Introduction to Arbitration Agreements
In recent years, arbitration has assumed an increasingly central role in dispute resolution, both nationally and internationally. In Italy, the use of this alternative dispute resolution mechanism is tied to its flexibility, speed, and confidentiality- features that can make it preferable to traditional court proceedings. In particular, the ability for parties to choose arbitrators with expertise in the subject matter of the dispute, as well as to adapt procedural rules to suit their needs, is a highly attractive element.
This is especially relevant for Italian international businesses and foreign companies operating in Italy, which are often involved in significant cross-border contracts and transactions. For these entities, arbitration might represent an effective and neutral tool for resolving potential disputes, allowing them to avoid the limitations and uncertainties of foreign state jurisdictions.
This article provides an in-depth overview of the arbitration procedure in Italy, analyzing the different types of arbitration, the requirements for a valid arbitration agreement and recognition and enforcement of foreign awards in Italy as well as the main advantages and challenges of this alternative dispute resolution method. We hope that this article will offer practical guidance for businesses.
Definition of Arbitration Agreement and Arbitration Clause
Arbitration is a form of alternative dispute resolution (ADR) in which the decision is not entrusted to a state judge but to one or more private individuals, called “arbitrators,” chosen directly by the parties involved in the dispute. The final decision rendered by the arbitrators is called an arbitral award, and it is binding on the parties.
In fact, Article 824 of the Italian Code of Civil Procedure (“c.p.c.”) confirms that: “Except as provided by Article 825, the award shall have, from the date of its final signature, the same effect as a judgment rendered by the judicial authority.”[1]
Arbitration is based on the principle of party autonomy: the parties may agree to resolve their disputes outside the ordinary court system, as provided for in Article 806 c.p.c.
To be valid, the agreement to refer disputes to arbitration must be in writing. In the absence of written form, the agreement is null and void. This requirement applies to both documents that may express the parties’ intent to arbitrate: the compromesso and the arbitration clause.
- Arbitration agreement (“Compromesso”): this is a written agreement in which the parties decide to submit a dispute to arbitration after the dispute has already arisen between them (Art. 807 c.p.c.).
- Arbitral clause (“Clausola compromissoria”): This is included in a contract to regulate any future disputes that may arise from that contract (Art. 808 of the Italian Code of Civil Procedure). The Italian Supreme Court (Corte di Cassazione), in its ruling of July 5, 2023, clarified that the arbitration clause only applies to the contract in which it is contained. It does not automatically extend to other related or connected contracts—even if they are part of the same overall transaction—unless such extension is expressly provided for. Therefore, when more than 2 parties are involved or the overall relationship or transaction is governed by a mix of several different contracts between the parties (i.e. a letter of intent, a supply agreement and a service agreement), it is important that all the contractual documents refer to one and the same arbitration clause. Ambiguity is sometimes frequent and can lead to problems of jurisdiction, that can be difficult to solve.
Legal Framework for Arbitration Agreements in Italy
In Italy, arbitration is recognized and governed by Articles 806 to 840 of the Code of Civil Procedure (CPC). These provisions allow the parties to jointly agree to grant arbitrators the power to resolve disputes in a binding manner, instead of turning to the courts, but only for the types of disputes specified in the agreement.
The Cartabia Reform (Legislative Decree No. 149/2022), which entered into force on February 28, 2023, introduced significant changes to arbitration rules in Italy, with the aim of making the procedure more efficient and aligned with international standards.
Moreover, Italy is a signatory to the 1958 New York Convention, which mandates that international arbitral awards be recognized and enforced in all contracting states (currently 173). This treaty has facilitated the spread of international arbitration, particularly useful for companies dealing with counterparts in countries with very different or less reliable judicial systems.
Differences Between Mandatory and Voluntary Arbitration
Arbitration can be either voluntary, when the parties choose this procedure, or mandatory, when it is required by law.
- Mandatory Arbitration: In certain cases, the law or sector-specific regulations may require arbitration as the exclusive method of dispute resolution.
- Voluntary Arbitration: In general, arbitration is voluntary because it is chosen by the parties willing to resolve their disputes through arbitration instead of turning to ordinary courts. Arbitration is always voluntary when it is included in commercial contracts, thereby waiving the right to bring the dispute before a national court.
