to an

arbitrato irrituale is a simple contractual arrangement and not a bind-

ing award.

Consequently, such a decision cannot be considered an award

according to the meaning set forth by the Convention, and the recogni-

tion and enforcement of such a decision could be refused by the

competent authority. This means that an arbitral decision issued in an

international arbitration having its seat in Italy may be strongly influ-

enced by this very particular kind of arbitration and could create a

serious problem of interpretation at the moment of its recognition and

enforcement abroad.

Under the 2006 Reform, this situation is slightly changed, but, in the

author’s opinion, it does not differ so much from the previous practice.

The Italian legislator has in some way protected the arbitrato irrituale,

proposing a specific definition under Article 808 ter of the CCP:

"The parties may, by express provision in writing, set forth

that, notwithstanding Article 824 bis, the dispute will be set-

tled by arbitrators as a contractual determination. Otherwise,

the rules of [Title VII of Book IV] shall apply.

"The arbitral award may be declared void by the competent

judge pursuant to the rules of Book I:

"If the arbitration agreement is invalid or the arbitrators have

decided on matters exceeding their powers and the proper

objection has been raised during the arbitral proceedings;

"If the arbitrators have not been appointed pursuant to the

formalities and terms set forth in the arbitration agreement;

"If the arbitral award has been issued by a person who could

not be appointed as arbitrator pursuant to Article 812;

"If the arbitrators have not respected the rules fixed by the

parties as a condition of the validity of the award;

"If the principle giving the parties the right to present their

case has not been fulfilled. Article 825 is not applicable to the

contractual award."

According to this new Article 808 ter, it is clear that the interpretation

of the arbitration agreement is now easier than in the past. The 2006

Reform has clarified that an arbitrato irrituale exists when the parties

Roberto Ceccon 31

have expressly stated in the arbitration agreement that arbitrators shall

settle the dispute through a determinazione contrattuale (contractual

determination), and only in this case will the product of the work of

the arbitrators (i.e., the award) not have the effects of an ordinary

award rendered by the judicial authority.

This is the meaning of the cross-reference to Article 824 bis45

contained in Article 808 ter. The arbitral award coming out of an

arbitrato irrituale is now excluded, by law, from the effects of an ordi-

nary award. This is the actual innovation and clarification introduced

by the new Article 808 ter of the CCP.

Moreover, the new rule has fixed another principle: the parties may

challenge the arbitral award should any of the events set forth in para-

graphs 1 to 5 of Article 808 ter arise. This is surely yet another change

under Italian law regarding the arbitrato irrituale, because it has been

clarified that the award may be challenged through the ordinary means

set forth for challenging an arbitral award in the very few cases speci-

fied, and not only in case of annullability of the award pursuant to the

remedies set forth for the annullability of a contract. But such a change

is hardly a means to simplify the institution of arbitration with regard

to the general practice accepted worldwide and to promote Italy as a

convenient place to arbitrate.

Rules of Procedure

It is interesting to look at the new rules of procedure introduced by the

2006 Reform, with particular reference to the manner of taking evi-

dence. Article 816 ter of the CPP states:

"The taking of evidence or any act regarding the taking of evi-

dence may be delegated by the arbitrators to any one of them.

"The arbitrators may hear a witness before them or decide to

hear a witness, if he agrees, at his home or office. They also

may decide to take the deposition by asking the witness to

provide written answers to the questions within a term fixed

by the arbitrators.

"If a witness refuses to appear before the arbitrators, they may

request, if deemed proper pursuant to the circumstances, the


45 The Code of Civil Procedure, Article 824 bis states that "save for what is providedfor in Article 825, the arbitral award has the effects of an award issued by thejudicial authority from the date of its last signature".

presiding judge of the place of the seat of the arbitration to

order the appearance of the witness before them.

"In the case set forth in the previous paragraph, the term for

the deposit of the award is suspended from the date of the order

until the date of the hearing for the deposition of the witness.

"The arbitrators may be assisted by one or more technical

experts. Physical persons or entities may be appointed as

technical experts.

"The arbitrators may ask the public administration for written

information regarding records and documents of the public

administration that they deem necessary for the proceedings."

The new Article 816 ter does not represent much of an innovation in

the statute of arbitration regarding the taking of evidence. The taking

of evidence was governed more or less in the same way in the previous

rules.

The only amendment that has been introduced is the possible inter-

vention of the ordinary court, upon request of the arbitrators, in case of

refusal of a witness to appear before the arbitrators. The 1994 reform

had already ruled on this specific subject matter by inserting Article

819 ter, according to which arbitrators could hear the witnesses before

them or at a witness’s home or ask for written answers.

The power of recourse to an ordinary judge to take the deposition of

a witness or ask the public administration for information has only

contributed to better defining the deposition of witnesses and has

opened access to the public administration archives. In the latter case

and according to the previous rules of law, it was not possible for arbi-

trators to obtain any information useful to the proceedings unless the

party interested was capable of procuring such information.

