Litigation & Dispute Resolution 2017
- 21 agosto 2017
This chapter was first published on Global Legal Insights website
1 – Efficiency of process
The Italian civil judicial system is governed by the Italian Constitution, the Code of Civil Procedure (“CCP”) and by several special laws on various matters.
Thanks to recent reforms, the judicial process is managed entirely electronically. A party can lodge a claim either by filing a hard copy of the petition or an electronic one. Save for the statement of defence, any other parties’ submission shall occur only via the electronic system managed by the Ministry of Justice. As soon as the law clerk uploads the submission on to the proceedings folder, briefs and exhibits are immediately available for all the other parties and for the Judge.
Such system, recently extended also to administrative proceedings, together with recent additional interventions of the Italian legislator, are aimed at increasing the efficiency of the Italian legal system. Above all, the statistics of the Ministry of Justice show that people are relying more and more on ADR mechanisms. In particular, as we will see infra, assisted negotiation and mediation in some cases are mandatory, and a party cannot start judicial proceedings without first having attempted to resolve the dispute extra-judicially.
The first result of this effort is the dramatic decrease in the average length of proceedings. The Ministry of Justice estimated that first degree proceedings last for “only” 367 days on average, against an average of 487 days in 2014, and 547 days in 2013.
In addition to the above, Italian procedure rules also provide for fast-track proceedings in case of credits supported by written evidence and certain in their amount. In such cases, the creditor can apply for a summary payment order (“decreto ingiuntivo”) instead of using ordinary proceedings. The relevant order is issued quickly: depending on the workload of each Court, in about a month’s time. If the application is upheld, the Court orders the debtor to pay in the context of ex parte summary proceedings, i.e. without the appearance of the defendant. The order is then served by the applicant on the debtor, who has up to 40 days to challenge the order. Further to such opposition, ordinary proceedings on the merits commence. Under certain circumstances, or if the order is not challenged, the same order can become enforceable, even if proceedings on the merits are still pending.
2 – Integrity of process
Principles and high-level rules concerning the Italian judicial system can be retrieved in the Italian Constitution.
In particular, Article 24 Const. grants everyone the right to bring cases before a Court of law. It further states that everyone – also poor people – are entitled to be defended in all Courts. The right to a defence is inviolable. Further, Article 25 Const. enshrines the principle that no case may be removed from a Court established under the law. It further provides for the principle nullum crimen, nulla poena sine lege.
Article 101 Const. grants the independence of the Judiciary: Judges are subject only to the law.
Article 111 Const. sets the principle of the due process of law. It states that all parties shall be entitled to equal conditions before an impartial, third-party Judge. To guarantee the full manifestation of this principle, the Constitution states that all judicial decisions shall include their reasoning. Eventually, the same article provides that any party can appeal to the Supreme Court of Cassation – the highest Italian Court – in case of violations of law.
The Italian legal system is organised in three main levels. Except for peculiar and limited cases, the petitioner can file an ordinary litigation before the Ordinary Courts or the Justice of the Peace. The latter has exclusive competence for claims concerning movable assets whose value is lower than €5,000, or concerning vehicle circulation whose value is lower than €20,000. In all other cases, the Court is competent.
Appeals can be brought against first-instance decision before the Court of Appeals, in case the appealed decision has been issued by an Ordinary Court, or before an Ordinary Court, to appeal a decision of the Justice of Peace.
Eventually, only for violations of law and in the limited situations enlisted in Section 360 CCP, the losing party can appeal to the Supreme Court of Cassation.
3 – Privilege and disclosure
Italian civil procedure is not based on the concept of disclosure, so compulsory disclosure mechanisms do not exist and the parties are, generally speaking, free to file only the documents to support their claims and arguments.
Under particular circumstances, as set out under Articles 210–213 of the CCP, a party may request the Judge to order the other or a third party to disclose certain documents, provided that the documents are specifically identified by the applicant party, and their disclosure is essential for the decision of the case.
