The Italian legislator is certainly aware of the need to make the rules on the recognition in Italy of foreign arbitral awards clearer and more effective. This awareness can be read generally through the Law No. 206 of November 26, 2021, pursuant to the implementation of the PNRR (the Italian Recovery and Resilience national plan). In art. 1(15)(b), principles and criteria issued by the delegated legislator are set out with a view to the overall reorganization of the civil proceedings and particularly through the suggestion for amendment of art. 839 of code of civil procedure in the following terms "explicitly provide for the enforceability of the decree by which the president of the court of appeal declares the effectiveness of the foreign award with sentencing content."
Current Italian procedure for the recognition and enforcement in Italy of foreign arbitral awards
The recognition and enforcement of a foreign arbitral award in Italy are regulated by articles 839 and 840 of code of civil procedure.
Art. 839 of code of civil procedure provides that: “a party wishing to enforce a foreign award in the Republic shall file an application with the president of the court of appeal in whose district the other party is resident; if that party does not reside in Italy, the court of appeal in Rome shall have jurisdiction […] The President of the Court of Appeal, having ascertained the formal regularity of the award, shall declare by decree the effectiveness of the foreign award in the Republic, unless: […].”
Art. 840 of code of civil procedure provides that: “opposition to the decree granting or denying the effectiveness of the foreign award is admissible by application to the court of appeal within 30 days of notification, in the case of a decree denying effectiveness, or of service in the case of a decree granting it […].”
These provisions set forth two different phases: in the first one (an ex parte procedure) the foreign award is granted with the same status as a decision of the Italian judicial authority; the potential second phase will start only in case of opposition to the decree recognizing the award.
In practice, it is debated if the decree recognizing the “effectiveness” of foreign arbitral awards in Italy is immediately enforceable or if it’s necessary to wait for the expiration of the time limit for opposition against the decree itself, to be able to enforce the arbitral award.
The current wording of articles 839 and 840 of code of civil procedure seems to imply that a foreign award can only be enforced when the time limit for opposition has expired. Scholars have not helped solve this debate as many of them have stated that the effectiveness referred to in art. 839 of code of civil procedure implies the enforceability of the award, which, therefore, can be enforced as soon as the presidential decree is issued. Many other scholars adopted a more conservative approach and concluded there was a lack of direct enforceability of the decree recognizing the foreign arbitral award.
Case law, and in particular the Court of Appeal of Milan, seem to be oriented towards the more conservative approach. In fact, in its judgment of October 7, 2019 – (which can be found in DeJure database) concerning the recognition and enforcement of an award issued in Moscow under the ICC Rules, the Milan Court of Appeal denied the direct enforceability granted to the decree at the end of the ex parte procedure pursuant to art. 839 of code of civil procedure, clarifying that:
"…in the absence of an express provision in the legislation and taking into account the letter of paragraph 4 of article 839 of code of civil procedure – which is expressed only in terms of effectiveness and not also enforceability – the decree issued by the President of the Delegated Court must be understood as limited to the mere recognition of the effectiveness of the foreign award (the conditions being met) without, however, conferring on it, with such a recognition, immediate enforceability ope legis."
This judgment – like many others – seems to be oriented at safeguarding the losing party’s general right to be heard. The losing party must be allowed to bring forward its opposition reasons, even before the enforcement of the foreign award.
Among other reasons supporting the conservative approach it has been stated that:
- Under Italian procedural law enforcement titles are listed in art. 474 of code of civil procedure (recognized foreign arbitral awards are not included in such list).
- Art. 840 of the Italian code of civil procedure does not refer to the possibility of asking the suspension of the enforceability in the opposition procedure, thus confirming that the presidential decree is not enforceable in the first place.
In contrast, among the reasons in support of the immediate enforceability of the presidential decree it has been stated that:
- The heading of art. 839 Code of Civil Procedure expressly refers to recognition and enforcement of the foreign arbitral award.
- The legislator conceived the presidential phase as self-sufficient in itself.
- Foreign award must not be subject to a stricter regime than the one set forth for domestic arbitral award.
In a nutshell: as of today, in the current wording of articles 839 and 840 of code of civil procedure, it is likely that the immediate enforceability of the decree issued at the end of the ex parte procedure will be challenged.
This portrays a very difficult scenario for Italian and foreign clients that wish to preserve their interests, ensuring an immediate enforcement of the foreign arbitral award in the Italian territory, rather than waiting for the conclusion of three- to five-year opposition proceedings before the Court of Appeal.
The reform proposal will be read against this background.
The enabling act sets forth the proposal that the legislator must:
"explicitly provide for the enforceability of the decree by which the president of the court of appeal declares the effectiveness of the foreign award with sentencing content."
France reaches the same conclusion on the proposed reform
France is one of the most in-demand seats for arbitration, (last survey available here) as its national legislation is favorable to arbitration.
In particular, the reform adopted in 2011 established that the appeal against the decree recognizing foreign awards in France no longer suspends the enforceability of the award and it allows the winning party to immediately start enforcement against its debtor. The court may stop the enforcement of the award or mitigate its effects only if the automatic enforcement would seriously affect the debtor’s rights.
The Paris Court of Appeal (CA Paris, 18 October 2011, n°11/14286), which can be found here, provided a strict interpretation of these conditions:
"In order to protect the rights of parties holding a foreign arbitral award, the Court of Appeal considers that such measures must remain exceptional and be limited to cases where the rights of the losing parties may be seriously affected or violated and to which immediate enforcement would cause irreparable harm. The Court stated that such damage cannot consist in mere financial difficulties or economic risks for the debtor, or in the disagreement of the losing parties with the arbitrator's decisions."
Since a similar provision can be found in Italian code of civil procedure, it’s likely that – even if the reform will not take into account this aspect – the debtor’s position can be safeguarded through this procedural route, without impairing the creditor’s possibility to immediately enforce the foreign award in Italy.
We’ll keep monitoring the work in progress of the commission delegated to implement this reform and keep you posted.