The Italian Arbitration Reform - The New Arbitrators' Power To Grant Interim Measures

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The most significant development has been the attribution to arbitrators of the power to grant interim measures, which has been implemented by entirely amending Article 818 of the Italian...
Italy Litigation, Mediation & Arbitration
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The recently introduced reform on arbitration1 has laid down principles and guidelines for restyling the Italian arbitration framework aimed at enhancing Italy's attractiveness in the international arbitration market.

The most significant development has been the attribution to arbitrators of the power to grant interim measures, which has been implemented by entirely amending Article 818 of the Italian Code of Civil Procedure ("ICCP") and by incorporating two new Articles (818-bis and 818-ter) into the ICCP, to regulate respectively the challenge and the enforcement stages of the interim measures granted.

Previous attempts to introduce this long-awaited reform were unsuccessful. The reform therefore represents a radical change of direction with respect to the previous prohibition for arbitrators to grant interim measures, thus filling a gap that distinguished our system from virtually any other jurisdiction (including those geographically and culturally closer to Italy, which had recognised such power to arbitrators for a long time).

With this second insight, we will outline the main new developments concerning the power of arbitrators2 to grant interim measures.

The parties' will as a ground for the arbitrators' power to grant interim measures

The new Article 818 of the ICCP provides that: "The parties, also by reference to arbitration rules, may grant the arbitrators the power to award interim and conservatory measures either in the arbitration agreement or by a written act prior to the commencement of the arbitration proceedings. Such provisional jurisdiction conferred on the arbitrators is exclusive. Prior to the acceptance of the sole arbitrator or the constitution of the arbitration panel, the application to be granted with interim measures is submitted to the competent court pursuant to Article 669-quinquies".

The first significant consideration is that the arbitrators' power is not 'free', but subject to the will of the parties as expressed in the arbitration agreement or in a subsequent written agreement predating the commencement of the arbitration proceedings.

This approach is uncommon in most other jurisdictions, which rather apply the opposite principle. The general approach is that the arbitrators have the power to grant interim measures, and, as an exception, the parties have the option to exclude such a power by agreement.

However, the new Article 818 of the ICCP provides for the possibility for the parties to express their will by reference to the rules of an arbitration institution that grants interim power to arbitrators ("also by reference to arbitration rules").

This, at least in institutional arbitration,3 is likely to help soften the rule as well as avoid interpretative uncertainty. As for ad hoc arbitrations,4 instead, it is advisable to keep this condition in mind and to pay even greater attention to the drafting of the arbitration agreement by expressly providing the powers to grant interim measures to the arbitrators according to the will of the parties.

The exclusive nature of the power to grant interim measures

The new Article 818 of the ICCP is further distinguishable in that it excludes the concurrent power of domestic courts. When arbitrators accept their mandate, their power to grant interim measures (subject to the assignment of the same by the parties, as seen) will be exclusive with the exclusion of any possibility of domestic courts to rule on that. The reform seems to be inconsistent with other internationally adopted models, which, on the contrary, opt for a system of concurrent power between arbitrators and judges.5

Instead, domestic courts will retain full jurisdiction for the part of the proceedings starting from the service of the request for arbitration up to the constitution of the arbitral tribunal. Jurisdiction of domestic courts will be identified according to the ICCP and would be granted to the court that "would have had jurisdiction on the merit of the case".

There are criticisms to the legislator's choice. To exclude the power of the ordinary courts after the arbitral tribunal has been constituted may potentially limit the effectiveness of certain measures since arbitrators lack coercive power.6

A further concern is the coordination of powers between ordinary courts and arbitral tribunals in cases of 'emergency arbitration', which consist of instances where a party requests interim measures before the arbitral tribunal is constituted. Some arbitration rules provide for the appointment of an emergency arbitrator who can rule on requests for interim measures before the arbitral tribunal is constituted.7

In this regard, it is arguable that referring the parties to the rules of an arbitration institution that provides for such an emergency procedure allows the parties to resort to it. In such cases, the jurisdiction of domestic courts in interim matters will be deemed to be barred upon the acceptance of the appointment by the emergency arbitrator, not the full arbitral tribunal.

