In a recent decision, the United Sections of the Supreme Court of Cassation found that:
"the arbitral decision which decides partially the merit of the dispute, immediately appealable in accordance with Article 827(3) of the Code of Civil Procedure, is both the one with a generic condemnation in accordance with Article 278 of the Code of Civil Procedure, and the one which decides one or some of the demands without resolving the entire proceeding, given that the awards which decide prejudicial and preliminary demands are not immediately appealable".(1)
Decision 23,463 examined the controversial question of whether an arbitration decision which decides only the validity of an arbitration clause is immediately appealable in accordance with Article 827(3) of the Code of Civil Procedure.
The Naples Court of Appeal decision – which had declared the nullity of two arbitral awards relating to an action requested by one company against another with reference to a contract that contained an arbitration clause which had been signed by the parties in 1992 – was appealed before the Court of Cassation.
More specifically, the Naples Court of Appeal had affirmed the appellant's non-involvement in the arbitration clause, which was stipulated by another company, excluding that the resulting inadmissibility of the arbitration request was precluded, "although already neglected by the first of the two arbitral awards, given that the decision… was not immediately appealable, as it concerned only the question of jurisdiction of the arbitration proceedings".
The decision was appealed before the Court of Cassation by the losing party due to:
- the violation and false application of the rules concerning Articles 827(2)(4), (4) and (279) of the Code of Civil Procedure, as the questions had been erroneously qualified as prejudicial questions, instead of preliminary questions of merit; and
- the violation of Articles 1362, 1363, 1366, 1367 and 2558 of the Civil Code, as the court had not considered the effective position of the appellant, the only company involved in the case.
The Court of Cassation rejected the appeal. With regard to the first reason of appeal, the court examined whether:
- the award which decides preliminary or prejudicial questions is immediately appealable or only appealable if the award decides a question of merit; and
- the question of nullity of an arbitration clause is a question of merit or a procedural question.
The second question was resolved by the court, which stated that "the exception of the existence of an arbitration agreement, given the jurisdictional nature to substitute the ordinary judgment of the non-ritual arbitration… must be included, with full rights, in the category of procedural questions".
In order to answer the first question, the court referred to distinctions between final and non-final decisions in accordance with Article 279 of the code.
Articles 360(3) and 361(1) of the Code of Civil Procedure provide for the immediate appealability before the Court of Cassation of decisions which:
- contain an order of generic condemnation under Article 278 of the code; and
- decide on one or more issues but not the entire proceeding.
In this view, the distinction between prejudicial procedural questions and preliminary questions of merit is irrelevant. As a result, the court rejected the first reason for appeal.
The court stated that the second reason for appeal was inadmissible given that "it suggests censures related to the decision of merit on facts", as the appellant reported the appeal court's error of incorrectly considering its effective position.
The decision saw the Court of Cassation examine the long-standing question of how to interpret Article 827(3) of the Code of Civil Procedure, which provides that:
"the arbitral award which decides partially the merit of the dispute is immediately appealable, however the award which decides on some of the questions raised, without resolving the arbitral proceeding, is appealable only together with the final decision."
Recognising the limits of the definition of a partial award is important with regard to the rules on the immediate appealability of a decision.
The changes that Law 25/1994 introduced to the legal system created a clear distinction between:
- partial awards that are immediately appealable, as they decide partially the merits of a dispute; and
- non-appealable partial awards, which do not resolve the questions of merit raised in the arbitral proceeding.
The court correctly clarified that the difference between questions of merit and prejudicial questions does not depend on the immutable nature of things, but must be examined in light of the different functions that the question can assume, even in different phases of the same proceedings. In arbitral proceedings, the question of nullity of an arbitration clause has the scope to ascertain the procedural errors which compromise the award, making it appealable.
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, United Sections, November 18 2016, 23,463.