Wording of the arbitration clause and setting aside of the award

The wording of the arbitration clause is of utmost importance: this is a subject I have already dealt with (for instance in this post). A recent decision of the Court of Appeal of Milan (No. 2528 of 10 June 2019, Italian text available here) confirms this importance also with respect to the possible recourse for setting aside the award.

In 2013, a Romanian company and the Italian subsidiary of a Japanese company entered into a contract for the engineering, procurement, construction, commissioning and start-up of a PV plant in Romania.

A dispute arose between the parties with respect to the fulfilment of the contractual obligations.  This dispute was referred to the arbitral tribunal provided for in the contractual arbitration clause.

The losing party in arbitration seized the Court of Appeal of Milan requesting the setting aside of the arbitration award, alleging that the arbitral tribunal misapplied the law rules concerning the merits.

As we know, in the case of arbitration proceedings instated on the basis of an arbitration clause entered into after the 2006 reform of Italian arbitration law, this appeal (concerning the merits) is only allowed if the arbitration clause expressly provides for it.

This is the nerve centre of the case.  The arbitration clause set forth that “The decision made by Arbitration shall be final and binding for the Parties, except for refutations that may be allowed by the law“.

On the basis of this clause, the losing party in arbitration argued that the appeal on the merits under Article 829.3 of Italian code of civil procedure was allowed since this appeal may be listed amongst “refutations (…) allowed by the law“.

The Court of Appeal had a different view.  It referred to the case law holding that the appeal on the merits is only allowed if the parties clearly and without any ambiguity expressed their intention to allow this recourse (as stated by Italian Supreme Court, I Civil Chamber, decision No. 19075 of 25 September 2015, Italian text available here). Since in the case at hand the wording of the arbitration clause was unclear and ambiguous, the Court of Appeal rejected the appeal.

Would it had been possible to avoid this dispute? I regard that the answer is ‘yes’ if the arbitration clause had different wording.  Was it necessary to stipulate in the arbitration clause that “The decision made by Arbitration shall be final and binding for the Parties, except for refutations that may be allowed by the law“? I believe that the answer is ‘no’, given that this provision, at the end of the day, has no true content.

In the light of the above, the paramount importance of the wording of the arbitration clause is confirmed: on the one hand, with respect to the choice of the proper words; on the other hand, with respect to the need to avoid non-sense jargon expressions that could be exploited by a malicious counterparty.