ARBITRATO

**ARBITRATION** -

1. Concept

By arbitration is meant the procedure by which a legal dispute is resolved in an obligatory manner by one or more persons to whom the interested parties have granted the power to resolve II.
In the modern conception of the State, every dispute concerning rights or interests (whether belonging to individuals, moral entities, or de facto associations) is devolved to the competence of ordinary courts or administrative jurisdictions (e.g., the Council of State), which issue decisions in accordance with the rules of law contained in the codes or other laws.

However, the interested parties may agree to entrust the resolution of their dispute to one or more private individuals, known as *arbitrators*, whose decision is thereby removed from the jurisdiction of the magistrate.

Arbitration allows the parties to resolve the dispute in a swift, rapid, and economical manner with the assistance of arbitrators particularly expert in the subject matter of the controversy, and with the advantage of the confidentiality of the proceedings. This explains why it is frequently resorted to in commercial, industrial, labor disputes, etc., and why it is particularly suited to the resolution of disputes arising in international relations.

2. Statutory Law

In statutory law, there are various forms of arbitration that must be briefly indicated: a) formal arbitration; b) informal arbitration; c) compulsory arbitration.

*Formal arbitration*, carried out in accordance with the provisions of the Code of Civil Procedure, must be established by the parties through the execution of an act with special formal and substantive requirements, known as a "compromise." The procedural rules must then be observed to reach the issuance of the "arbitral award," called a *lodo*. This concludes the arbitration, but it cannot take effect unless it is *homologated* by the judicial authority. Compromise, award, and homologation thus constitute the three phases of this form of arbitration envisaged by the code.

*Informal arbitration*. Alongside the aforementioned strictly formal form of arbitration, another is recognized in which arbitrators are empowered to decide the dispute without observing the rules of the Code of Civil Procedure and without the need for judicial homologation of the award. This form of arbitration is often carried out by delivering to the arbitrator a blank sheet signed by the parties, on which the third party will write their decision. Should the informal award not be executed by one party, the other may turn to the ordinary judge.

As is easily understood, this form of arbitration, free from the procedural rules prescribed by law, has developed considerably in recent times and is resorted to by broad social categories. In essence, informal arbitration, according to the most authoritative doctrine, constitutes a judgment based on equity.

*Compulsory arbitration*. In certain cases, the law mandates that the resolution of a dispute be entrusted to arbitrators, thereby removing it from the normal competence of the magistrate.

This generally concerns disputes in which a rapid solution is required to resolve issues of an urgent nature. Indeed, wartime legislation has envisaged this form of arbitration in many cases, to the extent that it often appears almost as a form of special jurisdiction.

3. Arbitration in Labor Disputes

In labor disputes, as well as in matters of compulsory social security and assistance, it often happens that the law establishes a prior attempt at conciliation or entrusts the decision to arbitrators chosen from among persons of particular expertise; this can be very appropriate given the technical knowledge required to decide such disputes.

It is well known, in particular, that the exercise of the right to strike is not infrequently linked to the possibility of resolving labor disputes through specific arbitral procedures. Political currents adhering to Catholic social doctrine believe that such procedures should be established by law and that the parties may resort to them for the resolution of collective disputes. They also require that arbitral procedures be made compulsory when the dispute concerns the interpretation and application of existing legal or contractual norms. This is to ensure that workers can be certain that once a labor contract is stipulated, its exact interpretation will be given by an impartial body.

4. Canon Law

The custom of resorting to arbitration in disputes among Christians is found, derived from the Jews, in the apostolic writings (*1 Cor.*, 6, 1-9). The Christian emperors sanctioned the right of recourse to arbitration by bishops in civil cases (1.7, Cod. I, 4; Nov. 123, c. 21); moreover, strictly ecclesiastical cases were very often decided by arbitration rather than by formal judgment (cc. 33, 34, C. II, q. 6, etc.). The Church, accepting this institution from Roman law, also adopted its regulations, sometimes correcting and adapting them to its own spirit (cf. c. 2 de arbitris, I, 21, in 6°; c. 2 de appell., II, 15 in 6°). Canonical legislation on arbitrators remained unchanged from Boniface VIII onward and was substantially reproduced in the Code of Canon Law; thus, the law of the Decretals constitutes the best part of the interpretation of current norms (can. 6, §§2-3).

