Arbitration is a dispute resolution procedure which is entrusted to arbitrators who are called to adjudicate as an alternative to civil process. It is commonly referred to as ADR, Alternative Dispute Resolution.

It is a legal concept, whose main characteristics are regulated by the Italian code of civil procedure and by international conventions.

It is conducted according to rules which are pre-determined, partly by the code of civil procedure (Book IV, Title VIII, Articles 806-840) and partly by the Arbitration Rules, as a guarantee for the parties in the procedure.

See also: FAQs on Advantages of arbitration

The advantages are many: legal, economic and practical.

Legal advantages.

a) An arbitration award or decision has the same effect as a judgment issued by a court. It becomes enforceable after a declaration is made by the court in whose jurisdiction the arbitration award was made

b) The decision is made by arbitrators who specialise in the specific area

c) The decision can become final, and can only be challenged in limited cases

Financial advantages

a) Tax credits. Following the Decree of the Italian Ministry of Justice of 30 March 2017 (published in Official Gazette no. 77 of 1 April 2017, parties who, in the year preceding their application, paid fees to arbitrators in cases that ended in an arbitration award can submit an application to receive tax credits. The tax credit, which is granted if the arbitration procedure ended in an award, is proportionate to the fees paid to the arbitrators, up to the sum of €250. It is determined in correspondence with the allocated resources up to the limit of €5 million per annum, from 2016 onwards.

b) Costs. The costs of an arbitration procedure are regulated by pre-determined fees (see FAQs – How much does arbitration cost?)

Practical advantages

a) Fast, clearly-defined timeframe for resolving the dispute

b) Arbitration is generally recognised as having the indirect advantage of favouring business, and preserving BtoB relations

c) Considerable flexibility in terms of the rules governing the procedure

Arbitrable disputes, in other words those that can be resolved by arbitrators, are any case that does not relate to inalienable rights. For example, disputes on corporate, commercial, supply, contracting, real estate, trade, leasing, banking and financial law matters can all be referred for arbitration.

Anyone who has available or alienable rights, whether they are a private individual, a consumer or a business. Arbitration is a system that is well-suited to any type of disputes, and always guarantees the same advantages. It is normally used to resolve disputes between businesses, or between businesses and institutions, but it can also be used in disputes between private individuals.

International arbitration is a procedure conducted between parties resident in different countries. In the Italian ADR system, administered arbitration procedures are almost the only kind of international procedure.

They can be accessed by private individuals, consumers or businesses, to enforce their rights against parties resident abroad.

A Chamber of Arbitration is a body set up to manage arbitration procedures. A Chamber of Arbitration may be public or private. The ICA, International Chamber of Arbitration, is private.

The ICA:

a) administers its procedures according to the Rules;

b) at the request of the parties, appoints the arbitrators and the technical experts and consultants in procedures which are not administered according to the Rules;

c) appoints the Arbitrators and offers the services provided for in the process applicable to arbitration proceedings conducted according to the arbitration rules of the UN Commission for International Trade Law (Uncitral).

The Chamber of Arbitration performs the functions provided for in the Rules through the Arbitration Council and the Secretariat.

To refer a dispute to the Chamber of Arbitration, the parties either need to have entered into a contract or compromise, or they must have included in their contract an arbitration clause or convention on non-contractual matters, through which they agree on how to settle a past or current dispute according to the Arbitration Rules.

With ICA arbitration, the parties can choose where they want the arbitration procedure to take place. They can indicate this in the arbitration clause, or in their arbitration agreement.

The parties can designate (usually in the arbitration agreement or clause) the seat of the arbitration (failing that, the Rules state that the seat of arbitration will be Rome).

The seat identifies the connection in terms of some of the core aspects of the arbitration procedure, such as the attribution of Italian nationality to the award, and the decision of the competent court to conduct the ancillary arbitration activities provided for in the code of procedure.

Arbitration procedures can also be held elsewhere, not at the seat (the Rules provide that “The Arbitration Tribunal may provide that hearings or other meetings of the procedure will be held elsewhere than at the designated seat”).

The appointment of an Arbitrator must not be made on the basis of the seat, but in terms of the competence that the particular arbitrator has, in terms of resolving the dispute.

ICA’s task is to identify the arbitrators or panel that are most suitable, in the seat chosen by the company.

