New Italian rules on arbitration: provisional measures and applicable law

by Antonio Leandro 

Introductory remarks 

New arbitration rules are around the corner to improve Italy’s attractiveness for international arbitration. Legislative decree 10 October 2022 no 149 (LD 149/2022) provides for some interesting novelties, which the 2023 Italian general budget law (law no 197/2022, Article 1 (380)) makes applicable to arbitral proceedings that will commence after 28 February 2023. This post deals with the provisions concerning provisional measures and the law applicable to the merits.  

Provisional measures 

a) Basis 

Under new Article 818 of the Italian Code of Civil Procedure (“ICPC”), arbitral tribunals may order provisional measures. This is a genuine game changer, as Italian law has hitherto limited such power to judicial authorities in their supportive role to arbitration. 

Arbitral tribunals need to be entitled by the parties prior to the commencement of the arbitral proceedings. The parties may do so either by the arbitration agreement - including through reference to arbitration rules that contemplate arbitral interim measures - or by a separate written act.  

Following the parties’ agreement, arbitral tribunals have exclusive competence in granting provisional measures, provided that they are duly instituted. Accordingly, courts retain the competence to order provisional measures until the acceptance from the appointed single arbitrator or the constitution of the arbitration panel. The competence lies with courts that would have been competent on the merits of the case. 

b) Challenge 

According to Article 818-bis, the parties may challenge the arbitral measure before the Court of appeal of the district in which the arbitral tribunal has seat. Article 829 (1) ICPC applies, provided that the grounds to set aside an award listed therein are compatible with the nature, contents, and purposes of a provisional measure. For instance, the infringement of the adversarial proceedings (Article 829 (1) no 9) may not work for provisional measures legally granted inaudita altera parte. A party may also claim that the measure is contrary to public policy (ordre public). 

c) Enforcement 

Since arbitral tribunals lack coercive powers, the measure is to be enforced by judicial authorities. The competence lies with the tribunal in whose district the seat of arbitration is located or, in the case of foreign seat, the tribunal of the place where the measure is to be implemented (Article 818-ter). When it comes to enforcing the measures in other countries, the enforcement will be governed by the law of the State in which it is sought. Given the nature of the measure, the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Award should not apply. 

A topic to engage in coming debates – especially among Italian scholars and practitioners – is whether, how, and to what extent the arbitrators’ duty to render an enforceable award also relates to provisional measures. 

Law applicable to the merits of the disputes 

a) Choice of ‘rules and law’ 

Article 822 ICPC has been amended with a rule whereby, when the arbitral tribunal is called upon to decide according to the rules of law, the parties may determine the applicable rules or ‘the foreign law as the law applicable to the substance of the dispute’ (‘la legge straniera quale legge applicabile al merito della controversia’). The parties may do so in the arbitration agreement or by a written act prior to the commencement of the arbitral proceedings.  

The generic reference to ‘rules’ (‘norme’) makes it possible to choose Italian, foreign or international rules (or a patchwork of rules with different sources). This is consistent with the broad role of party autonomy in arbitration, especially when it comes to contractual disputes. 

The alternative consisting in indicating (‘indicare’) ‘the foreign law as applicable law’ strikes quite a lot compared both with the generic bilateral function of the conflict of law rules, including those providing for a choice of law, and with the said role of party autonomy. Actually, this sort of outward unilateral choice of law really makes no sense. 

b) Absence of choice 

Failing the choice, the arbitrators shall apply ‘the rules or the law identified under the conflict criteria deemed applicable’ (‘le norme o la legge individuate ai sensi dei criteri di conflitto ritenuti applicabili’). Assuming that this fall-back rule also applies in the case of partial choice, the question arises as to what exactly the Italian legislator means with it.  

It is well known that several ways open up in absence of a choice of law. From a comparative perspective (including national legal systems and institutional arbitration rules) they basically see arbitral tribunals apply general or special conflict of laws rules of the State of the seat, or arbitration-tailored conflict of laws rules (e.g. that recalling the law having the closest connection to the dispute), or such conflict of laws rules as tribunals deem applicable, or such substantive rules (voie directe) or conflict of laws rules as they deem appropriate. 

The Italian legislator has opted for ‘conflict criteria deemed applicable’ (criteri di conflitto ritenuti applicabili) that lead arbitrators to determine ‘the rules or the law’ (le norme o la legge). Does it mean that arbitrators may only determine a conflict of laws system from which they infer the relevant rule leading to the applicable substantive provisions? Or may they single out the criteria (i.e. the connecting factors) from a conflict of laws system? And may they cherry-pick substantive rules rather than apply the entire law which is determined by the conflict of laws rule ‘deemed applicable'? Besides, may they split the normative framework between rules and laws, including through the cumulative application of national laws and international uniform rules? 

No doubt that the topic deserves careful analysis. As a general stance, hard-and-fast ‘yes’ or ‘no’ to the questions above clashes with the flexibility required in arbitration.  

Making sense of transitional rules 

a) Applicable law 

It is argued that the parties need not wait until 28 February 2023 to agree on the applicable law because LD 149/2022 applies to non-procedural issues as early as of 18 October 2022. It is true that parties do not need to wait. However, the reason is simpler.  

Actually, the new provisions pertain to arbitration governed by Italian law and give legal effects to agreements and acts that the parties might have concluded before 18 October 2022 or will conclude before 28 February 2023 in the exercise of their autonomy. The legal effect is that arbitral tribunals are bound by this ‘choice of law’ with respect to proceedings instituted after 28 February 2023. In other words, there is a difference between what the parties put in the agreement, its legal effects, and when those effects legally start running. As a result, irrespective of when the agreement or the act has been wrapped, its effect under the new provisions pertains to proceedings instituted after 28 February 2023. 

The tale is (has always been and will be) different if the parties subject an arbitration with seat in Italy to a set of rules that provide for the applicable law. The new provisions, in fact, are virtually impactful only to arbitration whose profile of the law applicable to the merits is governed by Italian law. 

b) Provisional measures 

In the author’s view, the same holds for agreements and acts empowering the arbitral tribunal to issue provisional measures, with a difference.  

Unlike the agreements on applicable law, the new provisions give legal effect to a kind of agreement that was previously inadmissible as arbitral tribunals were not permitted to order provisional measures. In other words, unlike the ‘choice of law’, the new provisions remove the risk that an arbitration agreement be declared partially ‘null and void, inoperative or incapable of being performed’ under Italian law due to the clause concerning the provisional measures. 

That being said, given that arbitral tribunals may issue provisional measures only if the parties agree, hardly could they do so in relation to proceedings that start, for instance, on 1 March 2023 if the parties were prevented from agreeing much earlier or, put it differently, were permitted to do so only as of 28 February 2023. 

Accordingly, even parties to ‘old’ arbitration agreements that provide for provisional measures might shift toward Italy – by designating an Italian city as a seat of arbitration or amending the previously designated foreign seat – and benefit from the new provisions in view of future or imminent arbitral proceedings.  

Needless to say, these scenarios vary according to the state of the relations between the parties, let alone in case a dispute has already broken out. 

Contact Information

Prof. Antonio Leandro

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