Trust as an Obstacle in Italian Arbitration

The often-repeated slogan that “arbitration is based on consent” plays a number of roles, from defining what parties have and haven’t agreed to arbtirate, to confirming how they have agreed to arbitrate, and arguably every other aspect of the arbitral process. It also, however, underlies the reality that no matter how much support a jurisdiction might offer for arbitration, arbitration can only develop if parties agree to take their dispute to arbitration. The most “arbitration-friendly” laws and the most expert arbitration lawyers won’t have much effect if parties are unwilling to arbitrate.

It is in this context that the question of “trust” becomes such a central issue for arbitration. The traditional maxim that “trust is earned” can often describe the trajectory of an arbitration, in which a tribunal of individuals unfamiliar to the parties and their lawyers proceed to handle the process well and thereby earn the trust of the participants in the arbitration. Or alternatively they handle it badly, and don’t.

Trust creates a particular obstacle for arbitration, however, precisely because arbitration is based on consent. That is, the development of arbitration in a jurisdiction in which it is not already common requires convincing parties and lawyers with little to no prior experience of arbitration that arbitration can be trusted with their dispute. It’s this fact that lies behind the reality that many jurisdictions update their arbitration laws and train arbitration lawyers but nonetheless fail to see any significant upsurge in the use of arbitration.

It was notable, then, that “trust” became a consistent feature of interviews with arbitration practitioners in Italy (full disclosure: in some interviews interviewees raised it themselves, while in some later interviews I raised it to ask the interviewees’ views; but it was quickly dropped if the interviewees didn’t acknowledge it as an issue). Italy has an extremely varied engagement with arbitration, from prominent centres for international arbitration in Milan and Rome, to large parts of the country, particularly in the south, where arbitration is almost unknown. When I explored with interviewees the question of what the obstacles are to the development of arbitration in Italy, this notion of “trust” was regularly acknowledged to be a central issue.

Importantly, however, the concern expressed was not that parties/lawyers felt that arbitrators would be corrupt, or that they would handle the dispute badly. Rather, the concern was more interestingly tied to the nature of Italian society, in which social networks and personal connections are often particularly important. Because of this context, many Italian parties were hesitant to engage with arbitration because they feared that any arbitrator appointed by the other side would have connections that would make them biased towards their appointing party. That is, they did not trust arbitration’s promise that it would be neutral.

Notably, this view was more commonly expressed outside Milan/Rome, the two jurisdictions in which both parties and lawyers could be expected to be reasonably familiar with arbitration and arbitrators. That said, even in Milan and Rome, some interviewees agreed, particularly those who primarily engaged in domestic arbitration, rather than international.

This notion of trust also goes towards explaining one of the most distinctive features of arbitration in Italy, namely the dominance of law professors in the role of arbitrator. Professors, in short, were seen as independent and trustworthy, with reputations dependent on their ability to interpret the law fairly and apply it neutrally. In turn, a less well-known feature of Italian domestic arbitration, the use of notaries as arbitrators, plays the same role – notaries are trusted to be independent and act neutrally. The use of professors and notaries as arbitrators, that is, arose and continues as an attempt to address the “trust” issue.

This serves as a useful reminder of the importance of understanding local contexts when discussing arbitration. Updating arbitration laws and training lawyers in arbitration is important, but unless parties have confidence that arbitration will provide them with a fair resolution of their dispute, they will hesitate to use it – and sometimes that hesitancy is not directly a result of flaws with the process parties are being offered, but is instead derived from the broader social context in which arbitration is functioning.

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