Arbitration and order for payment

A recent decision issued by the Court of first instance of Rome (no. 24195 of 28 December 2016, Italian text available here) gives us the chance to examine an interesting topic: that concerning the relationship between arbitration and order for payment.

The case heard by the Court of Rome was quite simple.

The claimant requested and obtained an order for payment, which was issued by the Court of Rome.

The defendant requested the Court to set aside that order, objecting to the jurisdiction of State Courts since the agreement out of which the claimant’s credit stemmed contained an arbitration clause and therefore the jurisdiction over the dispute lied with an Arbitral Tribunal. Moreover, the defendant also objected that the Court of first instance of Rome, in any case, was not the proper venue for the dispute, since in a subsequent agreement – maybe a settlement – the parties had agreed that the proper venue for their disputes was the Court of first instance of Turin. Eventually, as to the merits, the defendant denied owing any sum to the claimant.

The Court of Rome upheld the objection to its jurisdiction and set aside the order for payment.

The decision at hand did not examine a very interesting issue, that is that concerning the enforceability of an arbitration clause in the case of a subsequent settlement agreement (that topic was recently examined by the Court of first instance of Milan in its decision no. 13960 of 21 December 2016, Italian text available here). Nonetheless, the decision of the Court of Rome is quite interesting as to the relationship between arbitration and order for payment.

Under Italian law, the order for payment is an ex parte order. In a nutshell, the claimant has to provide the Court with written evidence of his credit. That’s all. Thereafter, the claimant’s application and the order for payment are served on the defendant. The defendant may request a full trial by requesting the Court to set aside the order for payment. In that full trial, he is obviously entitled to raise all his objections, as to the procedure and as to the merits.

Even tough the claimant’s credit arises out of an agreement containing an arbitration clause, the State Court cannot refuse to issue the order for payment. Indeed, the objection to the jurisdiction of State Courts may only be raised by the parties and cannot be raised by the Court by its own motion. This doctrine is settled case law of the Italian Supreme Court (for instance, Supreme Court, II Civil Chamber, decision no. 5265 of 4 March 2011, Italian text available here).

In other words, an order for payment may be issued by a State Court notwithstanding the parties entered into an arbitration clause. It is up to the defendant to object to the jurisdiction of State Courts and request to set aside the order for payment. To raise that objection, the defendant has only to prove that the parties entered into an arbitration clause. If that clause is enforceable, the Court sets aside the order for payment. It has not to be satisfied that there is a genuine dispute between the parties (as in certain common law jurisdictions).

This is the reason why some arbitration clauses expressly exclude from their scope of application the order for payment. I believe that such clauses are not so useful. Indeed, an arbitration clause allowing the parties to request the Court to issue an order for payment (as the clause analysed in that post) appears to be useless: the parties are already allowed to do so. Moreover, an arbitration clause excluding from its scope of application the whole proceedings (that is, also the full trial triggered by the defendant’s request to set aside the order for payment) appears to jeopardise the parties’ intention to have their disputes settled by arbitration.