Italian arbitration - Reduction of the long time limit to challenge the validity of an arbitral award and the <em>dies a quo</em>
The reform proposal
Article 828, par. 2, of the Italian Code of Civil Procedure (CPC) currently provides that the time limit (commonly known as the long time limit) to challenge the validity of an arbitral award is set at one year from the date of the last signature of the award by the arbitrators. At the same time, pursuant to Article 828, par. 1, of CPC, the “short time limit” to challenge the validity of an arbitral award is 90 days from the service of the award to the losing party.
The draft of the upcoming reform of the CPC, which will also include a reorganization of the legal discipline concerning the arbitral proceedings, contains a provision aimed at decreasing the long time limit to challenge the validity of the arbitral award from one year to six months.
Article 1, par. 15(e), of Law 26 November 2021, no. 206, the enabling act (Enabling Act) aimed at reforming the CPC, provides that “the legislative decree(s) amending the arbitration provisions shall be adopted in compliance with the following guiding principles and criteria [...]: e) reduce to six months the time limit set forth in Article 828, par. 2, of the Code of Civil Procedure to challenge the validity of the arbitral award, equating it to the time limit set forth in Article 327, par. 1, of the Code of Civil Procedure.”
In light of the above, a twofold goal of the Enabling Act seems to be, on the one hand, the intention, imposed by the need for procedural efficiency (one of the declared goals of the entire reform), to reduce the duration of proceedings; on the other hand, the will to equate, from a temporal perspective, the long time limit to challenge the validity of the arbitral award with the regime regulating the challenge of a judicial decision. As a matter of fact, pursuant to Article 327, par. 1, of CPC, the long time limit to challenge the validity of a judicial decision is also six months.
Hence, after the Enabling Act will be put into effect by the legislative decrees, the only remaining difference between the long time limit to challenge the validity of an arbitral award and the one to challenge a judicial decision will be the day from which the time limit usually runs (the dies a quo), as explained in the following paragraph.
The dies a quo issue
As mentioned above, pursuant to Article 828, par. 2, of CPC, the long time limit to challenge the validity of an arbitral award runs “from the date of the last signature” by the arbitrators. At the same time, pursuant to Article 327, par. 1, of CPC, a challenge against a judicial decision is no longer admissible after six months have elapsed “from the publication of the decision.”
Unlike the dies a quo of the long time limit to challenge a judicial decision (ie the day of publication of the decision), the date from which the long time limit to challenge the arbitral award runs may not be immediately acknowledged by the parties, as the date does not depend on the physical delivery of the award to the parties. Article 824, par. 2, of CPC provides that “[…] The arbitrators shall communicate the award to each party, by delivering, even by registered post, an original or a copy of the award certified true by the arbitrators, within ten days after the award is signed.” As a result, the parties usually acknowledge the issuance of the award only once the award is communicated to them by the arbitrators, and such a communication may intervene up to ten days later than the day on which the arbitrators signed the award.
This may create uncertainty for practitioners, as it would be difficult, for the party wishing to challenge the award, to promptly acknowledge the day of the last signature of the award and therefore the dies a quo from which the time limit to appeal would run. The legitimacy of the provision setting up the dies a quo to challenge the validity the arbitral award on the day of the last signature by the arbitrators has been questioned by scholars, according to which such a rule may violate parties’ right to defence and to due process. This has led to questions as to whether it would be possible to the have the long time limit to challenge the arbitral award running not from the time of its signature, but rather from the communication of the award to the parties. Such a conclusion would be reached, in scholars’ opinion, by interpreting Article 828 of CPC in compliance with Articles 24 and 111 of the Italian Constitution (respectively establishing the general principles of the parties’ right to defence and to due process).
The case before the Joint Sections of the Italian Supreme Court
The matter was the subject of a recent decision by the Joint Sections of the Italian Supreme Court (Italian Supreme Court, Joint Sections, 30 March 2021 no. 8776).
In that case, the appellant complained that it would not be legitimate for the parties that the time limit to challenge the award included a period of time (the one running between the – unknown day of the – last signature and the – known day of – communication of the award to the parties) during which the party potentially interested in challenging the award remains unaware that the award has been issued. Not only that; an extreme situation that could also happen, in the appellant’s opinion, is that the award may never be communicated to the parties. And the long time limit to challenge the award may run without the parties ever becoming aware of its issuance.
