The Italian Supreme Court, acting in the Joint Divisions format, has taken the opportunity to confirm the jurisdictional nature of arbitration. It did so while adjudicating on an application for a preliminary ruling on jurisdiction. The Joint Divisions recognise the full applicability of the procedure under Article 41 of the Italian Code of Civil Procedure (i.e. the procedure for obtaining a preliminary ruling on jurisdiction) when dealing with a clause providing for a “foreign” arbitration.
The ruling is a clear confirmation of the more favourable approach being taken in Italy to domestic and international arbitration. Three passages of the Supreme Court decision confirm this.
The Joint Divisions confirm the admissibility of applications under Article 41 of the Italian Code of Civil Procedure even where the contract contains a clause providing for foreign arbitration. Article 41 of the Italian Code of Civil Procedure allows parties to ask the Supreme Court to resolve questions of jurisdiction, for example, resolving whether a case can be heard by an ordinary judge, an administrative or even a foreign judge (Article 37 of the Italian Code of Civil Procedure and Law 218/1995). Consistent with the most recent case law, the Supreme Court applied the principle that a clause requiring foreign arbitration equates to an ouster of jurisdiction of for the domestic courts in favour of a foreign court. The Court reasons that the jurisdictional aspect of arbitration is now an undisputable fact for both courts and academics.
It has not always been like this. Over the years, courts and academics had developed different views. The new Supreme Court ruling is the result of a relatively recent revirement.
The change of approach reflects international trends and, most recently, amendments introduced by Legislative Decree No. 40 of 2006, whereby arbitration awards were recognised as having “the effect of a court judgment” (Article 824-bis of the Italian Code of Civil Procedure).
It can be seen that the Supreme Court decision first addresses the admissibility of an application for a preliminary ruling on jurisdiction where the contact contains a clause providing for foreign arbitration. As said, this examination is carried out in the light, first and foremost, of the jurisdictional nature of arbitration as a substitute for domestic courts. As a consequence, while a dispute on whether competence should be attributed to an Italian panel of arbitrators or to ordinary courts is a question of (internal) competence (and not of jurisdiction), in case of a clause for foreign arbitration, the relevant exceptio amounts to a question of procedure and not of substance or (internal) competence (given that the foreign arbitration is outside the Italian legal system).
The second passage of interest in the judgement is set out in an obiter dictum made while assessing the admissibility of the application. The Joint Divisions take the opportunity to confirm that the distinction between formal and informal arbitration [in Italian, “arbitrato rituale” and “arbitrato irrituale”] is irrelevant in international commercial arbitration, as it should always be classified as formal quoad effectum. The Supreme Court’s conclusion is consistent with the system set out in Law No. 25 of 1994 and takes into account that the distinction between formal and informal arbitration does not usually apply at international level (the Joint Divisions cite, inter alia, the earlier decision No. 10800 of 26 May 2015).
The third passage of interest in the ruling relates to the confirmation that, while a clause for foreign arbitration implies the absence of jurisdiction for the ordinary Italian courts to hear a case, a party can require a summary judgment (where not opposed by the other party), since the exceptio compromissi is optional and cannot be raised ex officio.
For completeness, and to avoid possible misunderstandings in relation to the applicability of Article 1341 of the Italian Civil Code to foreign arbitration clauses, reference to a final passage of the judgement is required. Indeed, the Joint Divisions, while finding that there was no need to consider the application of Article 1341, paragraph 2, of the Italian Civil Code in the case before it (since there was insufficient evidence that the terms of the contract were unilaterally drafted and imposed), at the same time, seem to emphasise two arguments that might, at least at a first glance, lead to recognising the applicability of Article 1341, and the consequent need for a second signature for the general terms of contract.
The Supreme Court has not come to any conclusion and cannot thus be said to have expressed any particular view on the issue. However, it is worth noting that Article 1341 of the Italian Civil Code should not apply to clauses for foreign arbitration (which implies the need of a second signature at the bottom of the contract when a foreign arbitration clause is included in the general terms of contract prepared by one party).
In this respect, it must be noted that, under Article II of the 1958 New York Convention, the validity of such clauses is only subject to the requirement that it is in writing and not to the requirement that a second signature be added. In any event, in the light of the prevalence of supranational sources of law on this matter, the repeal of Article 833 of the Italian Code of Civil Procedure in 2006 should be seen as a mere lack of coordination in adopting reform. In practice Article 833 was only included within the group of rules applicable to “international” arbitration which was repealed incidentally, as the aim had been to have just one set of rules for both domestic and international arbitrations. However, for the sake of clarity in law it would have been better if this specific rule had been kept, and its repeal does not mean that Article 1341 of the Italian Civil Code now applies to clauses providing for foreign arbitration.
To conclude (and notwithstanding the unclear and potentially misleading passage cited in the last paragraph above), the decision of the Joint Divisions of the Supreme Court reflects the increasingly favourable attitude being taken in Italy towards both domestic and international arbitration.