International corporate arbitration

International corporate arbitration under Italian law is a very interesting topic that nonetheless is virtually neglected by Italian scholars. Besides, to date there are no reported decisions.

First of all, a clarification of terminology is due: in this context, ‘international corporate arbitration’ means an abroad seated arbitration concerning a dispute falling within the scope of Article 34 of Italian Legislative Decree No. 5 of 17 January 2003, n. 5, which sets forth particular rules concerning arbitration in corporate matters.

In practice, possible cases of international commercial arbitration are not uncommon. For instance, an Italian incorporated company could represent the investment vehicle of a foreign entity. And that foreign entity could wish that corporate disputes (against an Italian co-investor, or the company’s directors) are referred to an abroad seated arbitration.

A few scholars addressed the relevant issue, which is also addressed by a recent decision issued by the Court of Appeal of Genoa (decision No. 649 of 9 July 2020, Italian text available here).

The case heard by the said Court of Appeal concerned the recognition in Italy of an award issued abroad, by virtue of an arbitration clause included in the articles of association of an Italian company, providing for ICC arbitration seated in Switzerland.

The dispute heard by the arbitral tribunal, in turn, concerned a claim for damages raised by the company against its director. The latter appeared in the arbitration proceedings, raised objections on the merits and, before that, objected to the jurisdiction of the arbitral tribunal, alleging that the arbitration clause was null and void.

The arbitral tribunal partly granted the claims of the claimant, which subsequently seised the Court of Appeal of Genoa to have the award recognised in Italy.

The defendant resisted to the said recognition.

The defendant objected that the recognition of the award was prevented under Article V(1)(a) of New York Convention, as the arbitration clause for international corporate arbitration is null and void, in that it contrasts with the mandatory rules of Articles 34-36 of Italian Legislative Decree No. 5/2003. This objection focuses on the fact that applicable Swiss procedural law prevents the review on the merits of the award, while the said review in corporate matters is allowed by Articles 35 and 36 of the said Italian Legislative Decree.

From another point of view, the defendant also objected that the award should not circulate under Article V(2)(b) of New York Convention, since the relevant arbitration clause was not but a device to circumvent Italian mandatory rules (once again, those on the review on the merits).

The last objection raised by the defendant concerned Article V(1)(a) or V(1)(c) of New York Convention, on the basis of an alleged waiver to the arbitration clause by the company that brought proceedings against the director before Italian State Courts.

That objection was rejected: first of all, because the company had never brought proceedings against the director before Italian State Court (it only filed, but did not follow up, a request for joinder). Also, the said request for joinder was filed when the arbitration proceedings were already pending and, as a consequence thereof, cannot be construed as a waiver to the arbitration clause.

The Court also rejected the second objection, since a possible conflict with public policy is only relevant under Article V(2)(b) of New York Convention if it concerns the operative part of the award (see on the point Italian Supreme Court, I Civil Chamber, decision No. 6947 of 8 April 2004, Italian text available here). In other words, substantial public order is only at stake. And no violation of that public policy had ever been claimed.

The most interesting reasoning of the Court concerns the first objection raised by the defendant. In this respect, the Court of Appeal held that validity requirements of corporate arbitration clauses are only set forth by Article 34 of Italian Legislative No. Decree 5/2003, whereby the arbitration clause is null and void if it does not provide that all the arbitrators are appointed by a third party. On the contrary, Articles 35 and 36 of the said Italian Legislative Decree are procedural rules that only apply in arbitration proceedings seated in Italy.

In this respect, it is worth noting that the said Article 36 do mention ‘international arbitration’.  It seems that, in the opinion of the Court, which did not explicitly address the point, such mention actually refers to the repealed rules on international arbitration contained in the Italian Code of Civil Procedure (concerning Italian-seated arbitration proceedings having transnational aspects).  It is clear that this is a sensitive issue and that the reasoning of the Court is controversial on that point.

Some questions remained in the background. In particular, that of the law governing the arbitration clause, which the Court of Appeal apparently identified regardless of the law conflict rule provided for by Article V(1)(a) of New York Convention (although it seemingly reached a conclusion in line with this conflict rule and its construction).

Another issue in the background is that of the possible invalidity grounds relevant under Art. V(1)(a) of New York Convention, whether Country-specific grounds are allowed or only internationally neutral grounds should be considered.

Likewise, a practical question also remained in the background. Italian law provides that requests for arbitration by the company or against it have to be filed with the Companies’ House and the question is whether the filing of foreign-language documents is allowed.

Despite these issues in the background, the decision issued by the Court of Appeal of Genoa represents the first reported decision on international corporate arbitration and, hopefully, the starting point of a line of cases.