See also: FAQs on Distance arbitration

Yes, this is possible. The ICA Rules provide that an Arbitration Tribunal can require the hearings or other meetings of the procedure to be conducted online, using the designated tools

Yes. If, during a dispute, one of the parties wants to start arbitration proceedings administered by the International Chamber of Arbitration in accordance with the Arbitration Rules, but the parties have no arbitration agreement, the requesting party may submit an application for the other party to join the arbitration, and for the Arbitration Rules of the ICA to be applied. Once the Arbitration Council has examined the request, the dispute and the relevant circumstances, it will then obtain the necessary consent of all parties to the Arbitration Agreement, which must be formalised by all the parties within an appropriate period.

Procedural arbitration is governed by the Italian code of civil procedure. It consists of the exercise of jurisdiction concurrently with the ordinary jurisdiction entrusted to the legal system.

Contractual arbitration consists of referring a dispute to arbitration through a settlement agreement or a declaration of the parties’ rights or duties

Administered arbitration is a procedure conducted in accordance with the rules of the Chamber of Arbitration. In this case, the parties only need to enter into an arbitration clause that indicates their intention to refer any disputes to the chosen Chamber of Arbitration.

With ad hoc arbitration, the parties also determine the rules of the arbitration procedure.

An arbitration award is a decision in which the arbitrators decide on the dispute, or declare or verify the parties’ reciprocal rights and obligations. It has the effect of a court order and becomes enforceable following a declaration made by the court in the place in which the Chamber of Arbitration is established.

According to the ICA’s rules, if the parties have not agreed that the decision is to be made in equity, the decision will be made in law.

Arbitration is fast, and immediate. To ensure these principles are upheld, the rules impose limited grounds for challenging a procedural award: invalidity, revocation or third-party objection.

Conversely, the negotiated nature of a contractual award means that it can be challenged due to flaws that impair the declared contractual intention such as error, violence, fraud or incapacity of the instructing parties or of the arbitrator.

The assistance of party lawyers is not obligatory, but it is preferable, especially for complex cases. To facilitate representation by party lawyers, the parties can receive a tax credit in proportion to the amount of legal fees they have paid, if the procedure ends with the adoption of an arbitration award.

See also: FAQs on Advantages of arbitration

The code of civil procedure indicates that an arbitration procedure lasts 180 days. In practice, according to the latest statistics, the duration is approximately 208 days.

To understand how short this timeframe is, the average duration of civil proceedings from the court of first instance through to the Court of Cassation is 500 days.

According to the ICA rules of arbitration, the administration costs are determined according to the value of the dispute, based on the scale of costs annexed to these Rules. Lower costs may be determined, in cases where the procedure is completed early. The activities which are included or excluded from the administration costs are indicated in Annex B to the Rules.

 The fees of the Arbitration Tribunal are determined according to the value of the dispute, based on the fee scale annexed to these rules. In determining the fees of the Arbitration Tribunal, the Arbitration Council will take into account the work performed, the complexity of the dispute, the speed of the procedure, and any other relevant circumstances. Differentiated fees may be determined for individual members of the Arbitration Tribunal. Fees may be set at lower rates than those indicated in the fee scale, in cases where the procedure is completed early, or higher fees may be set, in extraordinary circumstances.

The fees of the Tribunal-Appointed Experts will be determined equitably, considering the professional tariff, the court tariff and other relevant circumstances.

The reimbursement of the Arbitrators’ and Tribunal-Appointed Experts’ expenses must be proven by supporting documents. If receipts are not produced, these expenses will be considered to be covered by the arbitrators’ fees

According to the ICA’s rules on arbitration, the parties are jointly and severally responsible for paying the costs of the procedure

Yes. New systems of funding are becoming available for the resolution of disputes through arbitration. One such option is litigation funding.

According to the ICA’s rules, any party who receives third-party funding in relation to an arbitration procedure or its outcome must declare the existence of the funding, and the identity of the third party. This declaration must be repeated during the arbitration procedure until it has concluded, if this becomes necessary due to supervening circumstances, or at the request of the Arbitration Tribunal or the Secretariat

Yes. At any time during the procedure, the Arbitration Tribunal may attempt to settle the dispute by inviting the parties to attempt mediation, which may be through the mediation body Primavera Forense.

The parties, or their defence lawyers, must inform the Secretariat that they are discontinuing the procedure after having reached a settlement or for other reasons, thus exempting the Arbitration Tribunal – if already formed – from its obligation of making an award.