Scope of corporate arbitration clauses

A recent decision issued by the Court of Cosenza (no. 1171 of 4 June 2019, Italian text available here) addresses the topic of the scope of corporate arbitration clauses.

The dispute decided by the Court of Cosenza concerned the request for judicial removal of the director of a company, based on several alleged serious breaches to his duties, and the compensation of the relevant damage.

Since the dispute concerned a partnership (‘società di persone’), the proper venue was the ordinary Court of Cosenza and not the Commercial Court provided for by Italian legislative decree no. 168 of 27 June 2003, which is the proper venue, amongst other things, for similar disputes concerning limited companies (‘società di capitali’).

The respondent raised a number of objections on the merits and also objected to the jurisdiction of the State Court, on the basis of the arbitration clause stipulated in the company’s articles of association.

The Court of Cosenza rejected the said objection.

First of all, the Court stated that, even though corporate disputes may be usually deferred to arbitration, arbitral tribunals have no jurisdiction with respect to disputes involving the interests of the company or concerning the violation of law rules protecting collective interest of the partners/shareholders or third parties.

On the basis of the said principle, the Court held that the arbitral tribunal provided for in the company’s articles of association had no jurisdiction on the case at hand, since it concerned, amongst other things, alleged omissions on the part of the director concerning the company’s financial statements. In this respect, the Court of Cosenza referred to a handful of precedent decisions, including some decisions issued by the Italian Supreme Court (the most recent of which is Italian Supreme Court, I Civil Chamber, decision no. 18600 of 12 September 2011, Italian text available here).

I regard that the decision of the Court of Cosenza, although issued in accordance with the case law of the Italian Supreme Court, is nevertheless wrong. In my opinion, the principles laid down by some arbitral tribunals (see for example the award published on Corriere Giuridico 1999, p. 613, with a comment by Prof. Salvaneschi) or certain lower Courts (Court of Monza, 14 December 2001, on Società, 2002, p. 1019; Court of Bari, 7 February 2007, on Il Merito, 2007, p. 39; Court of Torino, 11 March 2011, on Dejure) are more persuasive.  According to the said decisions, there is no doubt that the liability action against a director and the request for her or his removal may constitute the subject matter of a settlement.  These disputes concern disposable rights and, as a consequence thereof, there is no law rule preventing the arbitral tribunals jurisdiction on them. Otherwise, on the basis of the principle laid down by the Court of Cosenza, we would reach the conclusion that the dispute concerning the removal of a company’s director would be subject to the arbitral tribunal or the State Courts jurisdiction in the light of the actual alleged grounds for the requested removal (e.g., State Court jurisdiction if the removal is requested on the basis of omissions concerning the financial statements; arbitral tribunal jurisdiction if the request is based on other grounds), which is clearly non-sense.

In addition, it could also be stated that the decision of the Court of Cosenza is wrong since there is no law rule preventing the jurisdiction of arbitral tribunals on disputes concerning the company’s financial statements.  This is a topic often addressed on this blog (see for example here and here).