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August 02 2018
The Court of Cassation recently addressed:
Based on an arbitration agreement executed between them, a company and a shareholder devolved to arbitration proceedings an existing dispute regarding the validity of the shareholder's withdrawal from the company.
Stating the legitimacy of the withdrawal, the arbitral decision provided for the continuation of the proceedings to determine the value of the shares. The company appealed the decision before the Court of Appeal.
The court stated that the dispute could be submitted to arbitration, underlining the arbitration agreement's nullity exception, as it did not assign the right to appoint the arbitrator to a third party.
The company appealed the decision before the Court of Cassation for a number of reasons, all of which were rejected.
In Decision 10399/2018, and with reference to Legislative Decree 5/2003 regarding corporate arbitration, the Supreme Court of Cassation stated as follows:
Disputes related to the legitimacy of the withdrawal of a shareholder from a limited company… concern disposable rights and, consequently, may be submitted to ritual arbitration, either general or corporate arbitration proceedings.
With regard to the validity of the clause which did not assign the right to appoint the arbitrator to a third party, the Supreme Court considered the exception of nullity to be late on the basis that:
Rejecting the appeal, the court affirmed that the alleged nullity of the arbitration agreement for breach of Article 34(2) of Legislative Decree 5/2003(3) was groundless, as the abovementioned rule was not applicable with regard to arbitration agreements regarding a specific dispute between a shareholder and a company.
Decision 10399/2018 addressed:
Arbitration is a procedure in which a dispute is submitted to one or more arbitrators, who take a binding decision. According to Article 806(1) of the Code of Civil Procedure "the parties may decide to devolve to arbitrators the disputes between them which do not refer to non-disposable rights, unless expressly provided by law".
Similarly, with regard to arbitration clauses contained in the articles of association of companies that do not resort to the risk capital market, Article 34 of Legislative Decree 5/2003 provides as follows:
Some or all disputes arising between shareholders or between a company and shareholders regarding disposable rights related to company relationships are submitted to arbitration proceedings.
According to established case law, disputes regarding mandatory rules (eg, the violation of rules regarding balance sheets) cannot be submitted to arbitration proceedings as they are intended to protect the interests of shareholders and interested third parties.(4)
The court affirmed that, as a shareholder's right of withdrawal concerns economic disposable rights, disputes in this regard may be submitted to arbitration. The fact that a shareholder's withdrawal may affect the economic situation of other shareholders or third parties does not imply that the dispute transcends the individual shareholder's interest.
Further, an arbitration clause which does not assign a right to appoint an arbitrator to a third party is null and void according to Article 34(2) of Legislative Decree 5/2003, which includes provisions regarding arbitration clauses contained in companies' articles of association.
Academic authors point out that the special rules should neither apply to arbitration proceedings concerning company disputes over a specific arbitration agreement nor arbitration clauses contained in articles of association.
The Court of Cassation has expressly stated that the rule regards only the following:
The articles of association of the companies which do not resort to risk capital market, thus it should be considered that, except for an arbitration clause included in the article of association or in the statute of a company, the only possible option is to submit the dispute to ordinary judge or, after the dispute has arisen, to reach an arbitration agreement in compliance with the provisions of the civil and civil procedure code, without the peculiarity which regards corporate arbitration and without applying the invalidity rules provided for in art. 34 D. L. n. 5/2003.
The court's decision confirms the validity of an arbitration clause which does not assign the right to appoint an arbitrator to a third party in a dispute between a shareholder and a company involving the shareholder's withdrawal from the company.
For further information on this topic please contact Costanza Mariconda at Mariconda e Associati Studio Legale by telephone (+39 02 795 212) or email (email@example.com). The Mariconda e Associati Studio Legale website can be accessed at www.studiomariconda.com.
The party which does not raise in the first brief following the acceptance of arbitrators the exception of jurisdiction for the non-existence, invalidity or ineffectiveness of the arbitration agreement, cannot appeal the arbitral award for the abovementioned reason, except for the case that the dispute could not be object of arbitration.
The clause must provide for the number and the methods of appointment of the arbitrators, conferring, under penalty of nullity, the power of appointment of all the arbitrators to a third subject unrelated to the company.
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