The Judge then examines the application of the party and issues an order in which it grants or rejects the application. If the order is addressed to a third party, the Judge may summon the third party, who in turn has the chance to file an opposition to the order and thus intervene in the proceedings.
CCP provides no sanction against a party who does not comply with the order; certain legal authors have stated, however, that if the non-compliance is without a legitimate reason, the Judge may negatively consider such conduct when deciding the case. In addition, if documents are not disclosed, the applicant party may apply for the documents to be seized further to an order of the Judge (Article, 670, paragraph 2 of the CCP, “sequestro probatorio”).
Moreover, the Judge, also without a specific request by one of the parties, may always request information or documents to the public administration which are necessary for the decision of the case.
The same rules apply to arbitration proceedings.
As said, there are no general disclosure obligations in Italian civil proceedings; so a party will not be forced to disclose documents they do not wish to produce in the proceedings, except in the case described above.
There are, however, certain provisions which protect confidentiality:
(i) A party may legitimately refuse disclosure if the latter implies violation of professional secrecy (which applies, inter alia, to clergy, external lawyers, doctors, accountants, etc.), civil service secrecy (i.e. in relation to civil servants with reference to facts learned during their service) and government secrecy;
(ii) Article 249 of the CCP which allows lawyers (only external lawyers and not in-house counsel) to refuse to give oral witness testimonies in relation to facts they have learned by reason of their profession; and
(iii) The Code of Conduct for Italian lawyers prohibits lawyers in civil proceedings to produce communications between lawyers marked as “confidential”, or communications related to settlement negotiations.
The same rules apply to arbitration proceedings.
4 – Costs
As a general rule, pursuant to Section 91 CCP, the Judge shall order the losing party to pay the legal fees and expenses of the winning party.
The counsels can submit to the Court a statement of their costs, but the final determination is left to the sole discretion of the Judge. Using his/her discretion, the latter awards the fees on the basis of tables periodically published and updated by the Ministry of Justice with its decree. The last update is the Ministerial Decree no. 55 of 2014.
The rule has two main exceptions. The legal fees and expenses can be offset – wholly or partially – in case: (a) there is no clear winning party; (b) the issue brought before the Court was new and innovative; (c) the law has recently changed; and/or (d) there is a brand new case law trend.
Notably, Section 96 CCP empowers the Court to issue a separate order in case one party failed to act in good faith in the proceedings or started it with mala fide. This is not intended to reimburse legal fees, but to sanction a party for his/her behaviour during the proceedings. Specific sanctions, also for breach of ethics rule, are provided for counsels. Indeed, the Judge has the power to report unethical behaviours to the competent organism of the competent bar.
5 – Litigation funding
Litigation funding and pactum de quota litis
In Italy, as well as in other civil-law countries, litigation funding is not common and, according to authors, can be said to be underdeveloped, also considering there are no rules or standards on the point. The issue is currently dealt with by several Italian law magazines, who are reporting the interest of several international entities who are exploring funding litigation in Italy. In particular, it is reported that funders have shown interest in financing actions in relation to private enforcement in competition claims.
It is also to be considered that, as in many other European countries, Italian lawyers are prohibited from applying pactum de quota litis to their clients; however, considering that, in litigation funding, lawyers would always be paid by funders, the rule would reasonably not be breached.
Legal Expenses Insurance
Legal Expenses Insurance is dealt with by Articles 173 and 174 of the Code of private insurance and is also rather underdeveloped in Italy. Statistics show that Italy had only 4% of the European premium income from Legal Expenses Insurance.
Legal aid is known as “Patrocinio a spese dello Stato” in Italy and is set out by Presidential Decree 30 May 2002, no. 115 (and following amendments), which is interpreted as implementing Article 24 of the Italian Constitution in order to ensure effective access to justice to those not able to independently obtain the services of a lawyer due to the inability to pay for them from their income. Legal aid is available in civil, administrative and criminal proceedings and the income threshold is currently set at €11,528.41 per year.
6 – Interim relief
These proceedings follow the general rules provided by CCP (Sections 669-bis to 700 CCP).
