Italy to Revamp Civil Justice System
The Situation: In the framework of the European plan "Next Generation EU," on November 26, 2021 the Italian Parliament passed the law no. 206 providing for the historic reform of the Italian civil justice process (the "Enabling Act"). Published in the Italian Official Gazette on December 9, 2021, the Enabling Act officially entered into force on December 24, 2021 (the "Effective Date").
The Result: According to the Enabling Act, within one year from its Effective Date, the Italian Government shall adopt certain legislative decrees (the "Decrees") aimed at revamping civil proceedings based on the criteria and principles envisaged in the Enabling Act. The civil justice system shall be guided by the principles of efficiency, readiness, and reasonable duration of trials, thereby granting quicker conclusions of civil proceedings, without prejudice to the right to be heard. Particularly, the reform seeks to reduce the average length of proceedings by 40% and accelerate the process of digitalization of the civil justice system in order to preserve the competitiveness of businesses and boost foreign investments in the Country.
Looking Ahead: The reform of civil justice is part of a program aimed at overhauling the Italian judiciary system at large. Additional reforms are indeed envisaged in the fields of criminal justice (see law No. 134 of September 27, 2021), tax justice, public administration and, in time, the judiciary bodies including the revamping of the Consiglio Superiore della Magistratura (Supreme Judicial Council, i.e., the self-governing body of Italian judges).
Alternative Dispute Resolution Mechanism
The Enabling Act provides for the reorganization (via a consolidated act) and the promotion of out-of-court means to resolve disputes, i.e., mediation and the so-called "settlement negotiations assisted by legal counsel" (or "assisted negotiations").
As to the former, the Enabling Act expands the scope of mediation as a mandatory pre-litigation step in cases dealing with, among other things, franchising, procurement, and partnership agreements. Additionally, in the event of a successful outcome in mediation, the parties may be eligible for certain tax incentives. As to the latter, the parties may carry out certain evidentiary activities (limited to third parties' depositions on relevant facts or requests for written confessions). Such evidence may be used in the subsequent Court proceedings (should the parties fail to settle their dispute).
First Instance Proceedings (on the Merits)
First instance proceedings on the merits will be devised according to the following guidelines:
- The plaintiff's complaint and the defendant's answer to the complaint or statement of defense shall now identify immediately the main elements of the dispute (statements of claim/defense, prayers for relief, allegations, rebuttals and any supporting evidence on which the claim/defense is grounded). It remains unvaried that the defendant must file any counterclaim, raise procedural defenses and defenses on the merits that cannot be raised ex officio by the Court in its statement of defense under penalty of forfeiture;
- New procedural deadlines are envisaged in order to determine the scope of "the matter to be decided" (thema decidendum) and the "matter to be proven" (thema probandum) at an early stage: by not later than the first hearing the parties must have finally articulated their respective claims and counterclaims (and filed any joinder), exhibited evidence and filed evidentiary motions;
- Following the first hearing, the presiding judge rules on any evidentiary motions and schedules an evidentiary hearing within 90 days;
- Further to the taking of evidence phase (if any), if no additional evidentiary hearing is held, the judge schedules a final hearing for closing arguments and sets time-limits for the parties to file their respective post-hearing briefs for closing arguments and rebuttals; and
- The judgment is rendered within 30/60 days of the final hearing (depending on the composition of the presiding panel).
A keynote feature of the reform is that summary proceedings on the merits (i.e., simplified proceedings) will apply by default in cases where the facts are undisputed, the evidence is documentary or the evidentiary investigation is deemed not complex.
Appeal Proceedings (on the Merits)
The Enabling Act redesigns the structure of appeal proceedings (second instance review). In particular, the Decrees to be adopted will:
- Amend the "filtro in appello", i.e., the preliminary scrutiny run by the Court of Appeal is limited to an appeal's (in)admissibility, i.e., whether it is more likely than not that the court will overrule the judgment on the merits;
- Reform the provisional enforceability of the appealed judgment, which will be suspended if: (i) the appeal appears well-grounded; or (ii) the enforcement of the judgment during the ongoing appeal proceedings would cause material and irreparable harm to the losing party on first instance; and
- Provide that a case may be transferred back to the first instance court (from the second instance court) only when there is a violation of the right to a fair trial/due process.
