Lexology GTDT Market Intelligence provides a unique perspective on evolving legal and regulatory landscapes. This interview is taken from the Dispute Resolution volume discussing topics including Brexit’s impact on choice of law and jurisdiction, market competition and the popularity of ADR within key jurisdictions worldwide.
1 What are the most popular dispute resolution methods for clients in your jurisdiction? Is there a clear preference for a particular method in commercial disputes? What is the balance between litigation and arbitration?
In Italy, ordinary litigation is arguably the predominant dispute resolution method. However, in recent years there has been a growing tendency towards both arbitration and mediation. In fact, while arbitration – particularly in corporate matters – is progressively becoming popular as a dispute resolution tool (with a clear preference for arbitral proceedings administered by the National and International Chamber of Arbitration of Milan, which is the most specialised arbitral institution in Italy), in the banking and finance sector especially, there is an obligation to attempt to resolve disputes through mediation before embarking on litigation.
2 Are there any recent trends in the formulation of applicable law clauses and dispute resolution clauses in your jurisdiction? What is contributing to those trends? How is the legal profession in your jurisdiction keeping up with these trends and clients’ preferences? Does Brexit continue to affect choice of law and jurisdiction?
The choice of applicable law depends on a number of variables, notably the type of transaction the parties intend to implement and their nationality. The same goes for jurisdiction and arbitration clauses, although in recent years there has been a trend in favour of ordinary litigation in the Court of Milan, likely because of its efficiency and professional competence. As to arbitration clauses, there is a trend in favour of the National and International Chamber of Arbitration of Milan, which on several occasions has shown a great deal of efficiency and professionalism.
Choice of law and jurisdiction is a key element of any transaction as, in the case of a dispute, it may favour one party over the other. International law firms are well equipped to fully advise their clients from a multi-jurisdictional perspective.
Although the consequences of Brexit regarding the choice of law and jurisdiction have not yet become apparent, we expect that it will entail some implications on the parties’ preferences in this respect. However, we also expect that law firms based in the United Kingdom that have offices in all the main EU member states may be able to offer wider, more efficient assistance to their clients during the transition period.
3 How competitive is the legal market in commercial contentious matters in your jurisdiction? Have there been recent changes affecting disputes lawyers in your jurisdiction? How is the trend towards ‘niche’ or specialist litigation firms reflected in your jurisdiction?
The legal market in Italy is extremely competitive in commercial contentious matters, especially with respect to ordinary litigation matters. The liberalisation of legal fees in recent years has certainly contributed to this increase in competition in the sector. However, in the event of disputes that are particularly complex or involve multi-jurisdictional aspects and, as such, require cross-border advice, there is still a limited number of law firms capable of offering proper assistance.
4 What have been the most significant recent court cases and litigation topics in your jurisdiction?
One of the most significant recent court decisions relates to investment litigation. In November 2019, the Supreme Court of Cassation, in its United Divisions, rendered a decision that confirmed that only the investor, and not the intermediary, is entitled to claim the nullity of a framework agreement that does not comply with the formal requirements provided by law. As a consequence of the declaration of nullity, the investor is entitled to claim the reimbursement of all the sums paid to the intermediary for the investments made under the invalid framework agreement.
However, the Supreme Court clarified that the nullity of the framework agreement cannot be detrimental only to the intermediary. If the investor claims the nullity of part of the investments carried out by the intermediary under the framework agreement, then the judge shall verify whether the investor has taken advantage of other investments made under the same framework agreement that are not included in the claim.
If the profits obtained by the investor are equal to or higher than the losses suffered owing to the investments made under the same framework agreement, then the investor would not be entitled to damages.
5 What are clients’ attitudes towards litigation in your national courts? How do clients perceive the cost, duration and the certainty of the legal process? How does this compare with attitudes to arbitral proceedings in your jurisdiction?
While it is recognised that costs are generally lower than in jurisdictions such as the United States or the United Kingdom, Italian litigation has traditionally been criticised for being overly protracted and burdensome. However, there have been significant reforms in recent times that have drastically reduced both the waiting times for hearings and the length of ordinary proceedings.
A significant decrease in the length of proceedings is also being recorded as to proceedings of second instance, owing to an improving organisation of resources.
Nevertheless, arbitral proceedings continue to be considered swifter and more efficient but with higher costs than traditional contentious proceedings. The type of arbitration, whether international or local, also has a bearing on the cost.
