paths and instruments to settle corporate disputes …

PATHS AND INSTRUMENTS TO SETTLE

CORPORATE DISPUTES IN MEDIATION AND

ARBITRATION PROCEEDINGS

Rome, 27 October 2017

Prof . Avv. Federico Pernazza

Prof. Avv. Federico Pernazza 1

I I Models and Paths to Dispute Resolution

II Key Factors for a Dispute Settlement

III Features of Corporate Law Disputes

IV Correlation of DR Methods

V Mediation and Arbitration

VI Interference of Mediation and Arbitration

VII Paths and Instruments to Settlement in Mediation

VIII Paths and Instruments to Settlement in Arbitration

IX Settlement Instruments in Intracorporate Disputes

X Conclusions

I Models and Paths to Dispute Resolution (1)

Paths

• Negotiation

• Mediation

• Adjudication by a third (Judge, Arbitrator)

Resolutions

• Agreement / Conciliation

• Decision by a third (Judgement, Award)

• Waiver of the Claim

2Prof. Avv. Federico Pernazza

Models and Paths to Dispute Resolution (2)

a) Waiver of the Claim

- The relationship is potentially compromised (interruption, possible claim in the future,

less confidence and collaboration)

b) Agreement / Conciliation

- The parties may continue their relationship in a collaborative manner

- Agreement may be extended to questions initially not involved in the claim

- In case of breach, new dispute and need of enforceable decision

- Agreement by Mediation may become enforceable (in Italy after homologation by the

Tribunal)

3Prof. Avv. Federico Pernazza

Models and Paths to Dispute Resolution (3)

c) Decision by Court or by Arbitration

• The relationship is compromised

• Decision is limited to the claim/counterclaim

• The Judgement or the Award are enforceable

• Risk of Judicial Review

• A consent Award keeps a collaborative relationship, and is enforceable

within the State and abroad (New York Convention 1958)

4Prof. Avv. Federico Pernazza

Key Factors for a Dispute Settlement

• Importance of the Dispute

• Knowledge of relevant information (real interest of the parties, documents and other proofs)

• Time (need of a decision within a certain period/duration of the dispute)

• Costs of the Disputes (fees, time, collateral costs)

• Benefit deriving from a positive decision

• Risk of a negative issue/decision

• Timing

5Prof. Avv. Federico Pernazza

Features of Corporate Law Disputes

Corporate Disputes / Intracorporate Disputes

• Intracorporate Disputes (Arbitration Clause in by-law for Disputes amongShareholders, Company / Shareholders, Company / Directors)

• Multiparty Disputes

• Strong Interest to keep a collaborative relationship

• Some profile of Public Order (Limits of Arbitrability)

What are the best Paths and Instruments to settle an Intracorporate Dispute ?

6Prof. Avv. Federico Pernazza

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Correlation of DR Methods

• Alternative approach

• Multistep approach

• Simultaneous use of different methods

• Integrated approach

Prof. Avv. Federico Pernazza

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Mediation v. Arbitration

Different Features:

• Purposes

• Areas of Debate

• Procedure Principles

• Challenge of Settlement Agreement / Award

Prof. Avv. Federico Pernazza

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Interference of Mediation and Arbitration (1)

• Mediation followed by Arbitration (Med/Arb)

• Arbitration followed by Mediation (Arb/Med)

• Arbitration / Mediation / Arbitration (Arb/Med/Arb or Mediation

Window with possible Consent Award)

Question: Different Neutrals or the same Neutral ?

