Corporate arbitration and foreign-based arbitration clause

Is it possible to include an arbitration clause in the corporate bylaws of an Italian company devolving company disputes to an arbitrator based abroad?

Although there is, as yet, no certain and consolidated position on this issue, doctrine and case law seem to recognize areas of admissibility of arbitration clauses providing for the devolution of disputes to foreign arbitral bodies.

The opportunity to align with the provisions that may be deemed mandatory under Articles 34, 35 and 35 of Legislative Decree No. 5/2003, and the general limits to the submission of certain types of disputes to arbitration, remain unaffected.

In the first respect, there’s a debate in doctrine and jurisprudence as to whether and which of the rules set forth in Legislative Decree No. 5/2003 are mandatory in the case of foreign arbitration.

The Court of Appeal of Genoa recently ruled on this issue (judgment no. 628 of July 9, 2020) in a case of an opposition to an award rendered by the ICC in Switzerland as an arbitral seat provided for in the bylaws of a limited liability company, which also envisaged the subjection to Swiss procedural law. The dispute concerned liability action brought against the company director.

The Court of Appeal distinguished between:

• substantive rules of necessary application, which have essentially been traced back to the need for the external appointment of arbitrators under Art. 34, in addition to the written form of the clause; and
• rules of a procedural nature, which may follow the different procedural law the clause may refer to (and to which, in the present case, the provisions on the possibility of challenging the award and the possibility of intervention by third parties of Articles 35 and 36 have been attributed; provisions considered, moreover, to be satisfied by the analogous Swiss rules).

It’s therefore argued that, in the case of arbitration with a foreign seat, the provision of the external appointment of the arbitrators must be complied with since it’s required, under penalty of nullity of the clause. The other provisions of Articles 35 and 36 (appealability of the award, possibility of intervention of third parties, possible appealability under rules of law of challenges to company resolutions) are, however, procedural and not substantive in nature.

In simplified terms, they must be respected if the arbitration is subject to Italian procedural law, whereas in the (usual) case where the arbitration is subject to the procedural law of the place of arbitration, the applicability of similar or equivalent rules is considered a sufficient requirement for the recognition of the award. Also, from a procedural public policy point of view, the respect for the adversarial is considered a sufficient guarantee.

On the other hand, disputes considered to be non-arbitrable (eg challenges to resolutions approving the financial statements or resolutions reducing the share capital below the minimum) remain outside the scope of foreign arbitration, and are submitted to ordinary jurisdiction, with devolution to the jurisdiction of the competent local company court.

Less explored, on the other hand, is the possibility of transferring corporate disputes to foreign judicial authorities, for which there seems to be less openness, given the reference to the Brussels I-bis Regulation, where Article 24 prescribes the exclusive jurisdiction "in matters of validity, nullity or dissolution of companies or legal persons having their seat in the territory of a Member State, or in respect of the validity of the decisions of their organs" of the courts of the state in which the company is incorporated.

It will be interesting to verify the effects on the current discipline of the reforms of the Code of Civil Procedure concerning arbitration that are being studied in accordance with Delegated Act No. 206 of November 26, 2021.

In particular, possible indications on the admissibility of the devolution of corporate disputes to a foreign-based arbitration could result from the interventions on the organic reorganization, simplification and inclusion in the Code of Civil Procedure of the rules on corporate arbitration.

Also, the expected civil proceeding reform could have an even more favorable outcome on the admissibility of corporate arbitration seated abroad. The reform aims to confer the explicit enforceability to the decree by which the president of the court of appeal declares the effectiveness of the foreign award and sets some provisions concerning the parties’ choice of the applicable law.