In any event, it would still be necessary to consider, on a case-by-case basis, the rules of the chosen arbitration institution to ascertain whether the parties, in order to resort to such urgency procedure, need to expressly provide for this in the arbitration clause (or, on the contrary, whether they must expressly exclude it where they are not interested in this procedure).8

The challenge and the enforcement of interim measures

The reform provides for the preservation of the domestic courts' jurisdiction to challenge interim measures. According to the new rules, both the phase of the challenge (which, pursuant to the new Article 818-bis of the ICCP, will be brought before a domestic court for the reasons set forth in Article 829, para. 1, of the ICCP as well as for public policy reasons) and the phase relating to the enforcement of the interim measures (Article 818-ter of the ICCP) are entrusted to the ordinary judge.

Conclusions

It is yet to be seen how the new rules on the power of arbitrators to grant interim measures will be applied in practice in order to assess concretely their effectiveness and any improvements, if any at all. However, the reform represents a drastic break with the past which has turned Italy into a more arbitration-friendly country.

Up until now, choosing Italy as the seat of arbitration could have led to disadvantages where a party needed to obtain an interim measure of any kind, from preserving evidence to obtaining injunctive relief. Arbitrators did not have the authority to issue interim measures as they would have been contrary to the lex arbitri, regardless of whether the proceedings were administered by the rules of arbitration institution that provided for such a power.

As of 1 March 2023, this will no longer be the case. The Italian arbitration reform has filled a gap that, until now, had made Italy an unattractive country as a seat of international arbitrations.

In the wake of the reform, a golden rule remains valid. Drafting arbitration clauses requires, more than ever, a certain level of experience in the field. This includes assessing several factors determining the nature of a contractual relationship, choosing suitable institutional arbitration rules, choosing the arbitral seat and the governing law applicable to the contract, as well as considering whether or not to provide for the arbitrators' power to grant interim measures. Relying on advisors with expertise in arbitration has become increasingly important in order to anticipate any potential unintentional limitations of one's rights and available claims that may arise in the course of a dispute.

Footnotes

1. Implemented by Delegated Act No 206 of 26 November 2021 and enacted by Legislative Decree No 149 of 10 October 2022. See Withers Insight 'The Italian Arbitration Reform' https://www.withersworldwide.com/en-gb/insight/read/the-italian-arbitration-reform.

2. The reform has only modified the institution of so-called ritual arbitration, leaving the discipline of non-ritual ('irrituale') arbitration unchanged. It would thus seem to exclude the possibility of adopting precautionary measures for non-ritual arbitrators.

3. That is, arbitrations governed by the rules of an institutional body (such as the International Chamber of Commerce (ICC) or the Milan Chamber of Arbitration (CAM), etc.). The vast majority of the most widespread regulations at international level, including those commonly used in arbitrations based in Italy, provide for the arbitrators' power to grant interim and conservatory measures (see, e.g., Art. 26(1) of the Rules of the Milan Chamber of Arbitration, which already in its current version, in force since 2020, recognises the arbitrators' power to issue measures "that are not prohibited by mandatory rules applicable to the proceedings").

4. That is, in cases where the arbitration is handled entirely by the arbitrators and the parties, without the intervention of any institution (e.g., an International Arbitration Chamber).

5. Consider Art. 28(2) of the ICC Rules (which "under certain circumstances" leaves the party free, even after the Arbitral Tribunal has been constituted, to address its request for interim measures to the ordinary court); or Art. 37(5) of the Stockholm Chamber of Commerce (SCC) Rules, which state: "A request for interim measures made by a party to a judicial authority is not incompatible with the arbitration agreement or with the Arbitration Rules".

6. See A. CARLEVARIS, La legge-delega per la riforma dell'arbitrato: verso il riconoscimento dei poteri cautelari degli arbitri?, Rivista di Diritto internazionale, Fasc. 1, March 2022, p. 157.

7. The emergency procedure is set out for example in the ICC Rules, which provide for the "Emergency Arbitrator" in Art. 29; the same applies to the Rules of the Milan Chamber of Arbitration 2020, Art. 44; the London Court of International Arbitration (LCIA) Rules (Art. 9b) and the Stockholm Chamber of Commerce (SCC) Rules Art. 37(4), Appendix II.

8. For example in the ICC Rules, Art. 26(6) the provisions on emergency arbitration do not apply, inter alia, "if the parties have agreed to exclude the provisions on emergency arbitration". The LCIA (London Court of International Arbitration) Rules provide in the same vein, art. 9.16 of which provides that "Article 9B shall not apply if [...] the parties have agreed in writing at any time to 'opt out' of Article 9B".

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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