Arbitrators' power to grant interim measures in Italy: Is the 'wind of change' blowing in the right direction?
As part of our presentation of the upcoming reform of the arbitration provisions contained in the Italian Code of Civil Procedure, as a result of the enabling act no. 206/2021 (Enabling Act), in this issue we focus on one of its most innovative features: the arbitrators’ powers to grant interim measures.
Italy is still one of the (few) countries in which the arbitrators do not have the powers to grant interim measures, a power that is reserved for state court judges. The proposal included in the Enabling Act is an historical shift in the Italian procedural legal system.
It’s not the first time an attempt of reform of this kind has been made. In 2017, the Commission led by Professor Alpa tried to raise Italy’s profile within the arbitral community. Yet, it proposed to lift the arbitrators’ prohibition to issue and grant interim measures only within the context of arbitrations administered by an arbitral institution, thus leaving out ad hoc arbitrations. The proposals contained in the report of the Commission led by professor Alpa were never reflected into a law.
The Commission led by Professor Luiso for the implementation of the Enabling Act has gone a bit further than its predecessor and it has been translated into art. 1, § 15(c) of the Enabling Act, which mandates that the law reform should be adopted with the aim of:
- “foreseeing the attribution to the ritual arbitrators of the power to grant interim measures in the hypothesis of express consent of the parties to do so, which shall be manifested in the arbitration agreement or in a subsequent act, unless a law provision differently mandates;
- in these hypothesis the state court judge shall maintain the power to issue interim measure only in case the relevant claim is made before the arbitrators’ acceptance;
- regulating the challenge of the interim measure before the State Court Judge for the reasons listed in art. 829, first paragraph, of the Italian code of civil procedure; and
- regulating the enforcement of the interim measure always under the control of the state court judge.”
The law reform proposal embedded in the Enabling Act gives rise to a number of remarks which should be taken into account during the law drafting process, to ensure the relevant result will actually be a useful normative tool for the ultimate users of arbitration: companies operating in the market of various industry sectors at an increasingly fast pace.
First, the Enabling Act is proposing a U-turn: from the current situation, in which arbitrators are prevented from issuing interim measures, to an almost exclusive jurisdiction attributed to them, without the concurrent competence of state courts. This is unparalleled in any most advanced arbitration legal system.
There are at least four issues that might be envisaged and that should be carefully thought through by lawmakers when drafting the law reform:
The limited scope of the arbitrators’ powers to grant interim measures
The scope of the arbitrators’ powers to grant interim measure is limited to the:
- absence of any other law preventing the arbitrators to do so; and
- the parties’ express agreement to it.
Once these requirements are met, state court judges will have no powers to grant interim measures as of the moment in which the arbitrators have accepted their appointment.
Requiring the parties’ agreement to grant the arbitrators powers to issue interim measure is quite unusual in most arbitration-friendly countries where, in contrast, the approach is quite the opposite: the arbitrators have the powers to grant interim measures, unless this is expressly excluded by the parties within the arbitration agreement (see for example, art. 374 of the Swiss procedural code, in relation to domestic arbitrations and art. 183 of the Swiss international private law in relation to international arbitrations).
This raises some genuine doubts about the Italian government’s real intention to push Italy into becoming an appealing seat for international arbitration. In fact, while the parties’ agreement recorded in the arbitration agreement is quite understandable, it’s unclear what the legislator meant when referring to the recording of the parties’ agreement in a “subsequent act.” Once the parties are in dispute, it appears quite impracticable that they might find any agreement, let alone an agreement to grant arbitrators with powers to issue interim measures.
Arbitrators’ exclusive competence to issue interim measures
State courts will not grant interim measures once the arbitrators have accepted their appointment.
This is quite a change that brings Italy from not having ever granted arbitrators powers to issuing interim measures to their exclusive competence. Such an approach runs counter to the most modern procedural legislations in which arbitrators and state courts are both entitled to issue interim measures, as a distinguished author noted (see an enlightening comment to the Enabling Act concerning the arbitrators’ powers to issue interim measures, from A. Carlevaris)1.
