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By Dahlia Belloul - 25 June, 2013

Credit: Commercial Dispute Resolution

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Italy re-establishes mandatory mediation following a challenge to a previous attempt in October 2012. Will it be second time lucky for the Italians?

Implementing the EU’s Mediation Directive, Italian-style, has been anything but straightforward.

In March 2011, the Italian government implemented a mandatory mediation procedure which faced considerable backlash from the country’s legal profession. Designed to fulfill the requirements set out by the Directive, it stipulated that all plaintiffs had to attempt to resolve their disputes via mediation prior to litigating in the courts.

The European Directive states: “Agreements resulting from mediation are more likely to be complied with voluntarily and are more likely to preserve an amicable and sustainable relationship between the parties. These benefits come become even more pronounced in situations displaying cross-border elements.”

Mediation is developing apace within the EU, driven in part by Brussels’ bureaucrats. While the UK’s efforts have been largely positive, a range of attitudes remain.

The first Italian provision lasted until October 2012. Following a challenge from the national Bar association to the Italian Supreme Court, it was withdrawn by parliament for failing to adhere to proper legal requirements in being released as a decree, instead of parliamentary legislation.

That is not to say, despite its controversy, the development was unwelcome. Indeed, during its short life there was a “mediation explosion” in Italy, says Giuseppe de Palo, the founder and president of the ADR Center, the Italian arm of JAMS International.

“Italy saw over 250,000 mediations started in this time, compared to maybe 1,000 per year beforehand,” he tells CDR. “We had a stunning increase, as one would expect.” But on 24 October 2012, he says “the mediation movement came to an end.”

All was not lost, however. On 15 June 2013, the government resurrected the provision by announcing a new mandatory mediation legislature, ensuring mediation’s legal basis would be achieved via a parliamentary statute.

Yet this time there’s a twist: the provision creates an opt-out system whereby all plaintiffs are invited to attend mediation within 30 days of the initial dispute. “If the parties decide that mediation is unsuitable, they can withdraw from the mediation by each paying a nominal fee,” explains de Palo. This fee ranges from EUR 60 to EUR 200 depending on the size of the suit.

“The burden on people having to mediate, when they do not want to mediate, or where it is clear from the beginning that there is no chance of success, is limited,” he says. The idea is for both parties to “at least give it a try.”

He says the new legislation hopes to achieve a balanced relationship between litigation and mediation, as provided for by the EU Directive, while avoiding criticism that the proposal might violate access to justice, which was one of the arguments its opponents had raised previously.

International investors have also expressed concerns over dispute resolution in Italy. A 2010 Hogan Lovells study, for example, found that when asked to identify jurisdictions in which their litigation experience had been worse than the in UK, Italy topped the list with 36%.

Although only 17% of mediations were voluntary during the mandatory period, de Palo says “of all the cases mediated, approximately 50% settled.” He notes that figure is echoed in other jurisdictions where similar provisions apply, like Australia, indicating the inclination to settle is present whether mediation is mandatory or not.

Italian prosperity

Five days before new Italian legislation was tabled, the New York-headquartered International Institute for Conflict Prevention and Resolution (CPR) announced a partnership with the Milan Chamber of Arbitration.

The partnership includes an ADR provision which will see the latter promote the former’s new “21stCentury Pledge.” The pledge asks signatories to agree to consider alternative dispute resolution, including mediation, prior to entering litigation.

Special counsel of the CPR, Kathleen Scanlon, tells CDR that the initiative aims to prevent “pledge fatigue” – where international organisations are faced with a multitude of similar agreements in different jurisdictions. The providers also agreed to exchange mediators for early neutral evaluations, if so required.

“These types of ADR processes are best when each side has agreed to proceed; they are strongest if they’re coming from the parties themselves, as opposed to being imposed from the outside,” Scanlon says.

While respecting the Italian parliament’s legislative interventions, she adds that “the role of government in these types of disputes is to have a legal structure that doesn’t interfere with parties being able to choose these other alternatives.”

For his part, de Palo says the Italian provision aims to bring those options to the attention of plaintiffs. “You need to kick people into the mediator’s room, or else there are no mediations,” he says. “There is evidence of this throughout the world, and there was evidence in Italy in the absence of the mandatory mediation provision.”

He similarly addresses the fears of some lawyers that mandatory mediation would jeopardise the role of litigators in Italy, saying that “when mandatory mediation was being used the busiest mediators were the lawyers; 85% of cases mediated were cases where the lawyers were at the table of the mediator with the client.”

Italy’s vibrant culture of litigation
– albeit which remains hamstrung by backlogged courts – has seen considerable post-credit-crunch activity, ADR or no ADR. The country also generated the infamous ‘Italian torpedo’ in relation to the ouster of anti-suit injunctions, as well as in private actions claims, allowing an opportunity for Italian defendants to choose the court to hear the case.

Lawyers also want to preserve their options. Take banking litigation, which has seen double-digit rises in the number of suits filed since the global financial crisis took hold.

Speaking to CDR previously, Andrea de Tomas, a partner at Bonelli Erede Pappalardo, said: “Certain controversies that in the past would have been amicably and privately resolved now hit the courts, as plaintiffs are getting more aggressive towards banks, which they now see as weaker targets.”

While dominated predominantly by domestic firms, Italy’s disputes landscape is also proving increasingly attractive to the Anglo-American legal machine.

Simmons & Simmons in December 2011 hired disputes partner Giorgio Fraccastoro in Rome, while Latham & Watkins established its Italian commercial litigation practice in Milan with the hire of litigator Cesare Degli Occhi in the same month. In July 2012, Linklaters launched its own litigation capability in Milan with the hire of dispute resolution partner Cristina Pagni from Simmons & Simmons.

Love thy neighbour

Italy’s new mediation provision presents a multitude of benefits. Besides helping to relieve the five million-odd cases currently pending in the country’s court, mediation is considerably cheaper than both litigation and arbitration. That’s no bad thing for a country currently sharing the burden of European and global economic crises.

The Italian provision, says de Palo, might be a “good model for Europe because lots of countries have thus far struggled with making mediation happen.”

He adds: “If Italy becomes the poster child for the smart form of mandatory mediation, that is, mediation with an opt-out provision, I bet you that European countries will follow suit immediately.”


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