The decision by the Joint Sections
The Joint Sections rejected the appeal. The heart of the reasoning followed by the Joint Sections is in the progressive equation (at which the Enabling Act is aimed, as previously said) between an arbitral award and a judicial decision.
Starting from a literal interpretation of Article 828, par. 2, of CPC, the Italian Supreme Court argued that the wording of the provision is not open to different interpretations. The rule is quite clear in considering the award to be subject to challenge starting from the day of the last signature by the arbitrators.
This would be compliant with the entire discipline established by the CPC concerning the effectiveness of the arbitral award, of which Article 824-bis of CPC would be the main expression. Pursuant to the latter provision, the arbitral award “has from the date of its last signature the effects of the judgment pronounced by the judicial authority.”
As a consequence, in the Joint Sections’ view, the appellant’s argument according to which the time limit to challenge the award should run from the communication of the award to the parties, is not valid.
The Joint Sections also maintained that to identify (as the appellant argued) the day of communication of the award as the proper dies a quo for the long time limit to challenge the award would bear the unreasonable consequence that, in the extreme event of miscommunication of the award by the arbitrators to the parties, the time limit might never start to run. Moreover, if the communication of the award is received by a party once the long time limit has already expired, the latter can, in any case, resort to the remedy envisaged by Article 153 of CPC. Such provision allows the party to ask the court to be put back in time, even though the time limit has expired, as long as the party proves that the time limit has expired due to reasons beyond its control.
In conclusion, according to the Joint Sections “The legislator has [...] established a correlation between the publication of the judicial decision – with which the decision comes into existence and begins to produce its effects – and the signing of the award by the arbitrators.” (see Cass. Civ. Sez. Un. 30 March 2021 no. 8776).
Hence, in the Joint Sections’ view, if the judicial decision becomes effective upon publication, and not upon communication to the parties, and if the arbitral award becomes effective just after it’s signed, then it’s reasonable for the long time limit to challenge the validity of the award to run from that day, and not from the day of the communication of the award to the parties.
The Joint Sections concluded that there’s no reason to believe that the risk envisaged by the appellant (according to which the long time-limit could start to run without the parties having actual knowledge of it) may actually materialise: parties’ right to defence and to due process is guaranteed by the length of the long time limit to challenge the award, which is, as of today, one year.
The question then arises whether, in the light of the reduction of the long time limit to challenge the validity of the award made by the Enabling Act, the legislator will also intervene on the dies a quo. As a matter of fact, following the reasoning of the Joint Sections, one might suspect that, if the annual time limit is of a length suitable to guarantee the parties’ right to defence and to due process, the same cannot be said in the event that the time limit is halved to six months.
Scholars have noticed that an intervention not only on the long time limit to challenge the award, but also on the dies a quo, would be troublesome. First, the communication of the award, if made by postal service, could reach the parties on different days, meaning there would not be just one dies a quo common to both parties, but rather different dies a quo depending on the day the parties received communication of the award.
Moreover, as already noticed by the Joint Sections, pursuant to Article 824-bis of CPC, the award becomes effective upon the signature by the arbitrators, and not upon its communication to the parties. If the legislator were to modify the dies a quo from which the long time limit to challenge the award runs (setting it on the day of the communication of the award to the parties, rather than on the day of the last signature by the arbitrator) it would therefore imply, at least, the need to amend Article 824-bis of CPC. If the time limit to challenge the award runs from the day of communication of the latter to the parties, it would mean that the award becomes effective from such communication, and not, as established by Article 824-bis CPC, from the day the award is signed by the arbitrators. This, however, would lead to ignore the correlation mentioned by the Joint Sections and established by the legislator between the publication of the judicial decision (which, as said, becomes effective from the publication) and the signing of the award by the arbitrators.
The answer to the questions about how the legislator will intervene on the CPC, and in particular, on Article 828, par. 2 CPC in light of the above-reported issue concerning the dies a quo of the long time limit to challenge the validity of the award, will be provided soon. The Enabling Act must be given effect within the end of 2022, and we will keep you posted.