A recent Supreme Court of Cassation decision found that in arbitration proceedings concerning disputes between business partners, the clause referring to the appointment of arbitrators assigned to the parties will be void even if stipulated before the reform.(1)

Facts

Supreme Court of Cassation Decision 21442/2016 addressed the invalidity of arbitration clauses that do not agree with Decree-Law 5/2003, which concerns judicial procedures for corporate matters. The court established that the judge in charge of disputes concerning the distribution of dividends from partnerships must be selected by applying the ordinary rules of the Civil Procedure Code.

In the case at hand, the claimant filed against the defendant before the Tribunal of Milan, opposing the tribunal's payment injunction, which stated that the claimant should pay a substantial sum in dividends to the defendant as an usufructuary of a third party.

The claimant argued that:

  • the Tribunal of Milan lacked jurisdiction, referring to the arbitration clause; and
  • the usufruct was invalid.

The third party, as bare owner, intervened in the proceedings.

The Specialised Sections of the Tribunal of Milan declared its lack of jurisdiction and the nullity of the injunction. Further, without examining the issue of the usufruct's validity, the tribunal stated that the dispute was covered by the arbitration clause, as the request was grounded on a right arising from the relationship between the partner and the company (in particular, the right between the usufructuary and the company).

The claimant and the bare owner petitioned to transfer the case on the grounds of (territorial) jurisdiction.

Decision

After confirming the admissibility of the petition to transfer the case on the grounds of jurisdiction and defining the arbitration as a ritual arbitration, the Supreme Court of Cassation accepted the appeal that the decision had been incorrect. The decision was judged to have been incorrect as it failed to ascertain the nullity of the arbitration clause for violation of Article 34(2) of Decree-Law 5/2003, as the defendant's articles of association stated that the arbitrator should be appointed by the parties or, in case of disagreement, by the tribunal president.

However, according to Article 34(2), the power to appoint arbitrators must be conferred on a third party and only in the case that the third party does not appoint the arbitrator can it be transferred to the tribunal president, if the parties agree.

The court determined that the Specialised Sections of the Tribunal of Milan had jurisdiction pursuant to Article 1182(3) of the Civil Procedure Code, according to which "the obligation concerning a sum of money must be fulfilled in the creditor's place at the time of the maturity" (in this specific case, Milan).

Comment

The Supreme Court of Cassation adopted a position on matters which have since been resolved.

Regarding the ritual nature of the arbitration, the court drew on recent case law and considered the specific terms used in the arbitration clause. The court placed importance on the will of the parties to obtain a decision "which could produce the effects pursuant to Art. 825 of the Code of Civil Procedure". This case law has since been consolidated by Article 808ter of the Code of Civil Procedure.

With regard to the nullity of the arbitration clause contained in the defendant's articles of association, the Supreme Court of Cassation confirmed the insignificance of the fact that the abovementioned arbitration clauses had been agreed before Article 34(2) of Decree-Law 5/2003 came into force. The court established that the arbitration clauses contained in the articles of association were annulled by this article, stating that the power to appoint arbitrators must be conferred on a third party only in the case that the third party does not appoint the arbitrator and could be transferred to the tribunal president if the parties agreed.

For further information on this topic please contact Costanza Mariconda at Mariconda e Associati by telephone (+39 02 795 212) or email (costanza.mariconda@studiomariconda.com). The Mariconda e Associati website can be accessed at www.studiomariconda.com.

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Endnotes

(1) Court of Cassation, October 24 2016, 21442.