Objection to State Court’s jurisdiction

A contract contains an arbitration clause whereby the parties’ disputes are referred to arbitration. Notwithstanding the said clause, a party sues the other party in State Court.  The respondent objects to the Court’s jurisdiction, on the basis of the arbitration clause, but the Court issues a wrong decision, rejects the objection and upholds its jurisdiction.  In such a case, what is the appellate Court that the respondent should seize to have the first decision overturned?

Two recent decisions, issued a day apart by two different Courts of Appeal (decision of the Court of Appeal of Catanzaro No. 1782 of 19 September 2019, Italian text available here; and decision of the Court of Appeal of Potenza No. 636 of 20 September 2019, Italian text available here), offer two different answers to the above question: the Court of Appeal of Catanzaro holds that the appeal has to be submitted to the Court of Appeal, while the Court of Appeal of Potenza states that it has to be filed with the Italian Supreme Court. Both decisions are correct because they concern two different kinds of arbitration proceedings.

Italian law provides for two arbitration procedures: the “regular” arbitration (“arbitrato rituale”) that results in an award that has the same effects as the decision issued by State Courts (Article 824-bis of the Italian Code of Civil Procedure), and another kind of arbitration: the “irrituale” arbitration that results in an award that has the value of contractual determination (Article 808-ter of the Italian Code of Civil Procedure).

The nature and effects of the award are the main difference between “rituale” and “irrituale” arbitration, but they are not the only one. Other differences concern the appeal to the award.  The award issued in “rituale” proceedings can be set aside by the Court of Appeal under Article 829 of the Italian Code of Civil Procedure on the basis of the mandatory grounds provided for therein (quite similar to the grounds for setting aside an award under Article 34 of UNCITRAL Model Law). On the contrary, the award issued in “irrituale” proceedings can be challenged for the reasons indicated by Italian law (Article 808-ter of the Italian Code of Civil Procedure) and the proper venue is the Court of First Instance (or the Justice of the Peace).

Another material difference is that concerning the relationship between State Courts and Arbitral Tribunals.

The objection to the Court’s jurisdiction, if the clause provides for a “rituale” arbitration, involves an issue of jurisdiction in the strict sense: the Court’s decision states that the Court or the Arbitral Tribunal has jurisdiction.  As a consequence, “The decision whereby the Court upholds or denies its own jurisdiction with regard to an arbitration agreement may be challenged according to Articles 42 and 43” (Article 819-ter of the Italian Code of Civil Procedure), that is to say: before the Supreme Court.

On the other hand, if the arbitration clause provides for “irrituale” proceedings, the situation is quite different: the objection to the Court’s jurisdiction does not involve an issue of jurisdiction in the strict sense.  On the contrary, it involves an issue of the merits, leading the Court to possibly declare that the claim is not admissible, without any decision on the jurisdiction (on this point, see Italian Supreme Court sitting en banc, decision No. 19473 of 30 September 2016, Italian text available here). Therefore, the decision issued by the Court of first instance may be challenged before the Court of Appeal.

The above explains the reasons why the Courts of Appeal of Catanzaro and Potenza reached two different conclusions as far as the proper venue of the appeal is concerned.  Indeed, the Court of Appeal of Catanzaro issued its decision on a case where the parties entered into an arbitration clause providing for “irrituale” proceedings, while the case heard by the Court of Appeal of Cosenza concerned a contract containing a clause providing for “rituale” arbitration.