A New Rule of Venue for Proceedings involving Foreign Companies in Italy
Pietro Franzina is associate professor of international law at the University of Ferrara.
The Italian Government has recently adopted a package of measures aimed at stimulating growth and enhancing the efficiency of public administration (decree No 69 of 21 June 2013). Some of these measures relate to civil procedure. One of them is specifically concerned with litigation featuring a foreign element.
Under article 80 of the decree, where jurisdiction lies with Italian courts (be it under EU rules, international conventions or domestic provisions), civil proceedings involving a company whose seat is situated outside Italy may be decided solely by the Tribunal of Milan, Rome and Naples. Milan shall be in charge of proceedings that would otherwise need to be commenced before the courts of northern regions; Rome would do the same in respect of cases that would normally be brought before the courts of central Italy, including Sardinia; Naples will cover the southern part of the country, including Sicily.
The new provision shall apply, in principle, to all proceedings in civil and commercial matters to which a foreign company is a party, provided the latter does not have a branch or an establishment with a permanent representative in Italy. Multi-party proceedings involving but one foreign company shall likewise fall within the scope of the rule. This shall include cases where a foreign company is sued as a third party in an action on a warranty or guarantee: in this scenario, should the original proceedings be instituted before a court other than the “major” courts mentioned above, both the original and the third-party proceedings shall be transferred – upon the request of the foreign company at stake – to the competent “major” court.
By way of exception, the ordinary provisions on venue shall remain applicable in matters relating to consumer contracts, employment contracts and social security, as well as to proceedings to which an Italian administrative authority is a party.
The new provision, it is submitted, shall not prevent an Italian court other than the courts indicated above to entertain a claim where it is the court specifically designated by a valid choice-of-court agreement. In matters governed by article 23 of the Brussels I regulation (and, tomorrow, article 25 of regulation No 1215/2012), a different reading would actually defeat the purpose of the uniform regime and should accordingly be disregarded as inconsistent with the primacy of EU law. The same may be said of choice-of-court agreements governed by the Lugano Convention of 2007, the respect for which is equally ensured by EU law through article 216(2) of the TFEU.
Article 80 of the decree does not purport to affect the provisions governing venue in respect of enforcement and insolvency proceedings.
The new rule is intended to apply to proceedings instituted on or after the thirtieth day following the entry into force of the statute expected to convert the decree into law. During the conversion procedure, due to be concluded by the end of August, the provision might be amended by the Italian Parliament.
It is reasonable to expect that, further to the reform, Italian judges having a particular expertise in the field of private international law will tend to concentrate in the “major” courts indicated above.
UPDATE – On 15 July 2013, the committees of the Italian Chamber of Deputies charged with constitutional affairs and financial matters have jointly adopted a resolution proposing, inter alia, to delete Article 80 of the decree altogether. While the resolution does not represent in itself the final decision of the Italian Parliament on the issue, it is now highly likely that the statute whereby the decree will be converted into law will not include the new rule on venue. As a matter of fact, a strong opposition against the new provision had appeared soon after the decree was published, coming from different stakeholders, including the Italian Bar Council.
I am under the impression that the new provisions have a very limited scope of application since most cross-border cases brought against a foreign company are subject to Brussels I. Indeed, some of the provisions of the Regulation designate directly the competent court in terms of venue and prevail over the domestic rules.
A few examples may suffice. Article 6(1) of Brussels I states that in case of a number of defendants, the defendant domiciled in a Member State may be sued in another Member State at the court for the place where one of them is domiciled. This provision does not indicate generically the Member States of the domicile of one defendant, but precisely the court where such domicile is located. Under Article 6(1), in case of co-defendants with seat in Genoa or Varese, a company having its seat in France would be sued in these courts, while as per the new Italian Article 80 the competent court would be Milan, in violation of the Regulation. The same would happen in case of an action for warranty: while Article 6(2) of the Regulation states that in such a case the court seised of the original proceedings (where the foreign company was not sued and thus which is pending before any Italian court competent under the ordinary rules) is competent to hear the action for warranty as well, under the new Article 80 the foreign company may choose and ask that the whole proceedings is moved to one of the selected concentrated courts.
Conflicts with Brussels I do not end here and are even more serious. Article 5(1) and 5(3) would be violated as well, since the proceedings would not be held at the actual court where the goods had been or had to be delivered or where the services had been or had to be provided, thus undermining the whole philosophy of these special jurisdiction criteria, which aim to the court closest to the substance of the case. As concerns claims against the insurer, the policyholder, the insured and the beneficiary would lose the protective forum of their domicile and would have to move to another court, which can be far away: Milan will cover the whole northern part of Italy, from Aosta to Trieste, Rome the centre, including Sardinia, and Naples the whole south, including Sicily.
The illegitimacy of Article 80 vis-à-vis EU law reveals itself where it states that the competence of the three courts is mandatory and cannot be derogated by the parties. If one interprets it literally, the parties would not be able to freely choose any Italian courts for deciding their claims. This result is even more unwelcome since Article 23 of Brussels I applies also when one of the parties is domiciled in a non-EU country. Let alone the future Article 25 of Brussels Ia! Thus, I share Pietro Franzina’s submission that Article 80 will have to give way to Article 23 of Brussels I. The real issue is that the legislator did not take Brussels I into consideration at all, or did not care of the difficult exercise that Italian courts will have to carry out in order to grant compliance with EU law.