Types of Arbitration
Under Italian law, there are two main types of arbitration, each with its own specific characteristics:
- Formal Arbitration (Arbitrato rituale – Articles 806 and following): In this form, the parties entrust the resolution of the dispute to one or more arbitrators, who follow procedural rules similar to those of judicial proceedings. The outcome is an arbitral award (lodo), which has the same legal effect as a court judgment and can be enforced pursuant to Article 825 of the Code of Civil Procedure.
- Informal Arbitration (Arbitrato irrituale – Article 808-ter): In this form, the parties grant the arbitrators the task of resolving the dispute in a more flexible manner, without having to follow the procedural rules set by law. The resulting award has only contractual value and cannot be directly enforced like a judgment, but it may be used as evidence in future litigation or to obtain an injunction (decreto ingiuntivo). Therefore, if one of the parties does not accept the decision of the informal arbitrator, the other party will have to submit the dispute to the judge. This does not happen with formal arbitration, because only the arbitrators and not the court judges would have the authority to decide the merit of the case.
Forms of Arbitration
Arbitration in Italy can be conducted in two main forms:
Administered Arbitration (Art. 832 Italian Code of Civil Procedure – c.p.c.)
In this case, the arbitration is managed by a specialized institution, such as an arbitration chamber, which provides procedural rules and organizational support. The parties rely on this institution to ensure a structured process that meets specific standards.
Examples: Milan Chamber of Arbitration (CAM), Paris International Arbitration Chamber (CAIP), etc.
Advantages of administered arbitration
- Predefined procedural rules with assistance provided by the arbitration institution.
- No need for negotiation between parties and arbitrators regarding fees, as tariffs are already set by the institution.
- The institution intervenes to resolve disagreements or delays related to appointments, seats, language, and other procedural obstacles.
- Faster proceedings: 180 days from the first hearing, or 30 days in fast-track arbitration, compared to the 240 days foreseen for ad hoc arbitration (Art. 820 c.p.c.).
Ad hoc Arbitration
Unlike administered arbitration, in ad hoc arbitration, the parties independently establish the procedural rules and appoint the arbitrators without the involvement of an arbitration institution. This type of arbitration offers greater flexibility but requires a detailed agreement between the parties regarding the timing, methods, and costs of the procedure.
Italian Legal Framework
What are the requirements for the validity of an arbitration agreement in Italy?
When parties decide to resolve a dispute through arbitration, they must comply with certain fundamental steps. An arbitration agreement in Italy is valid if it meets specific requirements:
Written form (Art. 807 and 808 c.p.c.)
There must be a written agreement between the parties opting for arbitration. This agreement can be an arbitration clause included in a contract to resolve future disputes, or a compromesso (submission agreement), which is a separate agreement made after the dispute has arisen.
The Italian Supreme Court (Corte di Cassazione), in ruling No. 2256 of February 2, 2007, stated that the requirement of written form does not necessarily imply a single document signed by both parties; it can also be fulfilled through separate documents exchanged between the parties that, taken together, clearly express their mutual intent to resort to arbitration.
Subject Matter of the Dispute
The subject matter of the dispute must be not only specifically identified but also clearly described. Moreover, the nature of the dispute must fall within the scope of arbitrability, thereby excluding disputes concerning non‑disposable rights. Such disputes in Italy can only be adjudicated by the courts and cannot be the subject of “commercial” arbitration agreements—for example, disputes over personal status rights. As an example, an arbitration on the recognition of natural‐born filiation or the validity of an adoption is null and void in Italy.
Appointment of Arbitrators (Arts. 809–810 c.p.c.)
The arbitration clause or agreement must either appoint the arbitrators or specify both the number of arbitrators and the method of their appointment. The parties may appoint one or more arbitrators, provided the total number is odd, to ensure decisive outcomes and avoid deadlock. If the two arbitrators appointed by the parties fail to agree on a third arbitrator, the appointment may be made by the president of the competent court, thereby ensuring the constitution of the arbitral panel.
Article 810 c.p.c. governs the appointment process: when the arbitration agreement provides that the parties shall appoint the arbitrators, each party must notify the other in writing of its arbitrator(s) and invite the other party to do likewise within twenty days. If no response is forthcoming, the inviting party may petition the president of the competent court to appoint the missing arbitrator.