The interested party shall file a petition with the competent Judge. The latter will then issue a decree scheduling the hearing in which the parties will discuss the case. When particular reasons of urgency exist, upon the petitioner’s request, the Court has also the power, along with the same decree, to issue an ex parte measure before the first hearing.
Then, the petitioner shall serve the decree and the petition on the defendant to allow the latter to properly prepare the defence. Unless the case presents complexities or there is any need to carry out brief preliminary activities (e.g. hearing witnesses), the decision – in the form of an “order” – can be issued immediately after the hearing.
In accordance with Section 669-ter CCP, if a dispute is not subject to the Italian jurisdiction, the competent Court for the issuance of the interim measure is the one where the latter shall be concretely executed or enforced.
Under the CCP, the remedies available on an interim basis are:
• judicial seizure, aimed at securing goods whose ownership is being challenged;
• precautionary seizure, aimed at securing assets when the alleged creditor fears that the debtor might dispose of them so that the guarantee on the credit might be lost;
• reporting of new works or of potential damages to avoid damage taking place as a consequence of new work being started or of other goods placing a claimant’s property or possessions in danger;
• preliminary investigation proceedings, aimed at securing evidence to be used in ordinary proceedings when there is the risk that such evidence will be lost;
• in all other cases, a judge can issue any kind of measure deemed most appropriate for reasons of urgency (section 700 CCP),
• when the application is likely to be successful on the merits (so-called, fumus boni iuris), and
• there is danger in any delay (so-called, periculum in mora).
Where a Judge issues measures pursuant to section 700 of the CCP, these will be stand-alone proceedings, i.e. they do not require the party to start proceedings on the merits.
Given that, normally, there is no preliminary activity, such interim proceedings are aimed at repairing contingent situations, which may be of such a damaging nature, they cannot wait to be rectified until the end of full proceedings on the merits. The petitioner, in fact, cannot seek damages from the opposite party. (S)he may only request specific performance to stop the damaging action(s).
7 – Enforcement of judgments / awards
Enforcement proceedings: general overview
As soon as a party gets an enforcement order (“titolo esecutivo”) it is entitled to start enforcement proceedings aimed at obtaining goods/money/etc. from the other side, even without the latter’s cooperation.
The enforcing party shall serve the enforcement order and the writ of enforcement (“atto di precetto”). Not sooner than 10 days from service – and provided that the debtor has not performed the payment yet – the creditor can file an application with the bailiff to:
(i) seize the debtor’s movable assets;
(ii) serve a writ of execution (“atto di pignoramento immobiliare”) to seize real estate; and/or
(iii) serve a writ of execution to third parties (“atto di pignoramento presso terzi”) that may owe money/goods to the debtor. Normally, this is the most-used modality and the recipients of the writ of execution are banks.
In any case, the bailiff will create the enforcement proceedings folder, including all the originals, and (s)he will provide it to the enforcement Judge. Depending on the type of execution selected, the Judge will in any case hold the hearings, instruct the bailiff to perform activities, and order that the amounts/goods seized are assigned to the creditor.
As soon as the creditor is fully satisfied or if the debtor does not have any additional goods that can be used to pay the creditor, the Judge will declare the enforcement proceedings closed.
Enforcement of foreign judgments
Enforcement of judgments issued by foreign Courts is regulated by the Italian Law on Private International Law (Law no. 218 of 1995). Article 64 provides that a foreign judgment is fully recognised and enforceable in Italy provided that certain conditions exist. In particular, the judgment shall not be contrary to Italian public policy. See below for more details in relation to the concept of public policy.
Pursuant to the EU Regulation no. 1215 of 2012, judgments issued by Courts of Member States of the European Union are automatically recognised without the need of a formal recognition. Considering the EU framework, Italian private international law rules only apply when a judgment of a non-EU country needs to be enforced in Italy.
Additional provisions may be provided by multilateral treaties with third countries.
Enforcement of awards
In relation to domestic awards, a party seeking to enforce the award should follow the steps set out by Article 825 of the CCP. In particular, the party must file an application with the competent Court for the place where the arbitration was seated, attaching the original or a certified copy of the award, together with the original or a certified copy of the arbitration agreement.