Last but not least, the 1968 Brussels Convention still provides the jurisdiction criteria that apply in Italy vis-à-vis non-EU-domiciled defendants, as provided by Article 3(2) of the PIL Act of 1995. Most of the Convention’s criteria are the same as those of the Brussels I Regulation, as per the examples above. Thus, when transforming the new decree into law, the Italian Parliament should explicitly declare whether Article 80 supersedes Article 3(2) of the Act or whether the latter survives as a lex specialis. In the latter case, the scope of the new Article 80 would shrink even more. Little room would then be left to the declared intent of the legislator to “guarantee a higher predictability of judgments and a reduction of logistic costs”.
As a matter of fact, both the wording and the rationale of Article 80 of the Italian Decree No 69 of 2013 are far from being convincing. Unsurprisingly, some scholars have already expressed the view that the provision should be modified or deleted altogether on the occasion of the conversion of the Decree. Stefania Bariatti rightly provides further reasons to reconsider the new rule, if not to abandon it.
That said, it is unclear to me whether – as suggested by professor Bariatti – Article 80 should actually be regarded as violating Article 5(1) and 5(3) of the Brussels I Regulation, i.e. Article 7(1) and 7(2) of the Brussels I a Regulation, on jurisdiction in matters relating to contracts and torts.
Indeed, as clarified by the Court of Justice in Color Drack, the latter provisions do not simply designate the Member State whose courts should be deemed to possess ‘international’ jurisdiction, but further indicate which court, within such Member State, is entitled to hear the case. In some way, the ‘double relevance’ of the said rules is prompted by the principle of proximity underlying ‘special’ heads of jurisdiction, i.e. the idea that jurisdiction should be based, in these cases, on a close relationship between the dispute and the courts of a given place.
Yet, to my eyes, it is for each Member State to decide just how large the jurisdiction of each of its courts should be. Thus, the Brussels I and the Brussels I a Regulations could not be understood as preventing, e.g., the United Kingdom from providing that a judge sitting in central London should be charged of a matter (or a class of matters) whose ‘localization’, according to the Regulations themselves, would rather be Essex or Buckinghamshire. Accordingly, it should be for the Italian legislator to determine, e.g., whether the courts of Milan should be entitled to deal with nothing more than matters whose localization, under the relevant uniform rules, is the city of Milan strictly considered, or whether the jurisdiction of those courts should extend to situations localized in a larger region surrounding the city.
Admittedly, the discretion vested with national legislators in this respect is subject to some restrictions, at least in theory. The ‘local’ jurisdiction of each national court should not be so broad as to disregard, in fact, the need of a genuine link of proximity between the court and the cause of action: the effectiveness of the European regime would otherwise be at stake. It remains that the actual implications of the latter requirement are not easy to determine.
In the end, I am not sure whether the strategy of ‘concentration’ underlying Article 80 of the Italian Decree No 69 of 2013 is formally in contradiction with the European rules governing jurisdiction in matters relating to contracts and torts. Truly enough, ‘concentration’ is somehow at odds with proximity, and the Italian legislator should feel bound to put forward very strong reasons in support of a choice like this, should this choice be maintained. In this respect, the reasons stated so far by the Government – predictability, reduction of costs – do not seem to meet the desirable threshold of strength.
Stefania Barrati and Pietro Franzina have raised very important issues with the new Italian decree No 69 of 21 June 2013. Indeed the rules and even more so the language used in Art 80 might be seen problematic in the context of European civil procedural law.
However, in my eyes the purpose and the result of the rules is not in conflict with Brussels I. It is important to note that Art 80 does not provide specific rules for parties under Brussels I, but is applicable whenever only one of the paries has its seat abroad. This does also cover parties seated in third countries where jurisdicition isstill in the national domain according to Art 4 Brussels I. Furthermore, the rules apply whatever the position of the foreign company in the proceedings, i.e. no matter if an Italian company is acting as claimant or as defendant. In this sense Art 80 is a general rule not discriminating against EU citizens.
Even when considering those provisions of Brussels I, which also provide for territorial jurisdiction, this does not take the power from the member states to decide on the territory of their courts. Equally, a member state may differentiate jurisdiction of its courts ratione materiae, even with overlapping territorial scope if useful. This is regularily done in relation to commercial and general civil disputes, with commercial courts sometimes serving the territory of several general civil courts. Also in the implementation of the European order for payment procedure many member states have resorted to defining specific courts as competent for this procedure, which may not be the courts competent under generl procedural rules.
In effect, Art 80 of the new Italian decree No 69 of 21 June 2013 can be seen as redistribution jurisdiction ratione materiae. It is the relevant question, if a very restricted definition of a subject matter as in Art 80 is appropriate and permissible in the context of Brussels I. In my opinon this has to be answered to the positive. There does not seem to be any material disadvantage for the foreign company, which has even a right to chose in the exceptional case that it enters the proceedings at a later stage. Furthermore – as explained above – it is still a general rule which applies to all foreign companies and therefore can not easily be seen as discriminating against companies of other member states. And lastly, the jurisdiction defined by the rules is still forseeable. As a consequence the rules do not seem in conflict with Brussels I and are also not superseeded by Brussels I. The exception of the secondary seat in Italy does even take regard of Art 5 (5) Brussels I.