Seat, Applicable Law, and Procedural Rules
To avoid ambiguities, the arbitration agreement must define the law governing the merits of the dispute, the seat of the arbitration, and the procedural rules to be followed.
Seat of Arbitration
Under Article 816 c.p.c., the parties may jointly choose any location in Italy as the seat of the arbitration. Failing such agreement, the arbitrators will decide. If neither the parties nor the arbitrators designate a seat, the place where the arbitration agreement was signed will be deemed the seat. However, if that place is abroad, Rome will automatically be deemed the seat of the arbitration.
Applicable Law (Arts. 822 & 839 c.p.c.)
Arbitrators empowered by the parties to decide the dispute have two options:
- Decision on the basis of law(the general rule): Arbitrators apply statutory law (Italian or foreign, depending on the choice of the parties or as determined by the arbitrators). Under the recent Italian reform, the parties have time until the filing of the arbitration request to choose the law applicable to their dispute. If they do not make a choice, the arbitrators may determine the applicable law themselves, without necessarily referring—as was previously required—to the law identified by Italian private international law rules. According to some commentators, this change could, in the future, allow arbitrators in Italy to refer not only to national legislation but also to customary sources, such as the lex mercatoria or the UNIDROIT Principles.
- Decision According to Equity
The parties may expressly authorize the arbitrators to decide “according to equity.” In this case, the arbitrators are not strictly bound by legal rules but instead decide based on criteria of substantive justice, common sense, and fairness.
Procedural Rules of Arbitration
The parties have the option to agree on the procedural rules that the arbitrators must follow during the arbitration (Art. 816-bis c.p.c.). For example, they may set deadlines for the submission of documents, decide whether hearings will take place in person or remotely, or determine the language to be used in the proceedings.
In the absence of a specific agreement, the arbitrators have the authority to establish the procedural framework themselves, provided they ensure compliance with the principle of adversarial proceedings and equal opportunity for both parties to present their case. As mentioned above, if the parties opt for institutional arbitration, the procedural rules are already established, and the arbitration is managed by the arbitral institution.
The Advantages of Italian Arbitration and International Arbitration in Italy
As previously mentioned, the recent reform has aligned Italian arbitration rules with international standards. In particular, we will now look at the new disclosure obligations for arbitrators, the new precautionary powers, and simplifications regarding the enforcement and challenge of arbitral awards.
Disclosure Obligations
Before accepting the appointment, arbitrators are now required to disclose in writing—within a short period of 10 days—any circumstance that could affect their impartiality or independence. While most major arbitral institutions already require such disclosures, this new Italian provision reinforces transparency and fairness for the parties through the force of law. Failure to disclose, or an inadequate disclosure, renders the arbitrator’s appointment void or subject to challenge.
Precautionary Powers of Arbitrators
Italian law now allows arbitrators to issue urgent and interim measures during the arbitration, such as asset freezes or the suspension of certain actions. This is permitted in two cases:
• When the arbitration clause or the arbitration agreement expressly grants such powers, or
• When the arbitration is administered by an arbitral institution whose procedural rules empower arbitrators to issue interim measures.
Unlike in Switzerland, Italian arbitrators do not have a general power to issue interim measures. However, when the law allows it, their jurisdiction is exclusive—meaning that only the arbitrator, and not an Italian court, may grant such relief. In contrast, under Swiss law, arbitrators’ precautionary powers are general and concurrent with those of Swiss courts.
A practical limitation of this innovation, as in other jurisdictions, is that arbitrators do not possess direct enforcement powers. Therefore, judicial assistance is still necessary to implement such measures in practice.
Enforcement of the Arbitral Award
An arbitral award differs from a court judgment because it is not immediately enforceable. The court of the place where enforcement is sought must first verify the regularity of the arbitral award before granting its enforceability. The formal requirements vary depending on whether the arbitral award is domestic or foreign. In Italy, there is a general tendency to favor the enforceability of foreign arbitral awards.
Domestic Arbitral Award:
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Foreign Arbitral Award:
– The award in its original version or a certified copy, and – The arbitration agreement or the contract containing the arbitration clause, also in original or certified copy.
– the dispute is not arbitrable under Italian law, or – the award contains provisions that are contrary to public policy.