6 Discuss any notable recent or upcoming reforms or initiatives affecting court proceedings in your jurisdiction.
In April 2019, the Italian legislator passed a law providing for a new regime for class actions in Italy. The main goal of the new regulation is to create a more claimant-friendly environment by facilitating the procedure by which consumers and individuals seek compensation for damages for infringements of homogeneous individual rights. As a consequence of the reform, the new regulation on class action (which will be implemented by November 2020) will be included in the Code of Civil Procedure (rather than in the Consumers’ Code as the tool will no longer be limited to individuals who qualify as ‘consumers’). Class actions will be commenced by each member of the class as well as by non-profit organisations or associations. In addition, individuals who did not take part in the proceedings may join the action (pursuant to an ‘opt-in’ mechanism) even after the final decision has been rendered by the court (within 150 days of its publication).
7 What have been the most significant recent trends in arbitral proceedings in your jurisdiction?
There has been a debate in Italy on the possibility of extending arbitrators’ powers, notably allowing them to authorise interim and emergency measures. However, arbitrators have still not been given the power to issue interim measures, with the exception of certain specific kinds of measures expressly provided for by the law. Accordingly, the party seeking a remedy of this kind would be compelled to make an application to the ordinary courts, even pending arbitration proceedings, to obtain urgent relief against the other party. If the current debate were to result in an actual enhancement of arbitrators’ powers, such a change may well have a significant impact on the growth of arbitration as a mechanism for dispute resolution in Italy. The necessity for parallel ordinary proceedings is, without doubt, one of the factors preventing arbitration from gaining ground in Italy.
The Arbitration Rules of the National and International Chamber of Arbitration of Milan, in force from 1 March 2019, provide that, unless otherwise agreed by the parties, the Arbitral Tribunal always has the power to adopt any determination of interim nature with binding contractual effect upon the parties, therein widening the traditional powers of arbitrators to issue interim and urgency measures, even if devoid of legal binding effects and endowed only by binding contractual effects on the parties (therefore not per se directly enforceable as a court ruling). The new Regulation has also introduced the ‘urgency arbitrator’, who can be appointed by the Chamber upon request of either party before the institution of the arbitral panel.
Although treaty claims have been progressively increasing in number in recent years, the rather recent yet already well-known decision given by the Court of Justice of the European Union on 6 March 2018 in the Achmea v Slovakia case may bring in a significant change in the treaty claims inside the European Union, drastically reducing (but not nullifying) the effectiveness of intra-EU treaties’ protection. In particular, as the Court found that arbitration clauses included in intra-EU treaties are not compatible with EU law, this ruling may actually result in the disappearance of treaty claims brought by EU investors against a member state. However, as the Achmea decision is destined to raise a number of issues, under many points of view, it is too early at this stage to predict how exactly it will affect intra-EU treaty claims.
8 What are the most significant recent developments in arbitration in your jurisdiction?
There have been no significant developments in arbitration in recent years. The landscape has remained largely unchanged since 2006, when Italian arbitral proceedings were brought in line with international proceedings. As a result of the changes then implemented, arbitral decisions became immediately binding and non-appealable unless the parties agreed otherwise.
9 How popular is ADR as an alternative to litigation and arbitration in your jurisdiction? What are the current ADR trends? Do particular commercial sectors prefer or avoid ADR? Why?
Since 2010, a preliminary attempt at mediation has been a mandatory requirement for any litigant who intends to bring a court claim regarding certain kinds of disputes, such as disputes in the banking, financial and insurance sectors. However, the percentage of attempts at mediation that are successful is very low, and usually claimants initiate a mediation proceeding only to allow the civil action to be admissible before the courts. Likewise, also in those sectors where no attempt at mediation is required by law, mediation (as well as other ADR) is not popular in the Italian jurisdiction as it has proven to be a not quite effective dispute resolution route so far.
The Inside Track
What is the most interesting dispute you have worked on recently and why?
We are advising a major captive bank in the context of a class action brought before the Court of Milan by the consumers’ association Altroconsumo on behalf of a class of consumers against several captive banks that have been fined by the Italian Competition Authority for an alleged breach of article 101 of the Treaty on the Functioning of the European Union, relating to the car financing market in Italy, on the grounds of a joint and several liability of the alleged cartelists with regard to all consumers who entered into a financing contract during the reference period.
Describe the approach adopted by the courts in your jurisdiction towards contractual interpretation: are the courts faithful to the actual words used, or do they seek to attribute a meaning that they believe the parties actually intended?
Italian contract law provides that in interpreting contracts, the courts cannot simply rely on the literal meaning of the words used in the contract but must investigate the mutual intention of the parties, also assessing the parties’ behaviour even after the execution of the contract. This principle is usually implemented by Italian courts.
What piece of practical advice would you give to a potential claimant or defendant when a dispute is pending?
There is no general practical advice that can be given without distinction in every situation; any piece of advice must be based on a case-by-case analysis. However, we always recommend our clients to carefully evaluate the trade-off benefits and costs before commencing any litigation. When a litigation is still pending, the evaluation must also consider the court’s orientation on similar cases (if available).