The Court verifies the formal regularity of the award and issues an order which renders the award enforceable (the so-called “exequatur”). The order may be appealed to the Court of Appeal within 30 days.
The procedure for the recognition and enforcement of foreign arbitral awards is set out by Articles 839 and 840 of the CCP.
Pursuant to these provisions, the party wishing to enforce a foreign award must file an application with the Court of Appeal of the place where the other party is domiciled. If the other party is domiciled abroad, the Court of Appeal of Rome will be competent.
The applicant must file the original of the award or a certified copy, a certified translation if the award was not rendered in Italian, and the arbitration agreement.
The President of the Court of Appeal verifies the formal regularity of the application and the attached documents and issues an order which renders the award enforceable in Italy, unless the dispute was not capable of arbitration according to Italian law or the award is in contrast with Italian public policy.
Pursuant to Article 840 of the CCP, the order of the President of the Court of Appeal can be challenged to the Court of Appeal within 30 days. The Court of Appeal will refuse recognition of the award for the reasons set out in the New York Convention as well if the dispute is not capable of arbitration, or if the award is in contrast with Italian public policy.
The standard applied by Courts of Appeal to refuse enforcement of foreign judgments and awards on the grounds of public policy has so far been a restrictive one, aimed at allowing the international circulation of awards.
Public policy is usually interpreted as including only domestic public policy and not also international public policy. In particular, legal authors define domestic public policy as the core of fundamental principles which shape the ethical and social structure of the national community in a certain period. In practice, Court precedents have included in the concept of domestic public policy:
(i) the provisions and principles of the Constitution, the principles which derive from criminal law, the fundamental principles of EU law, including competition principles; and
(ii) according to some authors, Courts of Appeal should also consider violations of procedural public policy, including violations of the principle of due process or the contrast of the award with a previous final award or judgment between the parties. Given the nature of the elements, however, such violations are more likely to be ascertained in the challenge phase, where the other party will have the chance to allege them.
8 – Cross-border litigation
Taking of evidence abroad
In relation to the taking of evidence abroad, the rules applicable depend on whether the states involved are members of the European Union or not.
For members of the EU, the taking of evidence abroad is governed by EU Regulation 1206/2001, which fully applies also in Italy.
Italy is also a party to the Convention on the Taking of Evidence Abroad in Civil or Commercial Matters – more commonly referred to as the Hague Evidence Convention – of 18 March 1970; thus, this Convention applies when an Italian Court requests the taking of evidence in a non-EU state or when a non-EU state requests the taking of evidence in Italy.
When an Italian Court requests the taking of evidence to a state which is not party to any international convention, Article 204 of the CCP shall apply, according to which the Judge shall request the taking through a letter rogatory addressed to the foreign Authority and transmit the letter through diplomatic channels.
In addition, Italian private international law rules (Articles 69 and 70 of Law 218/1995) set out that when a request is issued by a foreign (non-EU) state, the taking of the evidence is carried out pursuant to Italian procedure rules; however, Italian authorities may follow the instructions given by the requesting states, as long as it is compatible with Italian principles.
Enforcing interim or freezing orders
Italian Courts can assist EU member states in relation to interim or freezing orders as per the rules set out by the Recast Brussels Regulation (Reg. 1215/2012). In particular:
• interim measures ordered by the Courts of a member state can circulate freely and be enforced in other EU countries; indeed, the Regulation includes provisional, including protective measures in the concept of “decisions”; the only measures excluded from circulation are those taken without the defendant being summoned to appear;
• applications for provisional, including protective, measures may be made to the Courts of a state even if another member state has jurisdiction over the substance of the matter (Article 35). According to authors, this means that interim relief can be sought in the EU state (including Italy) in which the interim measure is to be enforced. In other words, if for instance, a party wishes to apply for a freezing order to be enforced in Italy, the Italian Courts will have jurisdiction even if another state has jurisdiction to hear the merits of the case. The interim measures issued by a Court which does not have jurisdiction on the matter cannot, however, circulate in other EU countries and are only effective in the country of issuance.
