Corporate arbitration and interim measures

A recent decision of the Court of first instance of Catania (decision no. 4041 of 19 July 2016, Italian text available here) focused on the relationship between corporate arbitration and interim measures and it is particularly interesting for its potential impact.

The case, in a few words, is as follows.

The claimant, a quotaholder of a limited liability company, challenged certain resolutions passed by the general quotaholders’ meeting (approval of financial statements, increase in corporate capital and transfer of the registered office).

The defendant, that is to say, the company, appeared in Court. Prior to any defence on the merits, it objected to the jurisdiction of the State Court on the challenge of the resolutions of increase in corporate capital and transfer of the registered office. Indeed, the Articles of Association of the company contained an arbitration clause. That objection was not raised with reference to the challenge of the company’s financial statements, notwithstanding the claimant’s claim was capable of arbitration. In fact, the claim concerned alleged procedural errors, whereas according to the prevailing case law the jurisdiction of the Arbitral Tribunal is only excluded if the claim concerns the content of the financial statements (this topic has been previously discussed, for example, in this post, in this one and in this one too).

The Court of Catania stated that the Arbitral Tribunal had jurisdiction on the challenge of the resolutions of increase in corporate capital and transfer of the registered office. In doing so, however, it also ruled that State Courts did not have jurisdiction to issue interim measures and, in particular, to order the stay of the challenged resolution pending the appointment of the Arbitral Tribunal.

This topic was previously discussed (in this post) commenting on a decision of the Court of first instance of Milan that reached the opposite conclusion. 

In the case of corporate arbitration, the Arbitral Tribunal has jurisdiction to order the stay of the challenged resolutions passed by the general share/quotaholders’ meeting (Article 35(5) of Legislative Decree no. 5 of 17 January 2003, n. 5: “The jurisdiction of an Arbitral Tribunal does not prevent State Courts from issuing interim measures according to Article 669(d) of Italian Code of Civil Procedure. Nonetheless, if the arbitration clause also refers to disputes concerning the validity of shareholders’ resolutions, the Arbitral Tribunal has jurisdiction to order the stay of these resolutions“). In other words, in the case of corporate arbitration, the Arbitral Tribunal does have a jurisdiction it does not have in the case of common arbitration. In the case of common arbitration, in fact, the Arbitral Tribunal does not have interim jurisdiction (Article 818 of Italian Code of Civil Procedure) and therefore that jurisdiction only rests with the State Courts (Article 669(d) of Italian Code of Civil Procedure). 

As a consequence of the above, a question arises on the nature of the interim jurisdiction of Arbitral Tribunals in the case of corporate arbitration: is that jurisdiction exclusive, that is to say, does that jurisdiction exclude the State Courts’ jurisdiction? The solution reached by the Court of first instance of Milan (upheld by other Courts) is that interim jurisdiction only rests with the Arbitral Tribunal, provided that it has been already appointed. Before its appointment, however, interim jurisdiction lies with the State Court: otherwise, the parties would be deprived of an energetic (and often necessary) remedy.

The Court of Catania does not seem to be concerned by the possible deprivation of such remedy. Indeed, in its opinion, that deprivation would be a consequence of the stipulation of an arbitration clause: “the stipulation of an arbitration clause entails that the parties intended to have their disputes settled by arbitration, whose timing – even if interim measures are sought – is other than the timing of State Courts.” 

The above is settled case law of the Court of Catania: in fact, the decision at hand also refers to certain similar rulings (Court of Catania, 14 November 2013 and Court of Catania, 14 October 2005).

For the time being, that doctrine is only followed by the Court of Catania; nonetheless, other Corporate Chambers could follow it in the near future and therefore a question occurred to me as to the available solutions.

A number of arbitration institutions set up specific rules on emergency arbitration. In Europe, International Chamber of Commerce (Article 29 of ICC Rules of Arbitration and their Appendix V), Stockholm Chamber of Commerce (Appendix II of SCC Arbitration Rules), and Swiss Chambers’ Arbitration Institution (Article 43 of the Swiss Rules of International Arbitration) could be mentioned. In Asia, Singapore International Arbitration Centre (Article 26 and Schedule 1 of SIAC Rules currently in force, corresponding to Article 30 and Schedule 1 of the Rules in force starting from 1 August 2016) and Hong Kong International Arbitration Centre (Article 23 and Schedule 4 of the HKIAC Rules).

All these Rules provide for the appointment of an Arbitral Tribunal having only interim jurisdiction and also set forth streamlined procedural rules.

Similar provisions do not seem necessary (nor useful) in Italy because Arbitral Tribunals usually do not have interim jurisdiction and also because of the above-mentioned case law concerning the very case where they do have such jurisdiction, that is to say, the case of corporate arbitration. However, the perspective would significantly change, should other Courts follow the doctrine laid down by the Court of Catania.