Arbitration and directors’ remuneration

The Supreme Court addressed the arbitrability of disputes between companies and directors concerning the directors’ remuneration (decision no. 2759 of 11 February 2016 of the I Civil Chamber, Italian text available here).

In June 2008, the former director of a company limited by shares applied for and obtained a payment order (that is, an ex parte order) for the remuneration allegedly owed to him.

The order was rendered by the Labour Chamber of the Court of first instance.

The company appealed that order before the Court of first instance.  In order to do so, it served on the other side a writ of summons: in other words, it commenced an ordinary procedure (under Italian law, proceedings before the Labour Chambers are commenced by filing a petition with the Court, which is thereafter served on the respondent; ordinary proceedings before Civil and Corporate Chambers are commenced by serving a writ of summons on  the respondent, which is thereafter filed with the Court). The company argued that the jurisdiction on the case rested with an Arbitral Tribunal, due to the arbitration clause in the company’s Articles of association. As to the merits, it also objected that the director’s claim was ungrounded.

The director appeared in Court and objected that the company’s appeal was not admissible (indeed, he argued that the appeal should have been commenced before the Labour Chamber). Furthermore, he argued that the arbitration clause did not apply since the dispute at hand was a dispute under Article 409 of the Italian Code of Civil Procedure (Article 806(2) of the Italian Code of Civil Procedure notes that “Disputes provided for in Article 409 may be decided by arbitrators only if so provided by law or by collective labour contracts or agreements” ) and he also contested the company’s objections on the merits.

The Court, both at first instance and on appeal, upheld the objection of arbitration raised by the company.

The Supreme Court confirmed the rulings rendered by the lower Courts.

First, the Supreme Court noted that the Corporate Chamber is the proper venue for all the disputes between directors and companies. More specifically, the Court ruled that “Article 3 letter a) of Legislative Decree no. 168/2003 states that the Corporate Chamber is the proper venue for all disputes relating to corporate relations. In particular, it is the proper venue for all disputes involving the company and its directors: the disputes concerning the corporate relationship, as well as those concerning the directors’ remuneration.” 

The Supreme Court referred to its settled case law, whereby a director cannot be an employee of the company (decision no. 2861 of 26 February 2002 of the Labour Chamber of the Supreme Court; decision no. 13009 of 5 September 2003 of the Labour Chamber of the Supreme Court; decision no. 7961 of 1 April 2009 of the I Civil Chamber of the Supreme Court; decision no. 19714 of 13 November 2012 of the I Civil Chamber of the Supreme Court; decision no. 22046 of 17 October 2014 of the I Civil Chamber of the Supreme Court) and concluded that “it can no longer be claimed that the disputes between companies and directors on the directors’ remuneration are not capable of arbitration.” 

The Supreme Court used to rule that the Labour Chamber is the proper venue of the disputes concerning the directors’ remuneration, as per Article 409(1)(3) of the Italian Code of Civil Procedure.

On the contrary, in the decision at hand the Supreme Court ruled that the procedure for labour cases as per Article 409(1)(3) of the Italian Code of Civil Procedure did not apply to the disputes relating to the directors’ remuneration.  Indeed, the Corporate Chamber is currently the proper venue of all the disputes between companies and directors.

On the other hand, Article 34(4) of Legislative Decree no. 5 of 17 January 2003, expressly provides that “the Articles of association may provide that the arbitration clause covers disputes brought by directors (…) or those brought against them (…).” Therefore, even if one were to assume that the procedure for labour cases still applies to disputes between the company and directors concerning the remuneration of the latter, these disputes are capable of arbitration. Article 806(2) of the Italian Code of Civil Procedure provides that the disputes governed by the procedure for labour cases “may be decided by arbitrators only if so provided by law or by collective labour contracts or agreements“. And a legal provision does exist.