Prof. Avv. Federico Pernazza

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Paths and Instruments to Settlement in Mediation

• Request of proposals of Settlement to the parties

• Caucus / private meeting

• Confidential communications between Mediator and each party

• Non-binding opinion on the merit

• Proposal of Settlement by Mediator separately to each party

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Paths and Instruments to Settlement in Arbitration (1)

Different Legal Traditions: (Bühring-Uhle 1996, 2006; PricewaterhouseCoopers –

QMUL 2008; Shalha Ali, 2011; Kaufmann-Kolher - Fan, 2008, 2014)

a) Anglo/American Tradition: the Judge and the Arbitrator do not mediate nor facilitate the

Settlement

b) Some European Traditions (German, Swiss and recently Italian): the Judge and the

Arbitrator have a proactive role to reach a Settlement

c) The Asian Tradition (especially Chinese): the Judge and the Arbitrator must Mediate

Prof. Avv. Federico Pernazza

Prof. Avv. Federico Pernazza12

Prof. Avv. Federico Pernazza13

Prof. Avv. Federico Pernazza 14

Prof. Avv. Federico Pernazza15

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Paths and Instruments to Settlement in Arbitration (2)

Pros of an active role for Settlement by Arbitrator

• Only a Neutral to be appointed, instructed and payed

• Choice of Timing

• Arbitral Proposal

• Consent Award

Cons of an active role for Settlement by Arbitrator

• Risk of Role Confusion

• Coercion of the Parties (decision making authority used as a “big stick”)

• Flow of Information not controlled by both parties

• The award may be substantially conditioned

• Risk of Award challenging

Prof. Avv. Federico Pernazza

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Paths and Instruments to Settlement in Arbitration (3)

Asian Solutions

• Arbitrator acts as Mediator with the consent of the parties, but in case of failure of Settlement

- shall not use opinions, statements, etc. expressed during process of conciliation (CIETAC, BAC)

- substitution of arbitrator on requests by both parties (BAC)

- discloses information relevant for decision obtained during caucuses (Hong Kong, 2011)

International standard (CEDR)

• Arbitrator acting as Settlement Facilitator

- specific agreement

- mediation without caucuses (settlement proposal simultaneously)

- resignation if arbitrator develops doubts as to his ability to remain impartial

• The waiver to the right to an impartial arbitrator is effective ? (ECHR, 31737/96, IBA)

An alternative solution (Abramson 1999, Deason 2013)

• An Arbitration panel of three Arbitrators

- two Arbitrators appointed by the parties mediate including caucusing (Co-Mediators)

- in case of failure, the decision is reserved to the President

Prof. Avv. Federico Pernazza

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Settlement Instruments in Intracorporate Disputes (1)

Recent Italian Laws

• New Company Law (2003)

• Intracorporate Disputes Proceedings (including ADR) (2003)

• New Arbitration Law (2006)

• New Role of the Judge in Conciliation (2013)

Principle: favour for Intracorporate Disputes conciliation by Judgement or by ADR

Prof. Avv. Federico Pernazza

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Settlement Instruments in Intracorporate Disputes (2)

• Proposal of Settlement as general power of the Judge (Art. 185 bis c.p.c.)

• Substitution of Shareholders’ Meeting resolution (Art. 2377, c. 8, c.c.)

• For Srl Court may establish a deadline (up to 180 days) (art. 2479 ter c.c.)

• Proposals by the Judge of Amendments of the Shareholders’ Meeting resolution (Art. 2378, c. 4, c.c.)

Question: What about the Arbitrator ?

Prof. Avv. Federico Pernazza

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Settlement Instruments in Intracorporate Disputes (3)

• Mediation or Settlement Facilitation by Arbitrator is not provided by Italian Law

• It depends on Arbitration clause or Arbitration Regulations

• Some Arbitration Regulations provide about (Rome Chamber of Commerce, art. 14.2; Milan

Chamber of Commerce, art. 22.1)

• Caucus or Separate Settlement Proposals are not permitted (art. 816 bis and 829, 1°, n. 9

c.p.c.)

• Proposal of Amendments of Shareholders’ Meeting resolution

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Conclusions

• Increasing Role of integrated approach Mediation/Arbitration

• Appointing different Neutrals is safer but more expensive and complicated

• Arbitrator/Panel of Arbitration may have an active role to settle the dispute

• The Intracorporate Disputes are a relevant field

• Different models compete worldwide: pure Arbitrator, Arbitrator /

Settlement Facilitator and Arbitrator / Mediator

Prof. Avv. Federico Pernazza