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? What are the advantages and disadvantages of the most popular dispute resolution methods?
Recourse to courts still appears to be the most popular method by companies and individuals having a dispute in Italy. In other words, judicial proceedings remain a preference. However, in our view the use of arbitrations and ADR (negotiations and mediations) is increasing and may assist to deflate continuous recourse to public justice.
Originally, it was a common view that arbitrations were more expensive, compared to judicial proceedings, but nowadays the level of fees for high value arbitrations could be comparable to that of the court proceedings. Therefore, arbitrational methods could be a good choice for companies for reducing the time needed for dispute resolutions.
However, it should be considered that, as the matter stands, the Italian system still furnishes cheap access to Italian courts and a neutral method of resolution of the disputes. An Italian judicial proceeding may still take longer than an arbitration, but such duration is decreasing.
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? What effect has Brexit had on choice of law and jurisdiction clauses?
Our feeling is that Italian companies infrequently resort to internal binding policies in relation to applicable law and dispute resolution clauses, since they are more inclined to make an assessment on a case-by-case basis. The value of the dispute, the nationality of the parties and the kind of contract are probably the key factors to take into account, and the support of an experienced lawyer could be crucial to making the right choice.
As to Brexit, it is too early to say if it will have any impact on the formulation of applicable law and dispute resolution clauses in the Italian jurisdiction.
We understand, though, that some issues connected with the withdrawal of the United Kingdom from the European Union are still being defined. For example, it is known that the UK applied to accede to the Lugano Convention 2007, which governs the judicial cooperation between the European Union and certain states (Denmark, Switzerland, Iceland and Norway) for the recognition and enforcement of judgments in civil and commercial matters, and the relevant procedure is still pending. In relation to arbitration, we suppose that Brexit will have limited effects, considering that the UK was already a party to the New York Convention 1958 on the recognition and enforcement of foreign arbitral awards.
In facts, certain associations may be able to put pressure on the markets to contribute to amendments to relevant clauses. However, if we recall the state of things before the United Kingdom became part of the European Union, we do not believe Brexit will cause substantial changes or impacts in applicable law clauses.
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?
We believe that, in Italy, the legal market in high value matters of commercial contentious is very competitive.
The Italian government is investing huge resources and funds to try to reduce the average duration of judicial proceedings and we believe that the first results of this are rolling in. According to a report issued by the Italian Ministry of Justice, the expected average duration of a civil proceedings was reduced by around 20 per cent in the past several years. Niche or specialist litigations (such as shipping, advertisement, trademark matters) follow a different route, but are always part of an extremely competitive market with a limited number of players.
4 What have been the most significant recent court cases and litigation topics in your jurisdiction?
One of the most significant court cases, in our view, is the Supreme Court decision No. 11626/2020 of 7 April 2020, when the importance of having in place a proper business structure to prevent corporate crimes in Italy returned to the limelight.
In this, the court clarified that, in relation to facts made in Italy by an agent, a foreign corporation is subject to Italian criminal law and Legislative Decree No. 231/2001 (providing for financial penalties and banning sanctions) regardless of the nationality of the corporation and even if its actual principal place of business is outside Italy. This has confirmed the absolute importance for foreign corporations having business in Italy to put in place suitable organisational models, appropriate, specific policies and, particularly, to implement and follow effective procedures to assess and prevent the risk of crimes committed by their officers and agents in Italy.
The Legislative Decree No. 231/2001 provides that the corporation is responsible for crimes (including bribery, private or public corruption and criminal organisation) committed by persons acting on-behalf of the corporation. The law provides for four different types of sanctions (that can be cumulative):
- fines (that can be very high depending on the severity of the crime);
- various type of disqualification of the corporation from the business;
- confiscation of the corporation; and
- publication of the judgement.
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?
Even though, as we stated in question 1, judicial proceedings are still the prevailing way to solve disputes in Italy, we perceive that clients generally prefer to avoid going to courts unless they are forced to do so.
Finding out-of-court dispute resolutions (or ADR options) when possible, such as effective negotiation or mediation, might thus provide effective results.
As mentioned in question 1, the use of arbitral proceedings does not seem to be as prevalent as it was, previously, been considered as an expensive method if compared to the Italian judicial system. Nevertheless, the use of arbitration seems to be increasing, particularly in relation to disputes involving large sums and technical issues, for which duration and expertise of the arbitrators are important factors.