Italian Courts may also assist non-EU states in relation to interim or freezing orders. Indeed, according to Article 669-ter of the CCP, Italian Courts have jurisdiction to hear applications for interim measures also if the substance of the matter falls within the jurisdiction of a foreign state, provided that the measure is to be enforced in Italy.
However, Italian private international law rules do not allow recognition and enforcement of interim measures issued by a non-EU state, as they are not final (Article 64 of Law 218/1995).
9 – International arbitration
Arbitration is governed by Articles 806 to 840 of the CCP.
Further to the arbitration reform of 2006, Italian law no longer makes a distinction between domestic and international arbitration. The only criteria which is still in place is that of the seat of the arbitration: in particular, if the arbitration is seated in Italy, Italian law (i.e. the relevant mentioned articles of the CCP) will apply. This is the case even if the arbitration has international elements in relation to the nationality of the parties or of the arbitrators, the law applicable to the case, or the language of the proceedings: thus, even if international elements are present, the arbitration will be considered a domestic, Italian arbitration, if the seat is in Italy.
As regards judicial support or interference in relation to international arbitrations seated in Italy, it must first be noted that Italian law fully applies the Kompetenz-Kompetenz principle. Indeed, only arbitral tribunals can rule on their jurisdiction and competence, and not national Courts.
There are, however, certain cases in which national Courts will interfere with arbitration pending in Italy. In particular, Italian law has identified the Courts which have jurisdiction over the district where arbitration proceedings are seated as the Courts which can rule over certain issues, which are listed below:
• Competent national Courts are always to grant preliminary or interim relief even when arbitration proceedings are pending; however, as said, they cannot rule on the jurisdiction of the arbitral tribunal. Indeed, pursuant to Article 818 of the CCP, Italian arbitrators are prohibited from issuing seizures and any other interim or precautionary measures. The only exception to this rule is provided for by the rules on corporate arbitration, which allow arbitrators to stay the efficacy of a resolution by a company’s general meeting.
• National Courts may also be called to intervene in relation to the appointment of the arbitrators. In particular:
(i) if the parties have indicated an even number of arbitrators and have not otherwise agreed, a further arbitrator is appointed by the President of the Court where the arbitration has its seat, upon an application of the claimant;
(ii) if the parties have not agreed upon the number or appointment method of the arbitrators, the arbitrators are three and are appointed by the President of the Court where the arbitration has its seat; and
(iii) lastly, if the claimant has served a statement of commencement of an arbitration and appointed an arbitrator, requesting the defendant to do the same, if the defendant does not proceed to do so within 20 days, the claimant may apply to the President of the Court where the arbitration has its seat to request the appointment.
• Under Article 816-ter of the CCP, if a witness refuses to appear before the arbitral tribunal, the latter, if deemed opportune, may request the President of the Court where the arbitration is seated to order the appearance of the witness.
• When challenges against awards are possible, they are decided upon by the Court of Appeal competent for the place where the arbitration was seated; the parties may then appeal the judgment of the Court of Appeal to the Supreme Court only on points of law in relation to the decision of the Court of Appeal.
According to Article 832 of the CCP, the parties may also opt for an institutional arbitration (instead of an ad-hoc one) and thus rely on the rules set out by the relevant institution. In Italy, there are several arbitration institutions, the most prominent being the Milan Chamber of Arbitration, which is run by the Milan Chamber of Commerce and runs the largest number of institutional arbitrations in Italy.
10 – Mediation and ADR
In recent years, Italian legislators have passed several bills aimed at enhancing the use of ADR in order to settle the dispute without relying on the Court system.
• Assisted negotiation – introduced by Law Decree no. 132 of 2014, passed into Law no. 162 of 2014
Before starting a lawsuit, the claimant must invite the other side to enter into an agreement (a so-called “Convenzione di negoziazione assistita”). The latter aims to amicably settle the dispute in good faith, with the mandatory assistance of the parties’ counsels, before filing a claim with the Court.