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International Arbitration and Enforcement in Italy
A foreign arbitral award, once recognized by decree of the Court of Appeal, becomes immediately enforceable in Italy (Art. 839, paragraph 4 of the Italian Code of Civil Procedure). If a party opposes the enforceability of a foreign arbitral award in Italy, it may request the court to suspend the enforceability or execution of the award, but only for very serious reasons.
Time Limits for Challenging the Arbitral Award
Once the arbitral decision has been rendered, the parties have a short window to challenge it: 90 days from the date of notification, or a maximum of 6 months from the decision itself if no notification occurred.
Applicability and Binding Force of Arbitration Agreements
Challenging an Italian Arbitral Award
Once issued and signed by the arbitrators, the Italian arbitral award is binding on the parties.
Article 829 of the Italian Code of Civil Procedure lists the circumstances under which an Italian arbitral award may be challenged to assert its nullity.
An award may be declared null and void in Italy if:
- The arbitrators were not entitled to decide the dispute because the arbitration clause or the parties’ arbitration agreement was invalid — for example, if there was no agreement between the parties or one of the parties lacked the necessary authority;
- During the proceedings, the principle of adversarial process was violated — for instance, if one of the parties was not informed of the arbitration or did not have the opportunity to present its case;
- There were irregularities regarding the appointment or participation of the arbitrators — for example, if the arbitrators were appointed in a manner inconsistent with the law or the arbitration agreement, or if they failed to sign the award;
- The decision concerned matters that are not arbitrable — i.e., the award ruled on issues that cannot be subject to arbitration, such as inalienable rights;
- The award lacks reasoning, unless the parties expressly released the arbitrators from the obligation to state reasons;
- The award contains serious violations of the law — for example, if the arbitrators ruled ex aequo et bono without being authorized to do so by the parties, or if they breached mandatory legal provisions.
Challenge of Foreign Arbitral Awards
In the case of awards issued abroad, as previously mentioned, any challenge can only aim to block their enforcement in Italy. The grounds for opposition are expressly set out in Article 840 of the Italian Code of Civil Procedure. Specifically, an award cannot be enforced in Italy if:
- The dispute was not arbitrable under Italian law, or
- The award contains provisions contrary to public policy.
The Italian Court of Cassation takes a rather restrictive approach toward requests to block foreign awards in Italy, with most objections based on the violation of public policy. The Court has ruled that the examination of whether an award contains “provisions contrary to public policy” is not a review of the content of the award and must be conducted solely based on the operative part of the decision (Cass. 17 March 1982, No. 1727; Cass. 3 April 1987, No. 3221; Cass. 8 April 2004, No. 6947; Cass. 21 October 2021, No. 29429 — not yet published in the official reports). In particular, in the case of an award ordering the payment of a sum of money to a bank, the ground for opposition based on the alleged lack of standing to sue by the bank — because its credit had already been fully satisfied — was deemed not suitable, even in abstract terms, to constitute a violation of public policy, i.e., a clear and serious breach of a fundamental principle of the legal system (Cass., Section I, Order of 2 February 2022, No. 3257).
Benefits of Arbitration for Businesses
Reduction in Time Compared to Court Proceedings
Arbitration is often chosen for its speed. Unlike court proceedings, which can take years, arbitration can sometimes be concluded within a few months, allowing businesses to save time and resources. However, this is not always the case: there are very complex arbitrations that can last several years and result in significantly higher costs than a judicial dispute in Italy.
Greater Confidentiality
Arbitration offers more confidentiality than court proceedings, which are public. Arbitration hearings are private, and the decisions can be kept confidential — a crucial aspect in the business world, where protecting sensitive information is essential.
Possibility to Appoint Arbitrators with Specific Expertise
One of the major advantages of arbitration is the ability to appoint arbitrators with experience and expertise in the specific field of the dispute, ensuring that the decision is made by professionals who understand the technical and industry-specific issues involved.
Flexibility
Unlike ordinary litigation, arbitration allows the parties to tailor the procedure to their needs by choosing: the arbitrators, the language of the proceedings, the seat of arbitration, and the procedural rules, even derogating from state rules.