Arbitration, except in cases imposed by law, takes place only when the persons interested in a matter entrust its resolution to one or more persons other than the judge by common agreement; *compromissum in arbitros*. Since, however, the compromise is an act that often involves alienation, only those who have free power over the things subject to the dispute may compromise (c. 5, X, de arbitris, I, 43).

Under the legislation in force before the Code, arbitrators could be one or more, preferably an odd number (c. 1, X, de arbitris, I, 43); but not all causes could be submitted to arbitration, nor could anyone serve as an arbitrator. Excluded from arbitration, in addition to criminal cases, were: cases of nullity of marriage and separation of spouses; disputes over benefice titles without the superior's permission; cases of restitution in integrum, except in incidental matters; causes on which a judgment had been rendered; and finally, those reserved to the Pope or other superiors. Moreover, the following could not serve as arbitrators: lovers, the insane, the mute, the deaf, wards, minors under twenty years of age, women, and laypersons in spiritual causes (except in the case of

arbitration or papal mandate), religious could act only for the utility of their own monastery and with the permission of their superiors, as well as those under a vitandus excommunication and, naturally, those with an interest in the case. The nature of the power belonging to arbitrators chosen by compromise does not appear perfectly clear. Some compare it to the power of delegated judges, but without true jurisdictional character; it must be noted, in any case, that it is always limited by the terms of the compromise. Unless otherwise stipulated, the arbitrators are bound by judicial norms in knowing and defining the case; but once the sentence is issued, they cannot correct or execute it, since correction and execution belong to the Ordinary (c. 7, X, de arbitris, I, 43). The arbitral decision was called arbitrium, arbitratum, rarely sentenza, commonly laudum. The acceptance of the compromise by the arbitrators imposed upon them the obligation to decide the controversy within the term established by the compromise itself or by common law, while the parties were, for their part, generally bound to respect the award. If a special pact or oath had intervened in this regard, acceptance was always obligatory; if, instead, a penalty had been stipulated for the case of non-acceptance, the obligation became alternative, so that, after paying the penalty, the party was no longer bound to accept the award. In any case, however, the mere compromise meant that the recusing party was held to interest, i.e., to reimburse the other party for expenses incurred or to be incurred because of the compromise. Against the sentence of necessary arbitrators (i.e., those impossible by law) appeal was admitted (c. 11, def. ind., I, 14, in 6°); not so against the award of arbitrators chosen by compromise (c. 33, 34 C. II, q. 6). If, however, the decision had not been expressly or tacitly accepted by the parties within ten days and appeared gravely prejudicial to one of them, it could be asked of the ordinary judge for its reform according to the advice of a prudent man. Likewise, in case of enormous lesion or nullity, nothing prevented the parties from asking the ordinary for the relevant declaration (c. 2, X, de arbitris, I, 43; c. 9, X, de rev. perm., III, 19).

Alongside arbitrators, the Decretals also mention arbitratores, i.e., honest persons freely chosen by the parties to resolve more contractual questions, who pronounce their sentence (arbitramentum) according to the dictates of equity, ex bono et aequo, without being bound to any procedural formalities. And it is precisely in this that the difference between arbitrators and arbitratori consists.

