Review of an award on the merits

The Court of Appeal of Venice, in its decision no. 2722 of 30 November 2015 (Italian text available here), deals with the issue of the possible review on the merits of an arbitration award rendered in proceedings commenced after the entry into force of Legislative Decree no. 40 of 2 February 2006 pursuant to an arbitration clause stipulated prior to the reform.  

I talked about this issue in this article, when I examined the development of a line of cases according to which it could be possible to request the setting aside of such an arbitration due to the violation of the law rules relating to the merits. Nevertheless, these rulings contradicted the content of the transitional provisions of the 2006 Legislative Decree.

Under the old Article 829(2) of the Italian Code of Civil Procedure, “A request for setting aside may also be filed where the arbitrators did not decide according to rules of law, unless the parties have authorised them to decide ex aequo et bono or they have declared that there may be no recourse against the award.” Nevertheless, the reform gave the opposite meaning to the silence of the parties on this point. Accordingly, the new Article 829(3) of the Italian Code of Civil Procedure reads as follows: “The recourse for violation of the rules of law relating to the merits of the dispute shall be admitted if so expressly provided by the parties or by the law (…).”

Article 27 of Legislative Decree no. 20/2006 contains the applicable transitional provisions. According to it, new Article 829(3) applies to all disputes initiated after the entry into force of the reform, despite the arbitration clause having been stipulated while the old provision was still in force.

The Court of Appeal of Venice, in its ruling, describes the two existing lines of cases on this subject. On the one hand, it analyses the reasoning of the Supreme Court that states that the above mentioned transitional provision cannot prevent the review of an award on the merits. On the other hand, the Court analysed the opposite line of cases and referred to decision no. 21205 of the VI Civil Chamber of the Supreme Court (Italian text available here) and the order no. 29075 of the I Civil Chamber of the Supreme Court (Italian text available here).

The Court of Appeal followed the latter line of cases and therefore ruled that the review of an award on the merits is only allowed if such review has been agreed by the parties in the arbitration clause. In other words, the admissibility of the review would not be affected by the legal regime in force when that clause was stipulated. In this respect, the Court stated that “transitional provisions are clear in preferring the law in force at the time the arbitration award was delivered, to the legal regime in force before that. There are no reasons to justify a different interpretation of a clearly defined rule. To this respect, there is no constitutional provision that guarantees the immutability, and the inalterability of the scope of the grounds of challenge on the basis of a fortuitous fact, such as the time of stipulation of the arbitration clause.” 

Some doubts arise due to the lack of a settled opinion regarding the possible review of an arbitration award on the merits. Are there remedies to counterbalance such uncertainty? I think that the easiest manner in which the parties could avoid such uncertainty, is by specifying, at the latest at the time of the constitution of the Arbitral Tribunal, if they accept the review on the merits. Nevertheless, this solution may only be implemented in new proceedings. And it also requires that the parties reach an agreement on an important and controversial issue, which may prove extremely difficult.