Supreme Court Proceedings (Questions of Law Only)
Supreme Court litigation undergoes certain critical changes too:
- First, the so-called "filter chamber" (sezione filtro) will be abolished. In consequence, every chamber of the Supreme Court will have to perform its own prima facie (in)admissibility test of any given third instance appeal.
- Second, the Decrees to be adopted will empower the Supreme Court to issue preliminary rulings, whose scope will be limited to addressing "questions of legitimacy" posed in the course of first or second instance proceedings via ad hoc submissions. It is expected that those submissions will tackle material legal issues on which the case-law is unsettled in an attempt to provide general clarifying interpretation and favor legal certainty.
Effects of European Court of Human Rights ("ECHR Court") Judgments
The Enabling Act provides that if, upon appeal of a party bearing a legally relevant interest in reviewing a certain Italian judgment, his/her successors and assignees (or the public prosecutor), the ECHR Court declares that such Italian judgment (final, irrevocable, binding and enforceable) violates the European Convention on Human Rights ("ECHR") (or its protocols) and the violation cannot be remedied upon monetary compensation, then such Italian judgment may be revoked within 90 days of the communication/publication of the ECHR Court's judgment.
The Reform responds to the increasing recourse to arbitration as a tool to settle commercial disputes too. For instance:
- In order to strengthen the guarantees of impartiality and independence of arbitrators, the Decrees will introduce: (i) the right to challenge any arbitrator's appointment for "material reasons of expediency" (i.e., cases where the arbitrator, although impartial, may not appear to be as such); and (ii) an obligation upon any appointed arbitrator to issue a declaration on his/her impartiality (i.e., an affidavit) along with any relevant fact to assess his/her ability to judge as a third party. Should the arbitrator fail to submit the affidavit, the acceptance of the appointment shall be deemed invalid (should the arbitrator at the time of his/her acceptance fail to declare the circumstances that may ground objections to his/her appointment, he/she will cease to hold office);
- The Reform will empower arbitrators to issue interim measures, thereby possibly amending Article 818 of the Italian Code of Civil Procedure, which at present prohibits arbitrators to preside over emergency proceedings. In particular, the parties will be permitted to express in writing (e.g., in the arbitration agreement) their will to have interim summary proceedings heard over emergency arbitration proceedings (as opposed to state courts);
- The jurisdiction of state courts over interim measures will be maintained for claims made prior to the appointment's acceptance by the arbitrators. In any event, state courts will retain jurisdiction over the appeal, if any, against emergency awards if the latter are deemed null and void or in breach of public policies;
- The enforcement of the interim measures adopted in emergency arbitration proceedings will be performed under the supervision of civil courts;
- The ad hoc legislation governing the arbitration proceedings as they apply to corporate matters will be reallocated in the Italian Code of Civil Procedure; and
- Finally, as to foreign awards, the Decrees are expected to provide that the Chairman of the Court of Appeal (the one before which an award would be subject to exequatur proceedings) may—upon a presidential decree—immediately recognize the enforceability of any payment order (e.g., damages, indemnifications) provided for in the relevant foreign award.
The Enabling Act envisages various amendments to enforcement proceedings and certain special proceedings, including labor law disputes (by introducing standardized proceedings for challenging a dismissal) as well as family law matters (by introducing a standardized family law procedure and a new ad hoc court).
Furthermore, the Enabling Act strengthens the role of the "Office for the trial" (Ufficio per il processo). Among other things, the Office will give support to the judges in preparatory activities (i.e., study of files and in-depth study of case law).
Finally, the reform aims to further encourage the employment of online/digital tools for any notification/service to the parties and for managing the unfolding of the proceedings.
Three Key Takeaways
- One of the key goals of the reform of civil justice is to reduce the average length of civil proceedings in order to make Italy more competitive and attractive to litigants. To rationalize, reorganize, and promote the speediness and efficiency of trials within the constitutional principles of fair trials and reasonable duration of trials are the underpinnings of the reform.
- The Enabling Act also addresses alternative dispute resolutions by extending the scope of mediations and negotiations assisted by lawyers. Likewise, arbitration will be impacted by the reform in that arbitrators will be empowered, inter alia, to adopt interim measures.
- As to appeal jurisdiction and Supreme Court litigation, the reform aims to encourage early resolutions and clarifications on interpretation trends in order to facilitate the issuance of judgments in an expedited fashion, without prejudice to due process rights.
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