ARTICLE
19 March 2004

Constitutional Issues in Formal Arbitration Proceedings

Under Italian law, questions regarding the constitutional legitimacy of legislation that arise in the course of proceedings before a "judicial authority" must be referred to the Constitutional Courtwhich alone has jurisdiction to decide such issues.
Italy Litigation, Mediation & Arbitration
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Originally published February 2002

Under Italian law, questions regarding the constitutional legitimacy of legislation that arise in the course of proceedings before a "judicial authority" must be referred to the Constitutional Court,(1) which alone has jurisdiction to decide such issues.(2) In other words, in Italy it is legally impossible for the court adjudicating a dispute to ignore or abrogate applicable legislation in the matter at hand because it conflicts with the Constitution, nor for the court itself to challenge directly the constitutionality of a legal provision. The interested party must raise the issue of an alleged conflict of any provision relevant to the case during proceedings. If it does not consider the issue frivolous or prima facie without merit, the court must stay the proceedings and refer the issue to the Constitutional Court.

In this context, there have been doubts as to whether the panel of arbitrators in an arbitration qualifies as a 'judicial authority'. The Corte di Cassazione (the approximate equivalent to the House of Lords in the United Kingdom) recently observed since arbitrators are not ordinary judges, they have no delegated power to exercise the functions of the state judiciary.(3)

However, the Constitutional Court has now confirmed that in arbitrations, the arbitrators form part of the "judicial organs of the constitutional order" by virtue of the function they perform as decision-makers within a quasi-judicial process.(4) As such, the court confirmed that arbitrators have both a power and a duty to refer matters concerning the unconstitutionality of legislation to the Constitutional Court - they cannot opt either to apply or to disapply relevant legislation in cases where doubts as to its constitutionality arise.

This decision can been seen as judicial support for the continuing trend towards the narrowing of the practical distinction between arbitrators and judges; indeed, the Constitutional Court made specific reference to the fact that arbitration awards in formal arbitrations are equivalent in nature to ordinary judgments. Thus, arbitrators are now clearly subject to the same duty and obligations as members of the judiciary when faced with questions of constitutionality, and this in turn provides further protection to those who use formal arbitration as an alternative to conventional legal proceedings. It may also serve to encourage more use of the system of arbitration. The decision can further be seen as giving effect to the 'due process' guarantees under the new Article 111 of the Italian Constitution.

However, caution should be exercised when considering the scope of the decision. The court qualified the judgment by explicitly stating that it was not seeking to enter into a consideration of the "complex problems of the judicial nature of formal arbitration", and therefore it may be difficult to argue that principles of general application arise from the judgment. Further, it is clear that the decision refers only to so-called 'formal' arbitration (arbitrato rituale) and therefore the decision does not concern the parties in 'free' arbitration proceedings (arbitrato irrituale, where the arbitrators' decision is purely contractual in nature and cannot be directly enforced). Nevertheless, many commentators have welcomed the boost to formal arbitration proceeding that the Constitutional Court has provided.

A further point is that the door is now wide open to anybody who wishes to challenge (or simply test) the constitutional validity of an Italian statute, at least as far as it may concern the rights to which arbitration may apply. While it is perfectly possible for two parties to bring a real or deliberately manufactured case to court with this intention, even in cases where no real dispute between them exists, the main obstacle against the ability of private individuals to take an issue to the Constitutional Court has been the preliminary assessment, made by the court in which proceedings are commenced, of whether a serious constitutional issue exists.

Following this decision, nothing prevents two parties from appointing an arbitrator who has already made public his opinion on the (un)constitutionality of a particular piece of legislation that they wish to challenge, commencing an arbitration based on a manufactured case but involving this legislation, and almost automatically having the issue referred to the Constitutional Court, which is bound to decide any case brought to its attention by way of a written judgment in which it must expressly state the grounds for its decision.

Endnotes

(1) L Cost, February 9 1948, Articles 1 and 23.

(2) Article 134 of the Italian Constitution, 1948.

(3) Judgment 527, August 3 2000.

(4) Judgment 276/2001.

 

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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