The lack of a parallel competence between state courts and arbitral tribunals to issue interim measures once the arbitrator has accepted its appointment might run counter to the users’ interests.
It’s well known that it might take some time before the Arbitral Tribunal becomes fully operative on a case from the acceptance of each single member (in case of an Arbitral Tribunal composed by three members and of a sole arbitrator). For example, the terms for challenging the arbitrators set forth in virtually all arbitration laws and institutional rules should elapse before the Arbitral Tribunal could be formally constituted. In its current drafting, the Enabling Act would provide for the exclusive jurisdiction of arbitrators while the term for their challenge is still running. It’s a valid question to wonder whether or not excluding state courts’ competence to issue interim measure from the acceptance of the arbitrators’ appointment is the right time: is it truly compatible with the urgent nature of the interim relief sought? Probably not. This is certainly an aspect that should be carefully taken into account when drafting the law provision.
The enforcement of the interim measure
Furthermore, precautionary measures are aimed at protecting the rights in dispute and the integrity of the arbitral proceedings itself. Such measures are useful to the applicant to the extent they are promptly issued and immediately enforced (eg in case of a conservative seizure).
The Enabling Act simply states that the enforcement of the precautionary measure will take place “always under the state court’s control.” What’s meant by that isn’t clear and certainly this provision does not provide answers to the following questions:
- Will the interim measure issued by the Arbitral Tribunal be characterized as an award and, as such, be subject to an exequatur procedure to be enforced?
- Will the Italian state court “assist” the party seeking to enforce an interim measure obtained abroad within an international arbitration seated in another country, for example? If so, how will the Italian courts assist? Through which proceedings? Again, is it going to be an exequatur?
Against this background, parties might find it more efficient to resort directly to the Italian state courts, rather than achieving an arbitral interim award that then needs to be enforced with the assistance of Italian state courts, given the uncertainties that such an enforcement might entail. Such a system would certainly be inefficient and run counter to the party seeking to obtain a quick and effective measure to preserve its rights.
The arbitrators’ powers to grant interim measure will be coordinated with the enforcement provisions included in the Italian procedural code. Without such coordination, the arbitrators’ power to grant interim measures might end up being a stalemate or an empty glass. Or worst, a tool that goes against the users’ interests.
Challenge of the interim arbitration order
The Enabling Act provides that interim measures granted by arbitrators can be challenged before state court for the reasons set forth under art. 829 of the Italian Civil procedural code, concerning set aside procedure of arbitral awards.
As well known by the arbitration users, this provision reflects the principles embedded in the 1958 NY Convention for the recognition and enforcement of arbitral awards. Applying the same grounds for set aside provided for arbitral awards to arbitral interim measures might be inappropriate.
In fact, most of the grounds for setting aside the award would not be applicable to precautionary proceedings, which by definition entail a fast and prima facie assessment of the case (for example, grounds like the validity and the scope of application of the arbitration agreement, the regular constitution of the arbitral tribunal, the arbitrators’ capacity, or breach of due process). It’s therefore advisable that the reasons/grounds for the challenge of an arbitral interim order should be moulded to fit the uniqueness of these precautionary proceedings.
Otherwise, the risk that state courts might extend their powers and actually look into the merit of the dispute (thus overcoming the arbitral jurisdiction) is very high.
All these aspects should be taken into account in the actual law that will give life to the proposal embedded in the Enabling Act.
In conclusion, arbitration users should keep an eye on how the Enabling Act is implemented and hope that the Enabling Act will be tweaked to truly serve the purpose of making arbitration more appealing and reduce the backlog in state courts.
1 “IV. Lett. c): provvedimenti cautelari,” in Benedettelli, Briguglio, Carlevaris, Carosi, Marinucci, Panzarola, Salvaneschi, Sassani “Commento ai principi in materia di arbitrato della legge di delega n. 206 del 21 novembre 2021, art. 1, c. 15.”