Current legal framework
Principles introduced by Law No. 206/2021
Foreseeable role of arbitral tribunals and persistent role of ordinary courts
Comment
Provisional measures are frequently sought in arbitration. However, while most legal systems recognise the authority of arbitrators to grant at least some kinds of provisional measures, the current version of article 818 of the Italian Code of Civil Procedure (CPC) prevents arbitrators from doing so. Traditionally, such a prohibition has been justified because arbitration, unlike litigation, is a private and consensual dispute resolution mechanism. Therefore, arbitrators lack the imperium (ie, the coercive power) necessary to issue and enforce provisional measures.
The rigid position adopted by Italian law was tempered in 2006, when article 818 of the CPC was amended to empower arbitrators to grant provisional relief "when expressly provided by law". To this day, however, the only exception to the exclusive jurisdiction of the ordinary courts on the matter is provided by article 35(5) of Legislative Decree No. 5/2003, regulating company law arbitration. Accordingly, if the arbitration agreement refers to arbitration disputes concerning the validity of shareholders' meeting resolutions, arbitrators always have the power to suspend the effectiveness of the resolutions, provided that the ordinary courts have a concurrent power. With this limited exception, in arbitration proceedings seated in Italy, the parties must address ordinary courts to obtain interim protection of their interests, whether prior to or pending the arbitration proceedings.
Principles introduced by Law No. 206/2021
The limitation to the power of arbitral tribunals to issue provisional measures has been subject to criticism. Scholars and arbitration practitioners have long called for a system overhaul, arguing that it runs contrary to the practice of arbitration-friendly jurisdictions, to the detriment of the attractiveness of Italy as a possible seat of arbitration.
These calls for reform seem to have garnered the attention of the Italian legislature. Article 1(15)(c) of Law No. 206 of 26 November 2021(1) marks a notable U-turn from the current allocation of powers. The government now has one year from the issuance of Law No. 206/2021 (ie, until 26 November 2022) to implement the reform by means of a legislative decree bearing the same force as a parliamentary statute, provided that it complies with the guidelines contained in Law No. 206/2021.
Article 1(15)(c) of Law No. 206/2021 provides that any amendment to the rules governing arbitration proceedings should endow arbitrators with the power to issue provisional measures "if the parties so agree". The agreement may be set in the arbitration agreement or in a subsequent written document, unless otherwise established by applicable statutory provisions. In such circumstances, the national courts should only maintain the power to grant provisional measures if an application is made prior to the "acceptance" of the arbitrators. However, the national courts shall still have "control" over the enforcement of provisional measures issued by arbitral tribunals.
Foreseeable role of arbitral tribunals and persistent role of ordinary courts
Undoubtedly, the changes envisaged by the proposed legislation will significantly impact the allocation of remedial powers between the ordinary courts and arbitral tribunals.
The scheme in article 1(15)(c) apparently does away with the existing system and grants arbitral tribunals (following acceptance of the appointment)(2) the exclusive jurisdiction to decide on the parties' applications for provisional measures of protection. However, the Italian solution seems somewhat weak in that it requires the express agreement of the parties to confer power to issue provisional measures to the arbitral tribunal. By contrast, most other legal systems confer arbitrators broad and presumptive authority to grant provisional relief, thus requiring the parties to expressly exclude the arbitral tribunal's power, if they so wish.(3)
In this respect, the approach envisaged in the proposed Italian reform is not fully in line with the principle of favor arbitratus that has inspired the national legislation on arbitration proceedings for the last decade. Subjecting the power of arbitrators to rule on applications for provisional relief to an express agreement of the parties might deprive the parties of this valuable tool when it would be most needed. Moreover, it remains to be seen how the requirement of an agreement in writing will be interpreted, and it will be for the governmental decrees implementing the legislative guidelines, and for the state courts tasked with applying them, to provide interpretative clarity.
For example, one possible interpretation of the legislative guidelines could lead to the requirement that derogating the exclusive authority of the courts to grant provisional measures requires a specific statement of consent by the parties. This approach would mimic what is currently required by article 808 bis of the CPC to extend the jurisdiction of arbitral tribunals to non-contractual disputes. If this solution prevails, parties must be careful to clearly formulate the arbitration agreement to endow arbitrators with such power.
In the alternative, a more liberal interpretation of the legislative guidelines could allow for effective expression of consent by indirect reference. In particular, this approach would make the incorporation by reference of arbitration rules providing for the tribunal's power to issue provisional measures sufficient. This solution would be consistent with the recommendations made in 2017 by the Experts Commission presided by Guido Alpa.(4) Should the latter solution prevail, arbitrators' provisional measures would be much more frequently available, as the most commonly used institutional arbitration rules adopt a permissive approach to the issue.(5)
Although subject to the presence of an agreement between the parties, the implementation of Law No. 206/2021 will lead to a significant change in the allocation of powers between the courts and arbitral tribunals. Provided that the arbitral tribunal has accepted its mandate, article 1(15)(c) seems to bar disputants from appealing to the courts to obtain the provisional measures recognised by the CPC. Italian law would thus go from a system recognising the exclusive jurisdiction of the state courts on applications for provisional relief to a system endowing arbitrators, present the agreement between the parties, with an exclusive authority on the matter. This solution goes beyond that of most arbitration-friendly jurisdictions, which provide for a concurrent (or – at the very least – residual) jurisdiction of the state courts. Such an approach has perplexed some authors, who believe that the Italian legislature may have taken the favor arbitratus principle too far, to the detriment of disputants.(6)
Nevertheless, the extensive power granted to arbitral tribunals, subject to the agreement between the parties, does not entail that the domestic courts will not still have a relevant role to play concerning provisional measures.
