Counterclaims and objection to Court’s jurisdiction

The Court of first instance of Milan issued an interesting decision addressing the relationship between counterclaims and objection to the Court’s jurisdiction raised by the counter-claimant (decision No. 10728 of 21 November 2019, Italian text available here).

The case heard by the Court of Milan concerned a company owning a property located in Milan city centre.

Following the death of the previous partners and the takeover of their heirs, the social relations worsened and the company, which that used to be a partnership, was transformed into a limited liability company.

As a consequence of the said transformation, a partner withdrew from the company (as she is entitled to do under Italian law in case of transformation). However, she did not receive the amounts due by the company due to her withdrawal (except for a down payment).  Therefore, she sued the company and its director before the State Court.

The company appeared in Court, objected to the Court’s jurisdiction (due to the fact that the company’s articles of association used to contain an arbitration clause), and raised a counterclaim against the claimant.  This counter-claim was not expressly conditional upon the rejection of the objection to the Court’s jurisdiction.

The Court of Milan upheld the said objection and considered that it precluded the examination of the merits, both as regards the claimant’s claim, and the respondent’s counter-claim.

With reference to the claimant’s claim, the Court of Milan, also referring to its previous decision No. 12539 of 9 November 2015, upheld the principle that the arbitration clause contained in the company’s articles of association is also binding upon the withdrawing shareholder/partner.

With respect to the respondent’s counter-claim, the Court of Milan noted that the said counter-claim was not conditional upon the rejection of the respondent’s objection to the Court’s jurisdiction, and also noticed that the claimant did not object to the Court’s jurisdiction with respect to the counter-claim. Nevertheless, the Court considered that it cannot examine the merits of the counter-claim, in the light of the Supreme Court case law, whereby raising a counter-claim does not involve a waiver of an objection the the Court’s jurisdiction (Italian Supreme Court, I Civil Chamber, decision No. 12684 of 30 May 2007, n. 12684, Italian text available here). 

It seems to me that the principle laid down by the Supreme Court, examining cases concerning the jurisdiction over the claim and not over the counter-claim, would require further elaboration. In fact, two issues should be carefully examined: the nature of the objection to the Court’s jurisdiction, on the one hand, and the duty of procedural fairness, on the other hand. The conclusions could be the same, but they could be possibly reached following different paths.