This is the third time in row we deal with the issue of the review on the merits of an arbitration award, rendered pursuant to an arbitration clause stipulated before the 2006 reform of Italian arbitration law, in proceedings commenced after the reform.
Corporate arbitration: the twin-track approach is wrong
Decision no. 22008 of 28 October 2015 of the I Civil Chamber of the Supreme Court (Italian text available here) followed the line of cases opposing the so-called “twin-track approach” to corporate arbitration. This judgment ruled that the only arbitration clause that may be stipulated in the Articles of association of an Italian unlisted company is the one pursuant to Article 34 of Legislative Decree no. 5 of 17 January 2003.
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Arbitration clause and payment order
It is quite usual that, when inserting an arbitration clause in an agreement, a party would like to preserve its right to file with the Court a request for a payment order (which is an ex parte order). The purpose would be to attain a temporarily enforceable payment order, since it would be an effective and fast solution to protect its rights.
Nonetheless, the outcomes of such choice could be different from those expected. The VI Civil Chamber of the Supreme Court, in its order no. 21666 of 23 October 2015 (Italian text available here), analysed the possible consequences.
Arbitration and statute of limitations
The First Civil Chamber of the Supreme Court requested the First President of the Court to transfer to the Supreme Court sitting en banc a case concerning the relationship between arbitration and the limitation period provided for by a specific statue of limitations. The dispute concerned Article 2527(3) of the Italian Civil Code, which states that the member excluded from a cooperative company is entitled to challenge the relevant resolution within 30 days of its communication. The current rule in force is Article 2533(3) of the Italian Civil Code, which extended the limitation period to sixty days, the same limitation period provided for by Article 2287(2) of the Italian Civil Code with respect to partnerships. The Italian full text of the order no. 20101 of 7 October 2015 is available here.
Waiver of the right to arbitrate
The Court of first instance of Rome (decision no. 19215 of 28 September 2015, Italian text available here) ruled in a complex case concerning the relationship between a limited liability company and its former director. First of all, the company sued the former director before the Court, claiming his liability. In a second case (the case of the decision at hand), the former director requested the Court to issue a payment order against the company, in order to obtain the amounts allegedly owed to him. The parties did not take into account the arbitration clause stipulated in Article 26 of the Articles of association. This provision notes that “all controversies arising among the quotaholders or among the quotaholders and the company, the directors, liquidators and statutory auditors shall be settled by a sole arbitrator appointed by the President of the Certified Public Accountants Register of the place where the company has its registered office (….).” In the judicial proceedings commenced by the company, the former director objected that the Court did not have jurisdiction, due to the above mentioned arbitration clause. On its turn, the company raised this objection when challenging the payment order issued in favour of the former director.
Did the parties waive their right to arbitrate, by initiating Court proceedings?
Construction of the arbitration clause contained in the Articles of association
In its decision no. 10610 of 22 September 2015, the Court of first instance of Milan declared its lack of jurisdiction on the challenge of a resolution of a cooperative company. The Court used a broad construction of the arbitration clause contained in the company’s Articles of association. The Italian full text of the decision is available here.
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Once again, on arbitration and companies financial statements
The Supreme Court confirmed the non arbitrability of disputes concerning the challenge of company’s resolutions approving the financial statements (order no. 17950 of 10 September 2015 of the VI Civil Chamber of the Supreme Court, Italian full text available here).
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Challenge of shareholders’ resolutions
Order no. 17283 of 28 August 2015 of the Italian Supreme Court affirmed the jurisdiction of an Arbitral Tribunal on the challenge of certain shareholders’ resolutions, pursuant to the arbitration clause stipulated in the company’s Articles of associations. The clause at hand only referred to the arbitrators “all disputes which may arise between the company and any shareholder or among the shareholders (…) concerning the company’s activities.” The Italian full text of the order is available here.
Arbitration and companies financial statements
The Court of first instance of Milan went back to analyse the relationship between Courts’ jurisdiction and the jurisdiction of Arbitral Tribunals, with respect to the challenge of the resolution approving the company’s financial statements (in this case, a limited liability company whose Articles of association included an arbitration clause). The Italian full text of the decision (decision no. 9115 of 28 July 2015 of the Court of first instance of Milan) is available here.
Construction of arbitration clause
The wording of the arbitration clause should be carefully selected, as it constitutes the basis of the jurisdiction of the Arbitral Tribunal. A possible wrong wording will not always be emended, once the dispute has arisen.
Nevertheless, it is commonplace that due attention is not devoted to this clause, either because it is inserted at the last minute in an agreement (known as the “midnight clause” effect), or because the agreement is reached after long negotiation on its commercial terms, underestimating the risk of a possible dispute.