The Italian Civil Procedure Code (CPC) (Royal Decree 28 October, 1940, No 1443) regulates, among other things, the practice of arbitration. Three amendments in the past 20 years have sought to bring flexibility to arbitrators and disputing parties. But it is the most recent novellazione, or reform, which has had the greatest impact on dispute resolution in Italy.

The reform in question seeks to modernise arbitration procedures and provide the legal profession with a stronger, more flexible instrument with which to confront dispute resolution. This article will highlight some of its key features.

Object and source of arbitration

In the first of the changes, the reform has established exactly which disputes can be settled by arbitration. Article 806 of the CPC now states that disputing parties can let arbitrators decide all disputes that have disposable rights as their object, unless expressly prohibited by law.

Since the reform, the following types of dispute can, among others, be subjected to arbitration:

. employment agreements (albeit not pertaining to the company's activity);

. various agricultural contracts;

. agency, commercial and consultancy agreements; and

. employment agreements with public institutions.

It is only possible to resolve the disputes listed above by means of arbitration if such proceedings are provided for by law or by national or local collective bargaining agreements.

As far as the source of arbitration is concerned (namely the arbitration framework agreement) the reform has introduced a single requisite – the ability to dispose of the disputed right.

Parties can also now establish that the framework agreement may refer to future non-contractual disputes,provided that the said agreement has the form required by law.

Extra-judicial arbitration

Another noteworthy feature of the reform is the introduction of the discipline of extra-judicial arbitration.

Under Italian law, arbitration is judicial when it is constructed on rules set forth by the CPC and when, as a consequence, the award has the same effectiveness as a judgment handed down by the court. Conversely, extra-judicial arbitration takes the form of a conventional assertion and therefore has the same effects as a contract.

The CPC has been altered to make reference to extra-judicial arbitration by giving parties the ability to establish in writing that the dispute be determined by arbitrators, with any award having contractual characteristics. Such an award can only be annulled after a series of considerations regarding the validity of the arbitration framework agreement and the nomination of the arbitrators, the observance of rules laid down by the disputing parties at the outset, and the parties' rights to equal and cross defence.

Responsibilities of arbitrators

A further characteristic of the new arbitration regime concerns the responsibilities of arbitrators, which the reform sets out in order to better guarantee their independence and impartiality.

The amended legislation determines the responsibility of arbitrators who can be requested to pay damages in cases in which a necessary act in the proceedings or the pronouncement of the award has been left out or delayed, either intentionally or through the fault of the arbitrator.

In addition, the acceptable reasons for revocation of the arbitrators have been clearly defined. These include lack of expertise relating to a particular dispute, an existing interest of an arbitrator in the dispute, or any relationship or employment agreement between the arbitrators themselves, the parties and/ or their lawyers. Essentially, arbitrators' appointments are no longer able to be revoked simply for convenience.

Procedure of arbitration

As anticipated, the reform also took into consideration the actual procedure of arbitration and also cases of multiparty arbitration.

Firstly, the seat of arbitration, if not established by the parties or the arbitrators, must correspond to the location stipulated in the arbitration framework agreement if this is in Italy. Otherwise, arbitration proceedings must be held in Rome. A further interesting change concerns the arbitrator's option to hold hearings, to carry on evidence proceedings and to render the award both in a place other than the seat of the arbitration and abroad, if not otherwise provided for in the initial agreement.

Within the scope of the procedure, the parties establish the rules which must be followed by the arbitrators. This must all occur before the start of the procedure. Alternatively, these elements are decided by arbitrators at their discretion at the outset, by guaranteeing reasonable and equivalent possibility of defence to both parties.

Where multiple parties are involved, the reform accommodates the possibility of a single arbitration procedure only if:

. the arbitration framework agreement devolves the appointment of the arbitrators to a third party; or

. the arbitrators are appointed by agreement of all the parties; or

. after the first party has appointed its arbitrators, the other parties in agreement appoint the same number or entrust their appointment to a third party.

Moreover, in accordance with the contractual nature of arbitration, intervention by a third party is permitted only on the agreement of the disputing parties, the third party and the arbitrators.

The reform has certainly simplified the process of making awards and rationalised the way in which an arbitrator's decision is pronounced. First, the terms of the award have been extended to a maximum of 240 days after the arbitrators accept their appointment. The award must then have formal requirements similar to a court judgment and have similar effects.

The award can only be appealed if it is null and void and, in this respect, Article 829 of the CPC initially sets out 12 cases as examples in which procedural errors were made. In essence, these are situations in which the award either ends the procedure without deciding on the merits of the dispute, contains contradictory dispositions, or does not decide on any questions or exceptions put forward by the parties in accordance with the framework agreement.

As for the appeal of the award in connection with errors in law, this is now only possible if expressly provided for by the parties or the law.

International arbitration

One very noteworthy feature of this reform is the elimination of the specific discipline of international arbitration from the CPC. There is no longer a section of the code dedicated specifically to this, so domestic arbitration rules are applied directly to the international context if they are compatible.

Also, any award made in the ambit of international arbitration will be subject to the same discipline previously seen in domestic arbitration, while the legal precedents in relation to foreign awards remain in force.

It seems that this latest reform, which is much more incisive than the previous two, has implemented a modernisation of arbitration, allowing disputes to be resolved within a more coherent and stable framework. The result is a more attractive solution for disputing parties and lawyers alike.

While it may be too early to tell whether these changes to Italy's arbitration landscape will revolutionise the way dispute resolution is tackled, it is hoped that the new, more flexible regime will increase the appeal of arbitration as a more discreet alternative to the notoriously expensive and drawn-out process of litigation in Italy. By giving arbitrators the ability to decide on awards which are contractually binding and have the strength of court judgments, the reform means that arbitration should no longer be seen as a weak option.

Emanuella Agostinelli is a lawyer at Ashurst in Milan.