6 Discuss any notable recent or upcoming reforms or initiatives affecting court proceedings in your jurisdiction.
The covid-19 pandemic has certainly had an accelerating impact on the Italian government’s investments and efforts to try to reduce average duration of judicial proceedings. New out-of-court and long distance hearings systems have been adopted and may be, in part, preserved in the future when the pandemic comes to an end.
7 What have been the most significant recent trends in arbitral proceedings in your jurisdiction?
The Milan Chamber of Arbitration (which is the most important arbitral institution in Italy) has recently updated its Arbitration Rules to include, starting from 1 July 2020, the new Simplified Arbitration Procedure to offer an easier and faster way to resolve disputes, with average costs reduced by around 30 per cent than the ordinary procedure.
The Simplified Arbitration Procedure applies to claims not exceeding €250,000 (unless one of the parties opts out) or, regardless of the value of the claim, if all the parties have agreed to opt in under the arbitration agreement or thereafter. The Simplified Arbitration Procedure provides that the decision is entrusted to a sole arbitrator (instead of a panel), who shall conduct the proceedings in such manner as they consider appropriate for an expedited conclusion (for example, by permitting the parties to file just one supplementary brief or by scheduling just a single hearing). Times might thus be halved if compared to an ordinary procedure.
Given its recent introduction, it is too early to understand the possible impact of this new procedure. Nevertheless, it could be envisaged that it will contribute to increasing the recourse to arbitration.
8 What are the most significant recent developments in arbitration in your jurisdiction?
We have not observed significant developments over the past several years. There is currently a debate on how arbitration could be further supported in the coming years, particularly in relation to the current lack of a publicly accessible database of previous case decisions and the possible establishment of a register of practicing arbitrators.
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?
We believe that Italian clients, including both individuals and companies, are starting to appreciate ADR in principle. Although quite rarely, negotiation or mediation procedures have been of assistance in resolving or discouraging certain small or medium-sized disputes from becoming judicial. In conclusion, however, we are of the view that current ADR procedures in Italy can be effectively used by Italian and foreign parties when they have a dispute in our jurisdiction, provided that they handle things like any extrajudicial negotiation or matter and not merely following compulsory and procedure routes.
10 What is the position in relation to litigation funding in your jurisdiction? Is funding available? Have there been any significant developments in this area in your jurisdiction?
As far as our experience is concerned, there is no huge knowledge and spread of litigation funding in our jurisdiction, although we see an increasing interest in the relevant topics. In particular, we believe that this might become, soon or later, an important subject for companies and insurance companies to be further developed in relation to Italian disputes and relevant markets.
The Inside Track
What is the most interesting dispute you have worked on recently and why?
We are currently assisting clients in several cases moved by the receiverships of bankrupt companies against former directors and auditors. These disputes relate to alleged wrongful acts and unfulfillments of the defendants in performing their duties, which, in claimants’ view, caused the companies to become insolvent.
These are quite interesting disputes, as they require various practice areas of our firm (particularly, financial and corporate areas) and are often connected to criminal matters.
We have noticed that this kind of dispute has been increasing and could remain a trend in the coming years.
What do you consider to have been the most significant legal development or change in your jurisdiction of the past 10 years?
Digitalisation of the Italian judicial system is certainly the most significant change in the past years. Starting from around 2014, a great part of the civil court’s operations has been computerised, with the aim of speeding up the conduct of the judicial proceedings, making them more efficient. The lawyers are now able to manage files with real time access to the court’s digital platform, they can also pledge defensive pleadings and serve acts upon counterparties by registered emails, without resorting to court’s clerks or bailiffs.
The implementation of such process of digitalisation is currently in progress for the criminal proceedings.
What key changes do you foresee in relation to dispute resolution in the near future arising out of technological changes?
We believe that the average duration of the judicial dispute resolution in Italy will be sensibly decreasing in the near future. This will, most likely, be the result of several changes that the Italian government has introduced to the procedure, judicial and court systems. We are also of the view, however, that costs of judicial proceedings in Italy will increase significantly as in our jurisdiction court’s cost and taxes are very competitive and make justice easily accessible to everybody.