Italy is becoming more arbitration-friendly: New developments in the area of arbitrators’ precautionary powers

Luciano Castelli

LCA Studio Legale, Milan

luciano.castelli@lcalex.it

Carlotta Guzzo

LCA Studio Legale, Milan

carlotta.guzzo@lcalex.it

Introduction

Interim measures are urgent remedies that usually apply where there is an imminent risk of irreparable damage.

Their main purpose is to protect one party’s rights on an interim basis throughout the proceedings on the merits and, in some cases, even before the commencement of such proceedings.[1] This tool is issued to preserve the status quo, to help secure satisfaction of the subsequent award and to promote the effectiveness and fairness of the arbitration process.[2]

Precautionary measures are therefore unanimously regarded as an indispensable element for the proper functioning of arbitration proceedings. Although such measures are generally considered very important in almost all areas, they are even more fundamental in international arbitration. Indeed, precautionary measures are particularly important both as a means of protecting parties’ legitimate interests and as a litigation strategy to exert pressure on opposing parties.[3]

Whether arbitral tribunals should have the authority to order precautionary measures has always been debated. The authority of arbitral tribunals to grant provisional measures depends on many factors (eg,, any applicable international arbitration convention; the parties’ arbitration agreement; etc), but a key element in determining whether these tribunals have such power is the national arbitration law. Indeed, national legislation is crucial for a number of reasons: an arbitrator, for example, usually grants provisional measures only if the law applicable to the arbitral proceedings grants arbitral tribunals this power; likewise, if national arbitral legislation does not allow arbitrators to grant interim measures, the risk is that national courts will then not enforce reliefs ordered by arbitral tribunals.

The Italian approach before the Cartabia Reform

Historically, in Italy, until Legislative Decree No 149 of 10 October 2022[4] (the ‘Cartabia Reform’) arbitral tribunals had no power to issue precautionary measures. Actually, except for a single exception set forth in Article 35 of Legislative Decree No 5 of 17 January 2003 concerning the suspension of challenged company resolutions, the Italian legislator had traditionally been peremptory in providing that arbitral tribunals could not grant precautionary measures (as set forth in the old Article 818 of the Italian Code of Civil Procedure (the ICCP)). Indeed, leading scholars have always held that arbitrators lacked the authority to issue this type of measures, or that there were insufficient guarantees of independence, or that they were prevented from issuing measures by virtue of a merely summary examination[5].

However, the decision not to allow arbitrators to grant interim measures was generally deemed the main barrier to affirming Italy as a seat of international arbitration.

This choice has been severely criticised for decades as anachronistic, and as a choice that increasingly made Italy an exception to most foreign legal systems where arbitrators were allowed to issue such measures.

With the brand-new Cartabia Reform, the Italian legislature has at last decided to introduce the possibility for the parties to grant arbitrators precautionary powers.

Milan: a new place d’arbitrage

As explained in more detail below, the Cartabia Reform led not only to an innovation of the rules of the ICCP but also to an even more favourable revision of the Arbitration Rules[6] (the ‘Rules’ ) of the Milan Chamber of Arbitration (‘CAM’). This Cartabia Reform has thus exceptionally fostered an increasingly ‘arbitration-friendly’ environment, thereby contributing to making Italy an attractive seat for international arbitration.

The Cartabia Reform and the new precautionary powers of arbitral tribunals under the ICCP

With the Cartabia Reform coming into force, arbitral tribunals now have the power to grant precautionary measures. In particular, Articles 818 to 818-ter of the ICCP[7] deal with new powers granted to arbitral tribunals.

Article 818 of the ICCP provides that the parties may empower the arbitral tribunal the power to grant provisional measures by the arbitration agreement or by a written agreement prior to the commencement of the arbitral proceedings. It is important to note that such empowerment may also be made by reference to arbitration rules, such as the CAM Rules.

Once the parties agree to confer precautionary powers to the arbitral tribunal, the provisional powers provided are exclusive. Therefore, there is no longer concurrent jurisdiction of courts and arbitral tribunals after the arbitral tribunal is established.

Moreover, the parties even have the option of conferring provisional powers on arbitral tribunals by an act subsequent to the commencement of arbitration. In this regard, Italian law has become much more pro-arbitration than most jurisdictions traditionally considered pro-arbitration. Most of these traditionally arbitration-friendly jurisdictions, in fact, usually leave the parties the option of applying to the national court or to the arbitral tribunal, even after the arbitral tribunal has been constituted.

In conclusion, the only two cases in which the power to grant provisional measures will continue to be held by national courts are before the commencement of arbitration proceedings (although it remains possible for the parties at this stage of the proceedings to choose between a national court or an emergency arbitrator) and when the parties have not attributed this power to arbitrators under the new Article 818 of the ICCP. Apart from these two cases, the interim powers attributed to an arbitral tribunal are exclusive.