First, it is well established that arbitrators may only exercise their authority towards the parties to the arbitration agreement, while they do not have the power to grant relief directly addressed to non-parties or encroaching on their rights. Thus, arbitrators cannot order provisional measures like the attachment or the preservation of property owned and controlled by a third party to the arbitration (eg, a bank), or the freezing of assets owed by a non-party to one of the disputants. However, these measures are often necessary to ensure adequate protection of the interests of the potential applicant.(7) In this context, it is easy to see that a system excluding the concurrent jurisdiction of the ordinary courts to hear and decide on applications for interim protection could undermine the effectiveness of provisional measures themselves.
Second, some provisional measures require imperium, which arbitrators lack. Hence, their implementation is dependent on the assistance of the courts. That is so even under the model shaped by Law No. 206/2021, as article 1(15)(c) provides that enforcement of arbitrator-issued provisional measures be "under the supervision of ordinary courts". On this point, it bears noting that a concurrent jurisdiction system with regard to provisional measures in arbitration would be beneficial when the requested measure is particularly urgent. If a party believes the measure to be effective only if it is immediately enforceable, it may have an interest in directly addressing the application for interim relief to the competent court, thus avoiding the need to undertake a two-step procedure, which would only serve to delay the protection of its interests.(8)
Third, Law No. 206/2021 provides for the exclusive jurisdiction of the courts on the challenge of interim measures issued by arbitrators.(9) Interestingly, however, the legislative guidelines restrict the grounds for challenge to those referred to in article 829(1) of the CPC (ie, the grounds for challenging the validity of an arbitral award) and to a breach of public policy.
Law No. 206/2021 is a significant step forward for provisional relief in arbitrations seated in Italy to meet the best practice standard. Although different and somewhat more limited in scope, the role of the ordinary Italian courts will persist. However, critical questions remain on the allocation of power between arbitral tribunals and the ordinary courts and on issues like the international circulation regime of arbitrator-issued provisional measures and of the national courts' decisions on challenges to such measures. It will be for the decrees implementing the civil procedure reform to strike a balance, which will hopefully enhance the attractiveness of Italy as a seat of arbitration while ensuring that the interests of arbitration users are adequately protected.
For further information on this topic please contact Marco Torsello or Valeria Fasciani at ARBLIT Radicati di Brozolo Sabatini Benedettelli Torsello by telephone (+39 02 8425 4810) or email ([email protected] or [email protected]). The ARBLIT Radicati di Brozolo Sabatini Benedettelli Torsello website can be accessed at www.arblit.com.
Endnotes
(1) The so-called "legge delega" (that is, the law providing the government with the legislature's framework for the reform of civil proceedings).
(2) The language of Law No. 206/2021 indicates that prior to the acceptance of the appointment, any request for provisional measure must be filed with an ordinary court. It is unclear how the future rule on this point will coordinate with the provision on emergency arbitration contained in several arbitration rules. Moreover, it is also unclear whether the time limit for attribution of competence to the arbitral tribunal applies in the event of an arbitration seated outside of Italy, when the need arises for provisional measures to be enforced in Italy.
(3) This, for instance, is the case in:
- France (article 1468 of the French Code of Civil Procedure);
- Germany (section 1041 of the German Code of Civil Procedure);
- England (section 38(4) of the English Arbitration Act 1996);
- Singapore (section 12(1) of the Singapore International Arbitration Act);
- Switzerland (article 183 of the Swiss Law on Private International Law); and
- the United States (where the position is supported by established case law).
(4) See "Commissione di studio per l'elaborazione di ipotesi di organica disciplina e riforma degli strumenti di degiurisdizionalizzazione, con particolare riguardo alla mediazione, alla negoziazione assistita e all'arbitrato" (Pres Prof Avv Guido ALPA), Proposte normative e note illustrative, 2017, pages 23 and 49.
- the International Chamber of Commerce Rules (article 28);
- the London Court of International Arbitration Rules (article 25); and
- the Rules of the Milan Chamber of National and International Arbitration (article 26(2)), which, notwithstanding the unavailability under Italian law, wisely adopted a rule whereby, unless otherwise agreed by the parties, the arbitral tribunal, at the request of a party, has the power to adopt any determination of provisional nature with binding contractual effect upon the parties.
(6) Andrea Carlevaris, Lett c: provvedimenti cautelari, in Benedettelli, Briguglio, Carlevaris, Carosi, Marinucci, Panzarola, Salvaneschi, Sassani, "Commento ai principi in materia di arbitrato della legge di delega" No. 206 del 21 novembre 2021, article 1, c 15, Judicium, 21 March 2022.
(7) On the other hand, arbitrators would not exceed the scope of their remedial powers by ordering a party to the arbitration to "take steps vis-à-vis third parties to prevent or accomplish specified actions", provided that such third parties cannot be held liable for failure to abide by that order (Gary B Born, International Commercial Arbitration, Kluwer Law International, 2021, page 2627).