Despite these procedural provisions, it cannot be considered that

there is a proper and satisfactory set of rules governing the taking of

evidence in arbitration proceedings. It is understood that, under Italian

law, the main principle applicable to this specific subject matter

remains the freedom of the arbitrators to govern the procedure as set

forth in Article 816 bis of the 2006 Reform (and previously in the first

paragraph of Article 816 of the 1994 reform). According to Article

816 bis:

"The parties may agree in the arbitration agreement or in any

other separate written act, if executed before the starting of

Roberto Ceccon 33

the arbitration proceedings, the rules that arbitrators will

follow in the proceedings and the language of the arbitration.

"Failing such rules, the arbitrators have the faculty to disci-

pline the arbitration proceedings in the manner they deem

proper. In any case, arbitrators must respect the right of the

parties to present the case, giving them reasonable and equiv-

alent opportunities to defend themselves."

The rules in force in Italy regarding the taking of evidence are very lim-

ited, but such a situation is perfectly in line with many other domestic

laws on arbitration and also with the rules of arbitral institutions. An

authoritative example is given by the MLICA, where Article 19 (which

remains the same after the amendments adopted in 2006) states:

"Subject to the provisions of this Law, the parties are free to

agree on the procedure to be followed by the arbitral tribunal

in conducting the proceedings.

"Failing such agreement, the arbitral tribunal may, subject to

the provisions of this Law, conduct the arbitration in such man-

ner as it considers appropriate. The power conferred upon the

arbitral tribunal includes the power to determine the admissi-

bility, relevance, materiality, and weight of any evidence."

Moreover, certain rules adopted by arbitral institutions are founded on

the same principle of freedom of the parties in stating the procedure to

be applied or, failing such agreement, the freedom of arbitrators. For

instance, Article 19 of the new ICC Rules (applicable since 1 January

2012) states:

"The proceedings before the arbitral tribunal shall be governed

by the Rules and, where the Rules are silent, by any rules

which the parties or, failing them, the arbitral tribunal may

settle on, whether or not reference is thereby made to the rules

of procedure of a national law to be applied to the arbitration."

In the same vein, Article 25.1 of the CAM Rules states that "[t]he

Arbitral Tribunal leads the case by taking all the relevant and admissi-

ble evidence adduced in the manner it deems appropriate".

Article 14.2 of the LCIA Rules states:

"Unless otherwise agreed by the parties under Article 14.1,

the Arbitral Tribunal shall have the widest discretion to


discharge its duties allowed under such law(s) or rules of law

as the Arbitral Tribunal may determine to be applicable; and

at all times the parties shall do everything necessary for the

fair, efficient, and expeditious conduct of the arbitration."

Article 30.b of the AAA Rules states:

"The arbitrator, exercising his . . . discretion, shall conduct

the proceedings with a view to expediting the resolution of

the dispute and may direct the order of proof, bifurcate pro-

ceedings, and direct the parties to focus their presentations on

issues the decision of which could dispose of all or part of the

case."

In addition to these general rules, a few other rules may be found in the

arbitral institutions’ rules regarding the conduct of the proceedings

and particularly regarding the taking of evidence. However, in order to

find a complete and reasonable set of rules on this specific subject

matter, it is necessary to look outside the domestic laws and the rules

of arbitral institutions and focus on the International Bar Association

(IBA) Rules on Taking of Evidence in International Commercial Arbi-

tration and, to some extent, to the UNCITRAL Notes on Organizing

Arbitral Proceedings.46

Conclusion

By enacting the 2006 Reform of arbitration, the Italian legislator has

not forgotten international commercial arbitration despite the cancel-

lation of the chapter on international arbitration set forth in Articles

832 to 838 by the 1994 reform. International arbitration is substan-

tially characterized by the same principles and manner of conduct as

applied to domestic arbitration.

Perhaps the technicalities applied by the arbitrators and lawyers

involved are more sophisticated, considering that this kind of arbitration

calls for a confrontation of different cultures and arbitrators, and law-

yers are accordingly engaged in making their best efforts to adopt a

procedure understandable and acceptable to both parties.

Roberto Ceccon 35

46 Ceccon, "UNCITRAL Notes on Organizing Arbitral Proceedings and the Conductof Evidence: a New Approach to International Arbitration", 14/2 Journal ofInternational Arbitration (1997).

In any case, as history has affirmed, arbitration remains the only

means capable of settling a dispute outside the ordinary courts through

the decisions of arbitrators freely appointed by the parties, with the

award having the same effectiveness as a judgment issued by a state

court.

"The practice of arbitration . . . comes . . . naturally to primitive

bodies of law; and after courts have been established by the

state and a recourse to them has become the natural method of

settling disputes, the practice continues because the parties to

a dispute want to settle it with less formality and expense than

is involved in a recourse to the courts."47


47 Holdsworth, History of English Law, Volume XIV (1964), at p. 187.

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