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Reintroduction of compulsory mediation in civil and commercial matters, including finance disputes

Sept/Oct 2013

Law Decree No 69 of 21 June 2013 enacted by Conversion Law No 98 of 9 August 2013

A new law in Italy passed on 21 September 2013 reintroduces compulsory mediation in certain types of civil and commercial disputes, including disputes concerning insurance contracts and banking and finance contracts. There are potential costs penalties for parties who either refuse to take part, or who fail to reach a settlement.

Compulsory mediation in finance disputes

Mediation is a condition precedent to filing a lawsuit and must therefore be requested by a claimant before starting any ordinary court proceedings. The mediation takes place before organisations enrolled in a specific register held at the Ministry of Justice. If the claimant fails to request mediation, the claim before the court is inadmissible and the defendant (or the Court ex officio) may challenge the admissibility of the claim at the first hearing.1

Note that mediation is not compulsory:

–– if certain pre-action orders are sought (eg an injunction); and

–– in class actions relating to the protection of consumers’ and users’ collective interests under articles 37, 140 and 140-bis of Legislative Decree No 206 of 6 September 2005 (the Consumer Code).

Outcome of mediation

If either party declares, at the first mediation meeting, that there is no chance that the dispute can be resolved through mediation, then the mediation will terminate. No payment is due to the mediation body in case of a failure to reconcile.

There is a penalty for parties who do not attend the meeting with the mediator. The court will order the party that did not participate in the mediation process “without just cause” to pay a penalty equal to the unified court fee due for the proceedings (for example, for a dispute whose value is EUR 500,000, the penalty is approximately EUR 1800). In addition, the court, in the subsequent ordinary court proceedings, may make inferences from a failure to participate in the mediation.

Reaching a settlement

However, if the parties decide to go ahead, and a settlement is reached, the mediator prepares a written report to which the text of the agreement is attached. If no settlement is reached, the mediator may make a reconciliation proposal. If the parties agree to adhere to this proposal, the mediator will prepare a written report containing the agreement reached. If the outcome is successful and the parties reach a settlement, the written report on the agreement will, if signed by all parties and their respective lawyers, be immediately enforceable and can be used for execution, repossession orders or delivery orders, enforcement of obligations to do or not to do something and to register a judicial mortgage (ipoteca giudiziaria).

Failure to reach a settlement – costs consequences

If the mediation fails (ie in the absence of a settlement or when the parties do not agree with the mediator’s proposal), the mediator will still draft a report with the details of his/her proposal. The content of this proposal, albeit not accepted, can have a substantial impact on the award of costs in the subsequent ordinary proceedings. Under general court rules, a judge normally orders the unsuccessful party in the litigation to pay legal costs to the successful party. However, in the case of an unsuccessful mediation, this rule changes:

–– if the court’s decision exactly corresponds to the proposal offered by the mediator, but declined by, for example, the winning party, the latter is not entitled to payment of its legal costs (even though it was successful in the court proceedings). Moreover, the winning party will be ordered to pay legal costs to the other (losing) party as well as an additional sum corresponding to the unified court fee; and

–– if the court’s decision does not exactly correspond to the refused proposal, the judge may, at his discretion, still apply the above rule.

Use of statements made or information obtained during mediation

The statements made, or information obtained, during the mediation process cannot be used, in the case of a failure to reconcile, in any subsequent ordinary court proceedings.

In particular, the parties in the subsequent ordinary court proceedings may neither request witness evidence on the content of the above information or declarations, nor apply for a decisory oath (giuramento decisorio). The work of the mediator is protected by professional secrecy and he or she may not be called as a witness during any subsequent court proceedings.

Comment

Finance parties have already experienced mediation under the previous law (which entered into force in March 2011), as mediation was also at that time compulsory for insurance, banking and finance contracts. Statistics published by the Ministry of Justice on mandatory mediation from March 2011 to December 2012 (ie during the period of application of the previous mediation law) show that 40% of all disputes for which mediation is compulsory, including finance disputes, resulted in a settlement.

Where the outcome is positive, mediation offers parties the chance to avoid the length of ordinary court proceedings. Indeed, the new provision establishes that the mediation process has a maximum duration of three months from the filing of the application. However, for disputes which are unlikely to settle some will view the compulsory mediation as causing delay and increased costs. Due to the importance of the role that the mediator’s proposal can play in subsequent costs decisions in court proceedings, parties may feel under pressure to try and persuade the mediator of the merits of their own case – this in itself may be viewed as an additional hurdle and cost to enforcing rights.



 1 Please note that in disputes arising from insurance and banking and finance contracts, the following dispute resolution procedures remain applicable, as alternatives to the mediation process:

− the conciliation and arbitration procedures at the Consob Conciliation and Arbitration Chamber (Article 2 Legislative Decree no. 179 of 8 October 2007) can be chosen for disputes between investors and intermediaries for infringement by the latter when the latter breached its duty to provide information and duties of fairness and transparency in contractual relationships with investors.;

− the proceedings before Banking and Finance Arbitrator (Art. 128-bis of Legislative Decree no. 385 of 1 September 1993) for disputes between banks and customers concerning banking services and transactions

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Massimo Greco
Massimo Greco
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Italy
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