The CIC has preserved the institution of arbitration, listing it among the means designed to avoid contentious judgment (I. IV, tit. XVIII, ch. II). Although its substance remains unchanged, there are nonetheless notable changes. First of all, there is no trace of necessary arbitrators; the Codex knows only arbitrators chosen by compromise, who settle the question submitted to them in accordance with the law (c. 1929), and arbitratori who deal with the dispute ex bono et aequo (ibid.). Incapable of exercising the compromise are laypersons in ecclesiastical matters (not precisely in spiritual matters as ancient law held), those under excommunication, and the infamous as a result of a sentence. Religious cannot accept a compromise without the permission of their superior (c. 1931). Objects of compromise, like those of transaction, cannot include, besides criminal causes, those concerning the matrimonial bond, those dealing with the title of a benefice without the consent of the legitimate authority, and spiritual matters to be compensated by payment of temporal goods (c. 1930, 1927 § 1). On the other hand, ecclesiastical temporal goods can be compromised, even if annexed to spiritual goods, provided they are separable, saving the formalities required for alienation (c. 1930, 1927 § 2). For everything not expressly contemplated by the Code, the respective norms of civil law not contrary to divine or ecclesiastical law apply in different places (c. 1930, 1926).

5. International Law

It consists in the settlement of an international controversy through a decision issued by one or more persons chosen by the parties themselves. Arbitration is distinguished from other methods of peaceful settlement of international disputes (negotiations, inquiry, good offices, mediation, conciliation) in that it more than any other resembles the jurisdictional procedure proper to state systems. It differs, however, from this procedure in that, given the structure of the international community, the establishment of the arbitral procedure and the validity of the award rest on the will of both parties and not on the will of an entity superior to them. Arbitration differs from negotiations in that it introduces into the procedure the neutral element constituted by the arbitrator or arbitral tribunal; from inquiry in that it includes examination of the merits of the controversy rather than merely ascertaining the facts; from good offices and mediation in that, whereas these aim merely to facilitate and assist the parties in reaching a peaceful solution, arbitration issues a true and proper binding award; and from conciliation in that the arbitral award, unlike the ruling of a conciliatory body, has binding force. The agreement between the parties to resort to arbitration takes in practice the form of a simple compromise, an arbitration clause, or a general arbitration treaty. The first procedure applies when two states submit a controversy that has arisen between them directly to arbitration, independently of a prior commitment to resort to arbitrators. The second is implemented when two states undertake to submit to arbitration all controversies that may arise between them in the execution of a treaty; an undertaking to which there then follows, for each controversy, the specific agreement (compromise) to refer to arbitration, in which, and not in the arbitration clause, the arbitral award will find its legal basis. The third procedure consists instead in the general commitment mutually assumed by two states to submit to arbitration all or part of the controversies that may arise between them. Even in this case, as in the previous one, the initial agreement establishes only a generic obligation to refer to arbitration, and the arbitral procedure will be instituted case by case through a specific agreement (compromise). The contrast between the need that induces states to conclude general arbitration treaties and the opposing need felt by the same states to reserve the widest possible freedom to submit or not a given controversy to arbitration gives rise to the problem of the limits of the general obligation to arbitrate. The need to ensure, in as many cases as possible, the peaceful settlement of international controversies would require extending the obligation to all or most issues that may arise between states. To this result, however, it has so far only been possible to arrive in relation to general arbitration treaties between small states or whose respective situations are such as to exclude in practice the possibility of deep conflicts of interest; whereas arbitration treaties between states whose relations are susceptible of leading to serious controversies are always accompanied by exceptive clauses that, in less recent times, excluded from

