The principle of 'in dubio pro arbitrato' under Italian law

Giuseppe de Falco
Ughi e Nunziante, Rome
g.defalco@unlaw.it

According to Italian law the arbitration clause under which the parties agree to entrust future disputes to arbitrators extends to all disputes arising from the contract or the relationship to which the contract refers.

This rule, set forth in article 848-quater of the Italian Code of Civil Procedure, goes under the name 'in dubio pro arbitrato', and provides that disputes which are not clearly and explicitly included in the scope of application of the arbitration clause but arising from the same contract which includes such arbitration clause, shall be referred to the arbitrator(s).

Such rule is aimed at expanding the application of the arbitration clause beyond a strict interpretation of the consent of the parties to the contract containing such clause. Thus, the construction of the clause shall be made in such a manner to include any disputes arising out of the same contractual relationship unless any express contrary will is stated by the parties in the same agreement.

Still, however relaxed the application of the said principle might be in order to facilitate the use of alternative system for disputes resolution, as chosen by the parties to the contract, the fundamental rule of the privity of contract set forth under the Italian Civil Code, cannot be derogated.

The application of the principle in the case law of the Italian Court of Cassation

In this respect, the Italian lawmaker has foreseen two kinds of disputes: a) disputes arising from the same contract; b) disputes originating from a different contract but pertaining to the same (contractual-economic) relationship.

Disputes arising from the same contract

a) As to the first type of litigation, the Italian Supreme Court of Cassation (hereinafter also 'SC') has consistently held that the arbitration clause refers to the contract in which it is inserted and, in the absence of an express will to the contrary, any other dispute that has its legal ground in the contract must be submitted to arbitration^[1], even where the litigated case goes back to a period prior to the moment on which the agreement between the parties has been reached^[2].

It has been held also that a controversy where one party claimed the rescission for breach of a contract was included in the scope of application of an arbitration agreement which only encompassed disputes concerning the interpretation and/or execution of the contract^[3].

In a similar situation - where the arbitration agreement of a binding term sheet for the purchase of real estate referred to arbitrators only 'the interpretation of the contract' - the buyer brought an action against the seller aimed at obtaining the performance of the contract.

Also in this case the SC confirmed the power of arbitrators to render an award, in spite of the wording of the arbitration agreement limited to the “interpretation of the contract”. A concern of the Supreme Court was in this case that different disputes arising from the same contract decided upon by different tribunals (State tribunals and arbitration tribunal) could lead to contradictory decisions^[4] .

However, in all the cases illustrated above, the SC dismissed the application of arbitration agreements to disputes relating to other contracts even when connected to the main agreement containing the arbitration clause.

Disputes originating from a different contract but pertaining to the same (contractual-economic) relationship

As to litigation under point b) described above, namely those cases regarding the application of arbitration agreements to disputes arising from separate contracts, if such other contracts are part of a single economic operation that is part of the same transaction, the case law of the Court of Cassation is very restrictive against any possible infringement of the privity of the contract.

The Supreme Court has deployed the fundamental criterion of a functional interpretation aimed at identifying the actual will of the parties^[5]. In this respect, the Court of Cassation has excluded that a new agreement which only contains amendments to the existing contract, could be considered as a separate agreement^[6]. In this respect, the SC has also taken into account the need for the parties not to judge separately different contracts which were part of one single transaction.

Apart from peculiar cases, however, the consistent attitude of the SC is hostile to any possible exception to the rule of privity and prohibits any application of the arbitration agreement beyond the boundaries of the contract in which it is contained.^[7]

Recently, the Italian Court of Cassation has maintained that the arbitration clause contained in a binding term sheet (contratto preliminare) signed by the parties still applies notwithstanding the parties had reached the subsequent final agreement without including the arbitration clause.^[8]

The survival of the arbitration clause set forth in the binding term sheet is, in fact, the result of the notorious principle of the “autonomy” of the arbitration clause with respect to the contract in which it is included. Therefore, on one side, the final agreement contains terms and conditions of the contract but the arbitration agreement set forth in the binding term sheet is still the valid choice of the parties as to the disputes arising from the contract.

The arbitration clause contained in a contract proposal shall, therefore, be considered effective even if the final contract contains amendments concerning the terms and conditions of the contract and is silent on the arbitration agreement.^[9]

This conclusion is not in conflict with the general rule according to which an arbitration agreement only applies to the contract in which it is provided for. Indeed, in both situations, the case law aims at fostering the choice of the parties to submit any disputes arising from the contract (or from a specific relationship) to the arbitration tribunal and to avoid conflicting decisions regarding the same contractual relationship unless a clear and unquestionable will is stated by the parties to the contrary.