Arbitration and the arbitration clause in corporate matters
- Avv. Giovanni Babino
- Mar 19
- 2 min read
Arbitration or arbitral proceedings are increasingly mentioned in the media, often in connection with sports disputes or matters involving large corporate entities.
However, arbitration is actually much more present in the daily operations of small and medium-sized Italian companies than one might think.
Arbitration is an alternative dispute resolution method in which the parties appoint one or more individuals (arbitrators) to issue a decision, known as an arbitral award, which has the same legal effect as a judgment issued by a court.
There are essentially two types of arbitration:
Arbitrato rituale (Formal/ritual arbitration): when the parties have adopted the substantive and procedural rules of the Italian Code of Civil Procedure.
Arbitrato irrituale (Informal /irritual arbitration): when the substantive and procedural rules differ from those established by the italian Civil Code.
In corporate matters, it is common for arbitration (as a means of resolving some or all disputes that may arise among shareholders) to be provided for in the company’s bylaws through an arbitration clause.
The arbitration clause is a provision within the company’s bylaws that establishes that any disputes related to the corporate relationship will be resolved by an arbitrator or an arbitral tribunal rather than by ordinary courts.
This clause binds both the members and the company itself, preventing recourse to ordinary justice in the cases it covers.
Among the reasons why arbitration is included in many company's bylaws are its generally faster process and the ability to choose arbitrators with expertise in corporate law.
On the other hand, it is important to consider that arbitration involves significantly higher costs compared to ordinary justice, and the appeal of an arbitral award (the decision issued at the end of the proceedings) is subject to strict limitations.
In conclusion, the inclusion of an arbitration clause in corporate bylaws should be carefully evaluated with the assistance of an expert, weighing its advantages and disadvantages.
Milan 19.03.2025
Avv. Giovanni Babino
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