Challenges in Enforcing Arbitration Agreements
High Cost of Arbitration
Although arbitration is often preferred for its speed compared to traditional court proceedings, the associated costs can be particularly high. Article 40 of the UNCITRAL Arbitration Rules, although intended for ad hoc arbitration, provides a useful and widely accepted definition of what constitutes “arbitration costs.” These costs are listed in Article 40.2 and include:
- The fees of the arbitral tribunal, specified for each arbitrator and determined by the tribunal itself as provided in Article 41.
- Reasonable travel expenses and other costs incurred by the arbitrators in performing their duties.
- Costs of expert advice and other assistance required by the tribunal (e.g., experts, consultants, secretaries).
- Witness expenses, such as travel and accommodation, provided they are deemed necessary and approved by the tribunal.
- Legal fees and other expenses incurred by the parties, to the extent that the tribunal considers them reasonable.
- The fees and expenses of the appointing authority and the Secretary-General of the Permanent Court of Arbitration (PCA).
Moreover, according to Article 40.3, in cases of requests for interpretation, correction, or completion of the award (under Articles 37–39), the tribunal may recover the expenses listed from (b) to (f), but it may not charge additional fees for these activities.
Such costs can represent an obstacle to access to arbitration for small and medium-sized enterprises, even though the main arbitral institutions also offer increasingly flexible and online procedures to reduce costs. It is important to emphasize that, to lower expenses, it is also possible to opt for a sole arbitrator to be appointed by the arbitral institution chosen by the parties.
Finality of arbitral decisions
In addition to the economic aspect, it should be considered that arbitral decisions are usually final, with very limited grounds for appeal. Unless there are serious legal errors or procedural irregularities, it is not possible to appeal, which may represent a limitation for parties seeking an additional guarantee of judicial oversight.
Difficulty in international enforcement
Finally, another obstacle arises at the international level: it is not advisable to opt for arbitration when the counterparty is located in a state that has not acceded to the 1958 New York Convention. Without such accession, there is no international legal framework that facilitates the recognition and enforcement of a foreign arbitral award in that state’s territory.
Advice for Businesses
Importance of accurate drafting of the arbitration clause
A well-drafted arbitration clause or agreement must clearly specify the disputes to which it applies, how the arbitrators will be chosen, in the case of institutional arbitration, which arbitral institution will administer it, the place where the arbitration will be conducted, which rules will apply, and which legal system will govern the contract. Each element has a concrete impact on the validity and effectiveness of the dispute resolution process.
In particular, elements such as the law applicable to the dispute—where the parties have not opted for arbitration in equity—the seat of arbitration, and the language of arbitration, become especially relevant when the arbitration involves parties of different nationalities or legal seats, or when a significant portion of the contractual obligations to which the dispute refers must be performed abroad.
Importance of specialized legal advice:
Relying on professionals experienced in commercial and arbitration law provides an additional guarantee. The involvement of specialized lawyers makes it possible to:
- Choose arbitration when it is truly necessary,
- Avoid formal errors, and
- Draft clauses that take into account the specific needs of the business, reducing future risks and ensuring a coherent, legitimate, and functional dispute resolution mechanism. Our law firm LEX IBC offers targeted support in drafting arbitration agreements and managing complex proceedings, both at national and international levels.
Conclusion
In summary, arbitration offers numerous advantages, such as greater enforceability of favorable decisions in foreign states and confidentiality—fundamental aspects for many businesses seeking to avoid the lengthy timelines of ordinary courts and the negative publicity associated with potential legal proceedings brought before a court. However, businesses must be aware of the challenges related to arbitration, such as costs, which may be higher depending on the complexity of the case, and the difficulty of appeal, which limits the possibility of correcting potential errors in the decision.
For companies wishing to include arbitration clauses in their contracts, it is essential to do so strategically. The inclusion of such clauses can lead to quick and effective dispute resolution, but it must be accompanied by careful planning and the assistance of legal experts, considering the specific needs of the business and the legal context in which it operates. In this way, companies can make the most of the benefits of arbitration while minimizing the risks.
Mariangela Balestra and Marie Vanswevelt
Lex IBC – 2025, All rights reserved. No text and data mining.
[1] Although the arbitral award is considered similar to a court judgment from a legal standpoint, it does not possess all the same effects. In fact, according to Article 825 of the Italian Code of Civil Procedure, the award only has certain typical effects of a judgment: it can establish a right, order a party to do something, or create a new legal relationship. However, it does not have direct enforceable value.