A never signed arbitration clause

An Arbitral Tribunal seated in Padua recently dealt with some issues concerning its jurisdiction. The award was delivered on 21 January 2020 and its Italian text is available here.

The dispute heard by the Tribunal referred to an alleged relationship between a bank and a limited company evidenced by a framework agreement and an interest rate swap contract.

The claimant’s case was that the said contractual documents were never signed by its legal representative and that the signature on them was forged. As a consequence, the claimant requested the respondent to return the amounts the latter received under the terms of the said contracts.

An interesting point is that the claimant commenced the arbitration proceedings provided for by the arbitration clause contained in the contracts that, in its own case, it never entered into.

Another interesting point is that, on the basis of the opinion of a Tribunal-appointed expert, the claimant’s signature on the contracts actually proved to be forged. The respondent did not raise any objection after the filing of the expert opinion. Nonetheless, when the Tribunal requested the parties to express their views on the matter, the respondent objected to the Tribunal’s jurisdiction, lacking an enforceable (and even existing) arbitration clause.

The Arbitral Tribunal reached a conclusion that seems correct, in that it rejected the objection to its jurisdiction. Nonetheless, the reasoning that led to the correct conclusion is quite peculiar. It is a clear sign of the cautious – excessively cautious, perhaps – attitude of the Tribunal, and a clear attempt to prevent possible recourse for setting aside the award on the ground of lack of Tribunal’s jurisdiction.

First of all and rather surprisingly, the Tribunal found that it was entitled to deal with the issue of its own jurisdiction, even though the relevant objection was not timely raised under Article 817 of Italian Code of Civil Procedure (whereby the said objection shall be raised by the respondent in its first defence).

In this respect, the Tribunal referred to a decision of Italian Supreme Court (No. 21215 of 8 October 2014), however concerning a different case. As a matter of fact, in the case heard by the Supreme Court the respondent did not appear before the Arbitral Tribunal and subsequently filed a petition to have the award set aside on the basis of the lack of jurisdiction of the Tribunal. The Supreme Court found that the respondent that did not appear before the Tribunal and therefore did not object to the Tribunal’s jurisdiction during the arbitration proceedings is nonetheless allowed to object to that jurisdiction in subsequent proceedings for the setting aside of the award.

The Arbitral Tribunal also held that Article 817 of Italian Code of Civil Procedure does not concern the objections to be raised during the arbitration proceedings, but the possible grounds for setting aside the award. The said distinction is not clearly drawn by the Tribunal and at the end of the day it is even ill-founded under Italian law.

In fact, Italian scholars’ opinion is that the Arbitral Tribunal has jurisdiction, on the basis or a void or voidable or even non-existent arbitration clause, if the interested party does not timely raise the relevant objection.

Italian scholars contend whether this mechanisms amounts to a substantial tool (whereby the arbitration clause is entered into by the parties’ behaviour) or a procedural one (whereby the party that did not timely object to the Tribunal’s jurisdiction is prevented from tardivamente raising that objection). In any case, the opposite scholarly opinions mainly take into account the case of the respondent that did not appear before the Tribunal. Therefore, they might be disregarded if the respondent appears, as it did in the proceedings that led to the award.

The Tribunal of these proceedings, as said, took a very cautious approach and held that it was entitled to deal with the issue of its jurisdiction, even though the respondent failed to timely raise the relevant objection.

The Tribunal found that it has jurisdiction. Notwithstanding the arbitration clause was void (or even non existent, in that it was never signed by the claimant), it held that the relevant objection was subject to the rules set forth by Article 23 TUF (whereby objections concerning the formal validity of contracts between banks and their costumers may only be raised by the customers). The bank’s customer did not raise the objection and as a consequence thereof the Tribunal was prevented from declaring that the arbitration clause was void/non-existent. It is clear that these findings are not consistent with the arbitration clause autonomy, which is a well-established doctrine under Italian law.

The Tribunal also followed a different reasoning leading to the same result, which appears more persuasive. It referred to the authority of a handful of Italian Supreme Court decisions (No. 105 of 15 January 1953, No. 720 of 23 March 1963, No. 4075 of 24 December 1968, and No. 1168 of 12 February 1985) that laid down an interesting principle. In case Italian law requires that a contract is made in writing (as it requires with respect to arbitration agreements), the signature of a party to the contract suffices if the other party (which did not sign the contract) files the contractual document with the Court and declares its intention to avail itself of the rights arising out of the contract. In other words, the contract signed by a party is characterised as an offer that is accepted by the offeree by filing it with the Court and declaring the intention to enforce the terms of the contract. In that perspective, the arbitration clause only signed by the bank in the case heard by the Tribunal was enforceable since the other party filed it with the Tribunal and declared its intention to avail itself of the rights arising out thereof.

As already indicated, the conclusion is right (the Tribunal has jurisdiction) on the basis of a peculiar reasoning. The Tribunal, in fact, has jurisdiction since the respondent failed to timely raise the relevant objection. The findings of the Tribunal gave however the chance to refer to some decisions issued by the Italian Supreme Court that laid down interesting principles. In fact, these decisions would be worth being analysed in details, also in the lights of arbitration law reforms enacted in the meantime.