Once again, on the review on the merits

This is the third time in row we deal with the issue of the review on the merits of an arbitration award, rendered pursuant to an arbitration clause stipulated before the 2006 reform of Italian arbitration law, in proceedings commenced after the reform. 

Before the reform made by Legislative Decree no. 40 of 2 February 2006, Article 829(2) of the Italian Code of Civil Procedure had a different wording. It held: “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.” 

New Article 829(3) of the Italian Code of Civil Procedure sets forth an opposite rule.  Indeed, it states that: “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 (…).” 

A question then arises as to which is the applicable rule when an arbitration award was rendered in proceedings commenced after the 2006 reform pursuant to an arbitration clause stipulated prior to the reform. 

Article 27 of Legislative Decree no. 40/2006 holds that “Articles 21, 22, 23, 24 and 25 shall apply to arbitration proceedings, in which the request for arbitration was made after the entry into force of this decree.” Article 24 of Legislative Decree no. 40/2006 amended, among other provisions, Article 829 of the Italian Code of Civil Procedure.

Because of the above, new Article 829 of the Italian Code of Civil Procedure should apply to any procedure for setting aside an arbitration award rendered in arbitration proceedings started after Legislative Decree no. 40/2006 entered into force (on 2 March 2006), irrespective of the date on which the arbitration clause was stipulated or the law rules applicable at that time.

A first line of cases of the Supreme Court follows this approach, and abundant case law applied this construction. In this respect, I have also commented a decision of the Court of Appeal of Venice (my comments are here).

However, there is a new line of cases that contradicts the above mentioned case law. According to this new line, it is allowed to request the setting aside, due to a violation of the rules of law relating to the merits of the dispute, of arbitration awards delivered pursuant to an arbitration clause stipulated before the 2006 reform even if the arbitration proceedings commenced after the reform. In other words, according to this line of cases, old Article 829(2) of Italian Code of Civil Procedure applies to these awards. In this article, I talked about this line of cases.

In my previous post on this blog, I was asking myself about the possible steps to take to reduce the uncertainty concerning the possible grounds of challenge of an arbitration award. And this is why I am very happy that the I Civil Chamber of the Supreme Court requested the Supreme Court sitting en banc to unify the case law (order no. 25040 of 11 December 2015, Italian text available here).

In this order, the Supreme Court stated that, in its opinion, it is not allowed to request a review of the award on the merits. The Court ruled that, having been established that “the jurisdiction of the Arbitral Tribunal is the same as the jurisdiction of the Court, arbitration proceedings may only be governed by the procedural rules in force at the time of their commencement – i.e., at the time of the request for arbitration. A different conclusion cannot be drawn from the fact that, when the arbitration clause was stipulated, the parties took into account different procedural rules, namely those in force at the time of the stipulation.” 

Nonetheless, being aware of the existence of the above mentioned lines of cases, the First Chamber requested the President of the Supreme Court to transfer the case to the Supreme Court sitting en banc. We are awaiting their ruling.