In general, for claims regarding damages subsequent to circulation of vehicles and for all matters not already included in the mandatory mediation, where one party demands payment of a sum not exceeding €50,000.00, the offer to conclude such an agreement is mandatory. This means that at the first hearing the Judge can autonomously investigate whether the process was ever started and order the claimant to invite the other side to conclude such an agreement.
The process can last from a minimum of one month to a maximum of three months.
Where the parties are able to settle the dispute, the final agreement, duly signed by them and by the assisting counsels, is considered an enforcement order and can be used to start enforcement proceedings. It is a breach of professional ethics for a lawyer who signed the agreement to appeal it.
• Mediation – introduced by Legislative Decree no. 28 of 2010 and amended by Legislative Decree no. 69 of 2013
Similarly to the assisted negotiation, in certain cases, before filing a suit the claimant shall first seek an amicable solution via a mediation organism. The mediation is mandatory for matters concerning, e.g., condominium, rights in rem, damages compensation for medical liability, libel committed via press or any other public means, insurance, banking and financial agreements, etc.
The mediation can last for maximum three months starting from the date the mediation’s claim was submitted.
If an agreement is reached, duly signed by the parties and their counsels, it has the same force as an enforcement order.
11 – Regulatory investigations
In relation to consumer protection, Italian law is shaped in accordance with EU law and principles on the matter. There is no regulatory agency in charge of overseeing the matter, except for some powers of the Italian Competition Authority, as we shall see below. The topic falls within the competence of the Ministry of Economic Development (“Ministero dello Sviluppo Economico”), which include departments which deal with consumer protection, also with the advice of the National Council of Consumers and Users (“Consiglio nazionale dei consumatori e degli utenti”), which is a public body representing Italian consumer organisations.
In relation to business affairs, in Italy there are different independent regulatory agencies (“autorità amministrative indipendenti”), with investigative, regulatory and sanctioning powers in the relevant areas of competence. These bodies are independent, which means that they do not report to the government or to branches of the same. These authorities have investigative powers, often also with the help of police forces, and – further to sanctioning proceedings in which the entities involved have the chance to defend themselves – can issue different types of sanctions, including monetary fines, injunctions, disqualifications, confiscations, in accordance with the powers granted to each authority. Appeals against the sanctions of Italian regulatory agencies are heard by Italian Administrative Courts or, in some cases, by ordinary Courts of Appeal (e.g. in the cases of Banca d’Italia and Consob).
There are 11 of these agencies, the most prominent being:
• “Banca d’Italia” (Bank of Italy), the Italian Central Bank, which has regulatory and sanctioning powers in relation to the banks and financial intermediaries under its supervision in the fields of, inter alia, transparency in the ownership structures and management, corporate governance and internal control systems, compliance with rules and regulations, also from a contractual perspective. In addition, the “Unità di Informazione Finanziaria”, which is Italy’s Financial Intelligence Unit, which is a division of the Bank of Italy, is responsible for investigating money laundering and terrorist financing.
• “CONSOB”, the Italian financial markets regulator, which has regulatory and sanctioning powers in relation to insider trading and market manipulation cases. In addition, CONSOB has regulatory powers to ensure transparency of ownership, accounting documents of listed companies, appeals for public investment (IPOs, takeover bids and equity swaps).
• “Autorità garante della concorrenza e del mercato”, the Italian Competition Authority, which has powers in relation to market dominance abuses, cartels and other anti-competitive practices, mergers/takeovers and market concentration, the repression of unfair commercial practices, misleading and unlawful comparative advertising, and the application of conflict-of-interests laws to government office-holders.
• “Autorità per le garanzie nelle comunicazioni”, the Italian Communications Authority, which is the regulatory and competition authority for the broadcasting, telecommunications, publishing and postal sectors.
• “Garante per la protezione dei dati personali”, the Italian Data Protection Authority, which has powers in relation to the protection of fundamental rights and freedoms in connection with the processing of personal data.