The State approaches arbitration in terms of the political character of the organ and offers the advantage of lending greater prestige to the decision. It is used mostly in territorial and boundary disputes. But the most frequent system is recourse to a tribunal composed of one or more jurists or diplomats (generally three or five), not all of whom are subjects of the two States in dispute, and selected partly by the States themselves, either separately or by agreement, and partly by a third State. A system often employed is to have a third arbitrator with the function of presiding judge (umpire) designated by the two members respectively chosen by the parties. To obviate the inconveniences arising from the difficulty of reaching agreement on the choice of arbitrators, the relatively more recent practice has resorted to the system of preconstituting permanent procedures for the formation of arbitral boards or even permanent arbitral tribunals (the so-called institutional arbitration). An example of the first system is the Permanent Court of Arbitration established by the Hague Conventions of 29 July 1899 and 18 October 1907, composed of a list of persons designated every six years, to a maximum of four by each of the contracting States, from which the parties choose, each time, according to a predetermined procedure, the arbitral board that will settle the dispute. An example of the second system is the Permanent Court of International Justice at The Hague, established within the framework of the League of Nations in 1921 and reconstituted after the Second World War with slight variations under the name of the International Court of Justice, as an integral part of the system of the new international organization of the United Nations (Chapter XIV of the Statute concluded at San Francisco on 26 June 1945). The organ is composed of 11 judges, elected for nine-year terms by the General Assembly and the Security Council of the United Nations, drawn from a list formed in a manner analogous to that of the judges of the Permanent Court of Arbitration at The Hague. Both the old and the new Court maintain substantially, despite their different names, the same character as the Permanent Court of Arbitration, from which they differ only in that they are constituted on a permanent basis and eliminate the problem of the selection of the board of arbitrators each time by the States concerned. The activity of the organ is in fact always based on the agreement of the parties and cannot be referred, unlike that of judicial organs, to a higher authority over the parties. The normal task of arbitrators is to settle disputes on the basis of general and particular international law in force, unless the parties themselves indicate the rules to which they must adhere or, as happens in political disputes, request an award based on equity (a disposititive judgment). In addition to the substantive rules, the parties also establish the procedural rules (contradictory proceedings, oral debate, representation of the parties, publicity, time limits), the requirements for the award (voting, reasoning), etc. It is not rare for the validity of the award to be contested. This usually occurs when the arbitrators have exceeded the limits of the mandate received or have not judged according to the substantive and procedural rules established by the parties (excess of power). The possibility of revising the award is frequently provided for in arbitration agreements.

As regards the scope of the obligation to arbitrate, disputes touching upon the honour, vital interests, or territorial integrity of the States themselves or the interests of third States are excluded; and in more recent treaties, matters pertaining to the “reserved domain” (domestic jurisdiction) of the contracting States are also excluded from arbitration. Clauses of difficult determination of meaning and scope, whose interpretation is expressly or implicitly entrusted, except in rare cases where it is itself submitted to the obligation of arbitration, to the parties in dispute. Even more serious is the other problem of the extension of the obligation to arbitrate to those disputes which, instead of concerning the ascertainment of existing law (legal disputes), relate—as is frequent within the international community—to the modification or maintenance of existing law (political disputes): a problem complicated by the difficulty of placing the very distinction between the two types of dispute on an objective basis, given the possibility that any State might always shift a dispute from the legal to the political plane simply by framing its claim on one basis rather than the other. The general tendency of practice is to exclude political disputes from arbitration commitments and to use for the latter other procedures of peaceful settlement different from arbitration (mediation, conciliation, inquiry) that are more suited to resolving questions of a political character and to adapting existing law to needs deemed worthy of protection. Resort is not, however, infrequent to arbitral awards based on equity (ex aequo et bono), which is provided for, for example, in paragraph 2 of Article 38 of the International Court of Justice. Practice knows various systems for the formation of the arbitral organ; precisely distinguished are arbitration by mixed commissions, arbitration by heads of State, and arbitration by a tribunal composed of one or more arbitrators. In the first case (the Anglo-Saxon system), the arbitrators are usually chosen from among the subjects of the States concerned, but it is common to include in the commission a citizen of a third State in the role of umpire; and there are also cases of recourse to a head of State as the final arbiter in the event of disagreement among the members of the mixed commission. This is the system followed by the first important arbitration treaty concluded in 1794 between the United States and Great Britain. Arbitration entrusted to a head of

State is also known, though it is less frequent. The system of arbitration by a tribunal composed of one or more arbitrators is the one most commonly used in modern times.