The new framework of the Italian dispute board

To face the dramatic financial consequences of the COVID-19 pandemic, the Italian government is now in the process of enacting a series of measures aimed at stimulating the recovery of the national economy. The so-called law decree Semplificazioni (literally simplifications) is one of those measures and, as the name suggests, it is aimed at simplifying the administrative procedures concerning public procurement and construction works. On July 16, 2020, after a long and draining negotiation within the majority of the Italian Parliament, the decree was finally published in the Official Journal of the Italian Republic (ref. law decree no. 76 of 16 July 2020). The decree entered into force the day after, on July 17, 2020.

One of the major innovations carried by the law decree Semplificazioni is the clear and accurate regulation of the instrument of the collegio consultivo tecnico (the board). Construction law practitioners are already familiar with such an instrument which, in the context of international construction contracts, is known as the dispute board. The dispute board is a method of dispute avoidance and resolution whereby the parties appoint an independent panel that is mandated to supervise the day-to-day execution of the construction works. If the parties disagree on a certain issue, they can ask the board to issue a real-time decision. As a consequence, the decision is taken by a panel of experts who are already familiar with both the contract documents and the technical issues that concern the construction project.

The Italian version of the dispute board was launched in 2016 by Article 207 of the new public procurement code. Only one year later, the public procurement code was amended so as to repeal the provisions concerning the board. Then, in 2019, the newly appointed government reintroduced the dispute board along with other measures whose aim was to break through the standstill situation that concerned the works’ progress at many construction sites (ref. Article 1, §§11-14 of law decree no. 32 of 18 April 2019).

The reintroduction of the board into the public procurement code was seen by construction law practitioners as a sign of the government’s will to implement this valuable instrument in the Italian legal system. However, the provisions of 2019 about the dispute board were too poorly drafted to allow for an efficient implementation of such instrument.

Now, times seem to be ripe enough for the introduction of a complete regulation of the dispute board mechanism. The provisions of the law decree Semplificazioni regarding the collegio consultivo tecnico can be found at Article 6, which consists, in its final draft, of nine paragraphs.

Provisions of Article 6

Paragraph 1 of Article 6 defines the scope of application and the functions of the board. Until July 31, 2021, the appointment of the board is mandatory for all public construction contracts whose value is equal to or higher than the thresholds set by Article 35 of the public procurement code. Nonetheless, according to paragraph 4, the parties may appoint a collegio consultivo tecnico even for those contracts whose value does not reach the thresholds set by Article 35.

The appointment of the board shall occur before or, in any case, within ten days from the commencement of the works. If the works had already commenced, the board shall be appointed not later than 30 days from the date of entry into force of the law decree.

If compared with the previous regulation, this paragraph already contains substantial changes. First, it establishes that the appointment of the board is not optional (as it used to be), but it is mandatory. Second, this new provision fills the gap left by the previous regulation, where it addresses the situation of the ongoing contracts for which the works have already commenced.

With regard to the functions, paragraph 1 establishes that the board is empowered to assist the parties for the resolution of both legal and technical disputes that may arise during the execution of the contract.

Furthermore, according to Article 5 of the law decree Semplificazioni, the board has the power to suspend the works (i) on serious grounds of public order and security, including any measure that needs to be taken against the COVID-19 emergency, and (ii) on technical grounds that may hinder the correct execution of the works.

Paragraph 2 sets the requirements that the board’s members should possess to be appointed. Firstly, members can be selected not only among engineers and architects, but also among legal and financial experts. Secondly, they are required (i) to have technical expertise that is specifically related to the construction project for which they are being appointed, and (ii) to be knowledgeable about the practice of building information models (BIM).

As to the method of appointment of the board, paragraph 2 provides for mechanisms that are similar to arbitration. In a three-member board, the parties can either agree on all members or, should they fail to do so, each party shall appoint one member and the presiding member is then selected by the party-appointed members. When there is a lack of agreement between the party-appointed members, the presiding member is appointed, for projects of national interest, by the Ministry of infrastructure and transport. For all other projects, the presiding member is appointed by the regional and local administrations.

Paragraph 3 contains probably the most interesting innovations. The board has 15 days to issue its decision on a matter brought to it by the parties and, to do so, it can decide whether to question the parties informally or to conduct formal hearings. Unless the parties agree otherwise, the decision of the board is equated to a contractual award pursuant to Article 808-ter of the Italian Code of Civil Procedure. A contractual award (lodo irrituale) is a specific tool provided by the Italian legal system: it consists of a decision that has the effects of a contract, rather than the effects of a judgment. Accordingly, as it lacks the efficacy of a judgment, a contractual award cannot be directly enforced by courts’ bailiffs. As a consequence, the party that is interested in enforcing the board’s decision would need to first refer the matter to the national court or to an arbitral tribunal.

In spite of the difficulties regarding the enforcement of a contractual award, the mere fact that the decree clearly defines the legal nature of the board’s decision is a great achievement. As a matter of fact, the definition of the legal nature of the dispute board’s decision is one of the issues that most concerns construction law practitioners around the world: in the absence of a clear definition of its legal nature, the parties do not feel compelled to abide by the board’s decision, thereby jeopardizing the implementation of the entire instrument.

To compel the parties to give effect to the decision of the board, paragraph 3 provides for an explicit sanction: non-compliance with the board’s decision is to be regarded as a violation of the parties’ contractual obligations.

Paragraph 5 provides for the public contracting authority’s power to appoint a board that supervises the phase that precedes the execution of the project. Typically, during this phase, the public contracting authority unilaterally (i) sets the terms and conditions of the invitation to tender, and (ii) defines the requirements that the contractors should possess to win the bid.

Paragraph 6 confirms the previous regulation where it states that the board’s appointment expires when the project is concluded or, for those cases in which the appointment is optional, when the parties agree to terminate its mandate. In any case, parties will have the power to terminate the board’s mandate at any moment after July 31, 2021.

Paragraph 7 fills the gap left by the previous regulation with regard to the fees of the board’s members. According to the new provision, the fees of the board’s members shall be proportional to the value of the project and to the number, the quality and the rapidity of the decisions.

Paragraph 8 addresses the issue of multiple appointments. It is established that each board’s member cannot be entrusted with more than five appointments at the same time and, in any case, it cannot be appointed more than ten times every two years.

Moreover, if the board adopts a decision with a delay of more than 60 days, the board’s members are prevented from being appointed to any other board for the next three years. Finally, if the delay in adopting the decision is not justified, the board members’ appointment ceases immediately.

Finally, paragraph 9 clarifies that the entry into force of the law decree Semplificazioni entirely replaces the previous regulation on the collegio consultivo tecnico.

Conclusions

The criticism that is currently targeting the law decree Semplificazioni mainly concerns how it approaches its final goals, namely reducing the paperwork and the complexity of the procurement procedures and fighting the corruption that prevents new investors from stepping in. It is not yet entirely clear whether a simplification of the administrative procedures will reduce the time and the costs of public construction works or it will allow the corruption to spread even more.

Nevertheless, as far as the collegio consultivo tecnico is concerned, the law decree Semplificazioni proves to have set an ambitious and challenging goal that is to fully implement the dispute board mechanism within the Italian public legal system. Therefore, although many of the provisions of Article 6 will need to be seen in their practical application, the law decree Semplificazioni deserves credit for having established a clear legal framework in which the dispute board can now operate.