Review on the merits

A recent decision issued by Italian Supreme Court (No. 17159 of 26 June 2019, Italian text available here) gives me the chance to make brief comments on the scope of possible review on the merits of arbitration awards by Italian State Courts seised in proceedings for setting them aside.

The case heard by the Supreme Court concerned an award delivered by an arbitral tribunal in relation to compensation due to an individual by a company.

The unsuccessful party seised the Court of Appeal requesting it to set aside the award on the basis of three separate grounds.  It alleged a violation of due process; inconsistency and illogicality of the award reasoning; incorrect assessment of the merits of the case.

Although the first two grounds could also be of interest, I think it is appropriate to dwell on the third one.

The Supreme Court, in fact, upheld the doctrine whereby, in the proceedings for setting aside arbitration awards, the applicant is only entitled to claim the violation of certain procedural rules indicated in the exhaustive list provided for by the Italian Code of Civil Procedure (Article 829, para. 1), and the violation of law rules concerning the merits, to the extent that this claim is allowed pursuant to Article 829, para. 3, of the Italian Code of Civil Procedure. (I have already examined this issue, for instance, in this post).

The latter claim (concerning the violation of law rules concerning the merits), however, should not be confused with a claim aimed at obtaining a new assessment on the merits of the dispute. Italian law does not allow a review, on the part of the Court of Appeal, on the merits of the dispute. On the contrary, the Court of Appeal may only  assess (if and when it is allowed) whether the arbitral tribunal misidentified the law rule that applies to the merits or whether the said rule, although correctly identified, have been misapplied.

In other words: Italian law does not allow the parties to request the Court of Appeal to review the award on the merits, to re-examine the facts, and, on that basis, to set aside the award.

A new factual assessment may only be carried out by the Court of Appeal after the award has been set aside (on the basis of one of the grounds indicated in the exhaustive list provided for by Italian law) and only if the dispute falls within one of the cases in which the Court of Appeal has jurisdiction to issue a decision on the merits (Article 830 of the Italian Code of Civil Procedure). Otherwise, the decision on the merits shall be issued by a new arbitral tribunal (unless, of course, the award has been set aside due to the fact that the arbitration clause was invalid/unenforceable). However, the decision on the merits is issued by a new arbitral tribunal in case of international arbitration proceedings sitting in Italy, unless otherwise agreed. 

Italian law, which does not follow UNICTRAL model law (available here), is nevertheless inspired by similar principles. As a consequence, it is no by chance that the new arbitration rules of Milan Chamber of Arbitration, which have recently come into force (I have examined them in this post), are in line with international best practice. I hope that, also as a result of these new rules, the number of international arbitration proceedings sitting in Italy will increase, and that international arbitration practitioners realise that Italy is a true arbitration-friendly jurisdiction.