The Supreme Court of Cassation, with reference to a liability action against the directors and the statutory auditor of a limited liability company, also for the breach of accounting principles for drafting financial statements, has recently dealt with both the issue of the distribution of competence between arbitrators and ordinary judge and the issue of the limits to arbitrability represented by the fact that the disputes is about available rights.

The facts are as follows:

  • the articles of association of a limited liability company state that: “any dispute arising among members or between members and the company, concerning available rights, can be submitted to the judgment of three arbitrators (…). This article is binding for the company and all its members, including those whose capacity as member is being disputed. Disputes raised by directors, liquidators and statutory auditors or against them are to be submitted to arbitration, in accordance with the procedures illustrated above, and in such event the judgment becomes binding for said persons following their acceptance of office”;
  • some members of the limited liability company brought a liability action against the directors and the statutory auditor before the Court, rather than before the arbitration panel;
  • the defendants raised an objection on the grounds of lack of competence of the Court, maintaining that the aforesaid arbitration clause – where providing that “disputes raised by directors, liquidators and statutory auditors or against them are to be submitted to arbitration, in accordance with the procedures illustrated above” – set the obligation to resort to arbitration, preventing an action before the ordinary court;
  • the Court upheld the objection put forward by the defendants and consequently the plaintiffs proposed to transfer the case on the grounds of jurisdiction (it should be noted that the distinction between arbitrators and ordinary court is by now, as is known, a matter of competence: Article 819-ter of the Italian Code of Civil Procedure).

In light of the foregoing, the Sixth Division of the Supreme Court (Cass., 6/11/2017, no. 26300, rep. Judge Marulli) focused, first of all, on the interpretation of the arbitration clause, exempting from cassation the judgment of the Court.

In this regard, the Supreme Court confirmed its orientation (among others: Cass., 21/11/2013, no. 26135) according to which the analysis of the scope of an arbitration clause in the articles of association must be carried out on the basis of the standards of contractual hermeneutics (Articles 1362 and ff. of the Italian Civil Code). Exactly in consideration of the correct application of said standards by the trial judge, the Supreme Court stated that, in the case at issue, the arbitration clause provides for the mere possibility to resort to the arbitration panel only in case of “disputes arising among members or between members and the company concerning available rights ” but not in case of “disputes raised by directors, liquidators and statutory auditors or against them” for which there is a real obligation to resort to arbitration (indeed, said arbitration clause uses in the first case the expression “can be submitted” and in the second case the expression “are to be submitted”).

The judges of the Supreme Court got confirmation that the intent of the parties was in this direction using Article 34 of legislative decree no. 5 of 17 January 2003, as term of comparison. Such provision establishes (par. 4) that “deeds of incorporation may provide that the clause concerns disputes raised by directors, liquidators and statutory auditors or against them”; therefore it was inferred that, in the case at issue, the parties wanted to specify in the articles of association the provisions of the aforesaid rule, exactly to introduce the obligation and not the mere possibility to resort to arbitration.

That being said, for our purposes the second issue dealt with by the Supreme Court of Cassation is even more interesting, which – as mentioned – concerns the limits to arbirtrability, represented by the fact that the dispute is about available rights.

Indeed, given that the breaches that the defendants were charged with under the corporate liability action included also the breach of accounting principles for drafting financial statements – and given that these principles preside over the collective interests of (members and) third parties – the plaintiffs had challenged the Court decision also on the assumption that the same had allegedly breached Articles 806 of the Italian Code of Civil Procedure and 34, par. 1°, of legislative decree no. 5/2003.

However, such challenge was considered unfounded by the Supreme Court of Cassation.

If, on the one hand, the Supreme Court of Cassation reiterated that the dispute concerning the appeal against the resolution approving the financial statements for being untrue, unclear and imprecise cannot be settled (among others: Cass., 13/10/2016, no. 20674) – on the other hand it remarked that the appeal of the plaintiffs was vitiated by “an evident error in its formulation”.

This is because the plaintiffs claimed the breach of accounting principles for drafting financial statements not in order to have the financial statements declared invalid, but only as “indicator of the summoned parties’ breach of the obligations imposed on them by the law and by the deed of incorporation”: as a result, the dispute did not “concern unavailable rights” (as it would have been if the financial statements had been challenged) but available rights (the right to compensation for damage).

So deciding, the Court of Cassation, on the one hand, conformed to its direction (among others: Cass., 19/02/2014, no. 3887; Cass., 18/05/2007, no. 11658; Cass., 02/09/1998, no. 8699) according to which the liability action – which may, generally, be waived or settled (Articles 2393, par. 6°, and 2476, par. 5°, of the Italian Civil Code) – must necessarily concern available rights, even if it is aimed to safeguard a collective interest. We add that the limit of availability of rights should probably be considered as respected even if the deed of incorporation of the limited liability company, as acknowledged by the incipit of Article 2476, par. 5, of the Italian Civil Code, excludes the waiver and settlement of the action; this at least in the event that, despite the exclusion, the articles of association provide anyway that the action must be referred to the arbitration panel: in these cases the statutory autonomy has actually limited the availability of the rights but not to the point of excluding the resort to private justice.

On the other hand, the Supreme Court – confirming the non-arbitrability of disputes concerning the challenge of resolutions approving the financial statements – has further contributed to clarify an issue that is debated in doctrine and jurisprudence, since on a few occasions case law from the merits courts, without excessive hesitation, has decided in favour of arbitrability (also) of challenges of financial statements.