In addition to that, unless the parties have provided otherwise pursuant to Article 816-bis ICCP, the arbitrators also have the power to grant ex parte provisional measures – that is, based on a summary knowledge – when the summoning of the other party could prejudice its effectiveness.

The assignment of precautionary powers to arbitral tribunals has also made it necessary to rule on the appeal against their exercise. The new Article 818-bis of the ICCP provides that the interim order granting or rejecting the request may also be appealed pursuant to Article 669-terdecies of the ICCP to the Court of Appeal where the seat of arbitration is located. In order to safeguard the arbitrators’ decision-making autonomy, a review of mere legitimacy, and never on the merits, is provided for. Therefore, except in the sole case of appeals for violation of public policy, any new enquiry into both the merits of the request and the existence of actual urgency is excluded.

Moreover, the recognition of the arbitrators’ precautionary powers necessarily requires the implementation of an enforcement regime. Thus, the Cartabia Reform introduced Article 818-ter of the ICCP. This article provides that the enforcement of the precautionary measures issued by the arbitral tribunals shall be conducted according to Article 669-duodecies of the ICCP under the control of the national court where the seat of arbitration is located. This regulation also deals with the case where a protective measure ordered in a foreign-based arbitration proceeding is to be enforced in Italy, providing for the jurisdiction of the court where the protective measure is to be enforced.

Provisional measures, then, can be enforced immediately, without the need to obtain a prior exequatur.

In addition, simplifying the traditional procedure, it has been established that all arbitral provisional measures can be enforced by the court where the arbitration is based, regardless of their subject matter.

The desire for unification and simplification in an arbitration-friendly perspective to make Italy increasingly attractive as an arbitration seat is clear.

The evolution of the CAM Arbitration Rules following the changes introduced by the Cartabia Reform

The new regime on arbitrators’ precautionary measures introduced with the Cartabia Reform gave Italy, as mentioned above, a favourable position on arbitration in the international arena. However, this is not the only improvement that has arisen. Italy’s most important arbitral institution, the CAM, has also been able to benefit from the Cartabia Reform. In fact, on the one hand, the Cartabia Reform has allowed the CAM to implement and further improve its Arbitration Rules and, on the other hand, this new arbitration-friendly environment will surely lead more and more parties to choose the CAM, an institution that is now based in a pro-arbitration forum, Milan, and thus has nothing to envy from other famous arbitration forums at the international level, such as Paris, London or Singapore.

As for the Rules, after the Cartabia Reform, they were subject to several amendments and changes in the interpretation of the existing regulation, always in the name of this new and increasing openness of Italy to arbitration.

First, it should be mentioned that, as of 2019, the Rules empower arbitral tribunals appointed in the context of an arbitration governed by them to grant all provisional, urgent and interim measures, including those with anticipatory content, that are not prohibited by mandatory rules applicable to the proceedings.

However, in the case of arbitral proceedings based in Italy, the prohibition set forth in the former Article 818 of the ICCP applied.

In contrast, after the Cartabia Reform, the provision on the general power of arbitrators already contained in the Rules and substantially unchanged will also apply to all arbitral proceedings seated in Italy.

The Rules also provide for the possibility for the arbitral tribunal to grant provisional measures even ex parte if serious prejudice to the interests of the claimant may result from the summon of the other party. The provision then provides that, once such an order has been granted, the arbitral tribunal will set a hearing to discuss the interim measure in the presence of both parties within ten days of the order granting the measure.

Furthermore, the Rules provide that a party may request the appointment of an emergency arbitrator to take interim and temporary measures pending the constitution of the arbitral tribunal. The emergency arbitrator should thus fill the gap that arises when the parties have agreed on arbitral (including interim) jurisdiction and the need for urgent and provisional relief arises before the body that can grant it has been constituted. The Rules thus provide for the concurrent jurisdiction of the ordinary court and the emergency arbitrator, as they give the parties the option to decide whether to turn to one or the other. Once again, the Cartabia Reform benefits not only the arbitration procedure but also the immediate and effective protection of the parties’ rights.

Last but not least, in terms of precedent and the implementation of useful case law to guide arbitral tribunals in future proceedings, the CAM now provides for the possibility not only to publish arbitral awards anonymously but also all arbitral orders and decrees (unless one of the parties objects within 30 days of the award being filed).

Conclusion

In conclusion, it is clear that the Italian legislature is increasingly favouring arbitral proceedings in Italy through the implementation of rules aimed at facilitating and improving the conduct of arbitral proceedings.

It is in the spirit of this intention that the innovations made to the precautionary powers of arbitral tribunals should be sought, as these are fundamental and necessary legal instruments to ensure practical and fair arbitration proceedings.

The efforts that the legislature is making to make the Italian system more and more favourable to arbitration are evident, thus fostering the idea of soon seeing Milan as one of the main places d'arbitrage.