Should the law follow the practice, or should the practice abide to the law? Although the answer to this provocative question may seem obvious (what is the value of a practice that does not comply with the law after all?), the question of the impartiality of the arbitrators and its treatment in domestic legislation requires further reflection. In a previous post I wrote about how, sometimes, the analysis of arbitral proceedings by judges, accustomed to dealing with rather different subjects, does not reflect the actual practice of a country or a professional sector, but rather its textbook version – as such, purified from its local peculiarities and sterilized from any cultural influences. As we have learned from our interviews, there are countries – especially in Northern Europe – in which the concepts of independence and impartiality of the arbitrators are to be considered in its absolute sense – that is, the link between an arbitrator and the party that appointed them consists merely in the definition of “party-appointed arbitrator”, without any further connotation. On the contrary, in other countries – including Italy – the concepts of independence and impartiality are to be understood in a more relative sense: although the party-appointed arbitrator is not an adjunct lawyer for the party in question, and must in any case abide by certain professional standards and keep a distance from the dispute, there may be situations in which the implicit or explicit disclosure of the relationship between the arbitrator and the party settles any question of impartiality and independence. Cases like Beg v. Enelpower do not suggest that there are no independence requirements, nor do they shift the burden of disclosure from the interested party to the party not linked to the arbitrator: these cases simply underscore how, in the absence of a challenge against a known situation of relationship between the party and the arbitrator, the right to challenge is to be considered waived. As pointed out by Italian courts repeatedly, insofar as the arbitrator does not blatantly favour one party, and as long as the existing relationship between the arbitrator and the party that appointed them is well-known and not hidden, an arbitrator can be considered sufficiently impartial and independent not to frustrate the integrity of the proceedings.
Notwithstanding the approach of Italian courts, the recent reform of the country’s arbitration law seems to go in the opposite direction. The Law n. 206 of 26 November 2021, aimed at increasing the efficiency of civil proceedings and revising the regulation of ADR, provides at Art. 1(15)(a) that the reform of arbitration in Italy shall be directed to ‘strengthen the guarantees of impartiality and independence of arbitrators, reintroducing the possibility of recusal for serious reasons of convenience as well as providing for the obligation to issue, upon acceptance of the appointment, a declaration containing all the relevant factual circumstances for the purposes of the aforementioned guarantees, providing for the invalidity of the acceptance in the case of omitted declaration, as well as in particular the forfeiture in the event that, at the time of accepting the appointment, the arbitrator has failed to declare the circumstances that, pursuant to article 815 of the code of civil procedure, can be asserted as grounds for recusal’. Clearly the Italian legislator is neither a fan of short sentences, nor of the local arbitration culture. The reform process, indeed, seems to be directed towards a progressive assimilation of the role of the arbitrator to that of the judge. The focus of the reform appears to be on the concepts of impartiality and independence, but it aims at reintroducing the lower threshold for the recusal of arbitrators from the arbitration chapter of the code of civil procedure of the late 1900s. Indeed, the Law 206 of 2021 introduces an obligation to declare all the factual circumstances that may be relevant for the purpose of any recusal; moreover, it makes the acceptance of the appointment automatically invalid in case of omission to declare any relevant circumstances by the arbitrator. It is evident that the award in Beg v. Enelpower would have been void, and would have been flawed from the beginning of the proceedings had this legislation been in force at the time of the case; and it is also clear how the reference to article 815 of the code of civil procedure reveals the real intent of the legislator – that is, to judicialize some aspects of the arbitration with particular reference to the profile of arbitrators.
From this perspective, one may argue that the reform is an attack not merely to the autonomy of arbitral tribunals, but to party autonomy as well. As often underlined in the legal literature, arbitration is ADR not only in name, but also and especially in practice: parties who choose to submit their disputes to arbitration do this being aware not only of the active side of their choice, but also of the passive one – namely, the exclusion of their dispute from the jurisdiction of the judiciary. Put simply, parties who want their dispute to be settled by a judge go to court, not to arbitration – and those who want their dispute settled by arbitrators certainly are not seeking a judge in disguise. The Law 206 of 2021 is not a mere specification of the scope of application of the definitions of impartiality and independence in commercial arbitration, but rather a move that brings arbitration in Italy a significant step closer to court proceedings – making arbitration much less attractive to parties to commercial disputes who, if brought before a de facto judge in disguise, might as well choose the original format and bring their dispute to court. In a country plagued by an average length of proceedings so long that the European Court of Human Rights have equated it to a denial of justice, cui prodest?
Cross-posted from The Social and Psychological Underpinnings of Commercial Arbitration in Europe