In a recent decision, the Supreme Court of Cassation found that:
"with regard to arbitration, following the ordinance of the United Sections of the Supreme Court of Cassation, the question concerning the application of an arbitration clause for ritual arbitration over another clause intervening between the parties, for non-ritual arbitration, does not constitute a question of "jurisdiction" but a question of merit, the solution of which requests the interpretation of the clause according to the ordinary hermeneutic rules imposed for the interpretation of contracts."(1)
In decision 4526/2016, the Supreme Court of Cassation considered the matter in which two companies had accepted:
- an arbitration clause for ritual arbitration (ie, arbitration which can be judicially enforced) in the framework agreement; and
- a supplementary agreement concerning the planned transfer of business, which contained a specific arbitration clause regarding "the management relationship of give and take relating to different credit".
In case of disagreement, the arbitration clause in the supplementary agreement referred to decisions made "non ritually and on an equitable basis" by an arbitration panel of:
- two members appointed by both parties; and
- one member appointed by the two arbitrators.
In case of disagreement, the arbitration panel would be selected by the president of the Florence Association of Accountants.
Following a request for the execution of all preliminary agreements and compensation for damages suffered by one of the companies, and a dual counter-claim by the defendant, the arbitration panel (established according to the arbitration clause provided in the framework agreement), decided on the first claim, but declared a lack of jurisdiction for the second with reference to "the management relationship of give and take" and the need for non-ritual arbitration (ie, not bound by judicial procedure).
The losing party appealed the decision before the Florence Court of Appeal, which partially annulled the decision on the basis of Article 829(4) of the Code of Civil Procedure, under which the appeal for nullity is permitted "notwithstanding any prior waiver… if the decision was made outside the limits of the arbitration clause".
The Florence Court of Appeal quashed the compensation ruling, declaring that both matters must be decided in non-ritual arbitration concerning "the management relationship of give and take", for which the parties had chosen this specific dissolution method.
The losing party appealed the decision before the Court of Cassation, claiming:
- the violation and false application of Article 829(1)(4) of the Code of Civil Procedure, as the decision entered into the merit of the question;
- the violation and false application of Article 829(3) of the code, as the decision criticising the arbitration decision had applied substantial rules without the necessary contractual provision; and
- the violation and false application of the agreement's rules of interpretation and defective reasoning regarding Article 360(3)(5) of the code.
The court rejected the appeal and ordered the appellant to pay legal expenses. It stated that:
"the three reasons for appeal must be examined jointly, as they concern the same question of verifiability on the part of the appeal court – even considering Decree-Law 40/2006 – of the arbitration clause in order to confirm the arbitration panel's power and limits… in this specific case, the focus is not on a question of jurisdiction between ordinary judges and arbitrators, but exclusively on the regulation of the application of the two arbitration clauses negotiated by the parties and finalized to establish which clause (and type of arbitration) is applicable in the dispute between the parties. Essentially, this is not a question of jurisdiction, in which form is represented and which results in conflict between ritual arbitrators and ordinary judges, but of the correct delimitation of the complexity of the arbitration clauses negotiated by the parties, which had, with a first clause (related to the framework agreement), established a ritual arbitration of general law (with appointment of the arbitrators entrusted to the President of the Tribunal) and, with a second clause, decided for non-ritual arbitration on the basis of equity (with appointment of the arbitrators entrusted to the President of the order of Accountants), in relation to the management relationship of give and take related to different credit."
The Court of Cassation stated that the conflict arising from the existence of two different arbitration clauses which govern the same relationship is not a question of jurisdiction, similar to the conflict between ritual arbitrators and ordinary judges, but rather of merit. This excludes the possibility that the court which examines procedural facts can also examine the arbitration clauses to decide who is in charge of the dispute.
The court embraced the following principle, which has been affirmed before:
"with regard to the interpretation of an arbitration clause, the verification of the willpower of the parties in relation to the contents of the agreement constitutes a survey of facts which is entitled exclusively to the judge of merit... this verification is censurable for a question of legitimacy only if the motivation is so inadequate that it does not allow for the reconstruction of the logical path followed by the court to assign particular content to the contract, or hermeneutic rules in the case of a violation."(2)
In the case at hand, even if the court had adopted a wider interpretation of 'management relationships' regarding the company than that affirmed by the claimant, it would have been impossible to confirm that the interpretative result, although debatable, was irrational and the motivation inadequate. As a result, the court decided for the absolute immunity of the arbitration clause and dismissed the appeal.
For further information on this topic please contact Costanza Mariconda at Mariconda e Associati by telephone (+39 02 795 212) or email ([email protected]). The Mariconda e Associati website can be accessed at www.studiomariconda.com.
(1) Supreme Court of Cassation, Sez I, March 8 2016, 4526.