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25 May 20206 minute read

Arbitration proceeding in the time of Coronavirus

The Italian government, driven by the aim to counter the epidemiological emergency from COVID-19, has adopted, over the last few weeks, several measures in order to conform to the recommendations given by scientists. These measures affect different aspects of civil society, including the administration of justice and, in particular, arbitration.

If the government had initially adopted – on the spur of the moment given the emergency – a legal framework that was rather generic, it was then able to make some clarifications which, apparently - at least until enactment of law n. 27 of 23 April 2020 - were not sufficiently clear as to their applicability to arbitral proceedings.

Art. 1 of Decree Law n. 11 of 8 March 2020, sets out the postponement ex officio of the “hearings in civil and criminal proceedings pending before all judiciary offices – with appropriate exceptions – to a date subsequent to 22 March 2020,” and the suspension of the “time limits for accomplishing any act in the proceedings under paragraph 1.” The scope of the provision sounded generic as it referred to all pending civil and criminal proceedings and, therefore, casts doubt on the interpretation of its applicability to arbitral proceedings. A small – although not conclusive – step forward in the identification of a rule applicable to arbitral proceedings was identified in the subsequent Decree Law n. 18 of 17 March 2020, known as Cura Italia Decree, where Art. 83 provided that the “hearings in civil and criminal proceedings pending before all judiciary offices” are postponed and the “time limits for accomplishing any act in civil and criminal proceedings” are suspended until 15 April 2020. According to the same article, the suspension was also applicable to mediation proceedings, assisted negotiation as well as “to all out-of-court settlements of disputes governed by the legislation in force, when the aforesaid proceedings are initiated by March 9, 2020, and constitute a condition for the prosecution of the claim. Consequently, the maximum time limits for such proceedings are suspended.” A subsequent decree, the so-called Liquidity Decree, has extended the suspensions and postponements for all abovementioned proceedings to 11 May 2020.

The rules ultimately contemplate all civil (and criminal) proceedings, as well as civil and commercial mediation procedures, assisted negotiations and ADRs but, also in this case, no express reference is made to arbitral proceedings. It was only with the law n. 20 of 24 April 2020, the legislator specifies the applicability of the provisions on suspension and postponement to ritual arbitration.

Until 24 April 2020, the question therefore was whether and to what extent such provisions might be deemed applicable to pending arbitral proceedings or, in any case, what solution might be more consistent with the rationale of the rule for a better handling of such proceedings during the health emergency.

The Italian government’s attempt to resolve interpretive doubts by mentioning the extra-judicial procedures offers no help to the interpreters, because, by reading at a glance the provisions of Decree Law n. 18 of 17 March 2020, it seems that the suspensive effect does not concern all out-of-court procedures but only those which (i) are a condition for the prosecution of the claim, and (ii) are initiated before 9 March 2020.

The solution to the hermeneutic dilemma must necessarily focus on the nature of the institute of arbitration and on the purpose and scope of the extraordinary suspension of the time limits.

Historically, there were different opinions on the nature of arbitration; the so-called ritual and irritual arbitrations were treated as separate phenomena, one intended as an activity alternative to the jurisdictional one – hence a sort of para-judicial activity – and the other relevant to contractual and private aspects. The traditional opinion was then opposed by the so-called unitary or monist theory, according to which ritual and irritual arbitrations are overlapping phenomena, except for the limited effect of their awards which, in the first one would be equivalent to a judgment, while, in the second one, to a contract.

These opinions, which have also had repercussions in case law, where arbitration was considered a non-judicial body and the award a bargaining act, were overcome once and for all with the reform of 2006, which has conclusively qualified arbitration as a proceeding designed to replace the ordinary jurisdiction and reduce the volume of judicial litigation.

As most of us know, the extraordinary suspension of the time limits is part of the measures that the government has adopted to prevent the spread of the contagion and overcome as rapidly as possible the health and financial crisis of the country. For this reason, there are no analogies between this extraordinary suspension and the annual summer break: therefore, it would be wrong to consider the COVID-19 suspension as not applicable to arbitration proceedings just because such proceedings are unaffected by the summer break. The summer break, as clarified by the Italian Supreme Court, is “peculiar to the jurisdiction,” namely, it has nothing to do with the suspension of the time limits set out in case of an emergency. The purpose of such extraordinary suspension, far from being the enjoyment of a period of vacation, is to limit as much as possible any mass gathering that is likely to endanger public health.

For this reason, since arbitral proceedings, for their nature, purpose and structure, do not fall within the category of the mediation procedures, assisted negotiation or ADR constituting a condition for the prosecution of the claim, it appears more consistent with the guiding principles of our legal system and the logic of emergency laws that the main types of arbitral proceedings are comparable to, for the purposes hereunder, ordinary proceedings and, as such, they are subject to the same emergency provisions. With the consequence that it is reasonable to implement the postponements and suspensions set out for any other proceeding, until 11 May 2020.

A confirmation that arbitral proceedings are aligned with judicial proceeding can immediately be found by reviewing the decisions taken in the last few days by the main Chambers of Arbitration.

By resolution no. 21328, dated 15 April 2020, the Italian Arbitrator for Financial Disputes (ACF), who had initially suspended all deadlines until 15 April 2020, has further extended the suspension up to 11May 2020; the Italian Banking and Financial Ombudsman (ABF) has set out that the time limits are suspended until 11 May 2020, on the basis of the provisions of the so-called Liquidity Decree. The Chamber of Arbitration of Milan has set out that “in view of the extraordinary and urgent measures adopted in order to counter and contain the spread of the COVID-19 virus, any procedural deadlines, including the time limit to file arbitral awards, as well as any other deadline provided for in the Arbitration Rules, are suspended from 16 March 2020, until 11May 2020.”

Following the clarification introduced by the Conversion Law regarding the application of such extraordinary suspension to ritual arbitration, the interpretation doubts persist with regard to irritual arbitration proceedings.

Given the changing nature of the legislation and the constant evolution of the epidemiologic situation in Italy, we cannot exclude the possibility that suspension of civil proceedings and therefore of arbitration proceedings may be subject to a further extension.