This article provides an in-depth analysis of the pros and cons of pursuing legal action in the commercial sector in Italy. It examines the potential benefits and challenges for Italian businesses that choose to resolve commercial disputes through litigation.
Introduction to Commercial Litigation in Italy
Commercial litigation in Italy involves legal disputes between businesses or between businesses and individuals in the commercial sphere. These disputes may cover contractual issues, unfair competition, bankruptcies, breaches of commercial agreements, and other business-related matters.
Unlike alternative dispute resolution methods such as arbitration or mediation— discussed in a previous article —litigation is the most traditional and widely known approach to resolving disputes through judicial proceedings in Italian courts. Italy, with its strong civil law tradition and a modern yet complex legal framework, has recently introduced reforms aimed at digitalization, reducing litigation timelines, and promoting alternative dispute resolution mechanisms.
While commercial litigation can provide greater legal certainty, it also presents challenges that businesses must carefully consider. This article will analyze the advantages and disadvantages of commercial litigation in Italy, the key challenges involved, and strategic considerations for businesses, offering a clearer overview of a process that can significantly impact business operations.
First: Mandatory Mediation!
Before taking legal action in Italy, it is essential to remember the obligation of mediation. Mediation was introduced by Legislative Decree 28/2010 and is a process led by an impartial and neutral mediator who belongs to an accredited mediation organization in Italy. The mediator is a facilitator who helps the parties and their lawyers resolve the dispute through an agreement. In Italy, for certain commercial disputes, it is mandatory to attempt mediation before resorting to litigation:
- Insurance contracts
- Banking and financial agreements
- Disputes related to commercial leases
- Conflicts between some business partners
(subcontractors, longterm suppliers of goods, franchisees and franchisors)
The main advantages are speed, lower costs with certain tax benefits, confidentiality, and the possibility of customized solutions that maintain relationships between the parties. Additionally, the agreement reached through mediation constitutes an enforceable title, making it immediately enforceable without further legal intervention (Article 12 L.D. 28/2010)
Although both commercial litigation and mediation play crucial roles in dispute resolution in Italy, they offer different advantages and challenges. Commercial litigation guarantees certainty and formal protection but involves high costs and time. Mediation, on the other hand, offers flexibility, speed, and cost-effectiveness, but requires cooperation and compromise.
Advantages of Commercial Litigation in Italy
A Comprehensive Legal Framework
The Italian commercial legal system is well-developed, benefiting from both national regulations and European Union legislation. The Italian Civil Code contains detailed provisions governing commercial relationships, ensuring predictability in business disputes. Additionally, Italy has specialized business courts (Tribunale delle Imprese), where judges have expertise in intellectual property and corporate governance, leading to more informed rulings on such matters.
Effective Enforcement Mechanisms
As an EU member state, Italy enjoys robust cross-border enforcement mechanisms. Judgments issued by Italian courts can be easily enforced across the European Union under Regulation (EU) No. 1215/2012 (Brussels I Regulation). Similarly, decisions obtained in other EU member states can be recognized and enforced in Italy.
Moreover, Italy is part of the New York Convention on International arbitration of 1958 and foreign arbitral awards can be declared immediately enforceable in Italy, after a formal exam by the Court of appeal (art. 839 Italian code of civil procedure).
A Relatively Cost-Effective Option
Compared to other major European jurisdictions, litigation costs and legal fees in Italy can be relatively lower. Furthermore, Italy follows the “loser pays” principle, meaning the prevailing party can recover a significant portion of its legal expenses.
Challenges and Considerations
Lengthy Proceedings
One of the most critical issues in Italian commercial litigation is the duration of proceedings. Despite the digitalization of the judiciary, data from the Ministry of Justice in 2024 indicates that commercial cases in the first instance take an average of 2.9 years to conclude. However, efficiency and court practices vary significantly across regions.
Procedural Complexity and Strict Deadlines
Italian civil litigation is characterized by stringent procedural requirements and mandatory deadlines. Initial pleadings must be filed within strict timeframes and adhere to precise procedural steps. Failure to comply with these deadlines can result in case dismissal due to procedural defects.
This complexity requires foreign businesses to act promptly, necessitating the assistance of an experienced Italian attorney—especially if they receive a summons to appear before an Italian court, requiring the party to prepare and submit its legal defenses to the Italian Court in a short deadline. Failure to comply with such a deadline, can lead to a dismissal and eventually to a judicial defeat.
Language Requirements
Judicial proceedings in Italy are conducted exclusively in Italian. This can lead to additional costs for document translation and interpreter services for foreign parties. The first document requiring translation is the power of attorney (procura alle liti), which a foreign company must grant to its Italian lawyer before initiating litigation. Additionally, a power of attorney signed abroad must be authenticated by a notary and/or legalized for validity in Italy, in accordance with International Conventions. Legalization is not necessary for parties domiciled in the EU e/o in States which adhered to the Hague Convention of 1961 on Apostille.
Risk of Public Exposure
Litigation can damage a company’s reputation since some legal disputes might be publicly accessible, potentially impacting business relationships and brand image.
Strategic Considerations for Businesses
Commercial Litigation vs. Alternative Dispute Resolution
Businesses should carefully evaluate alternative dispute resolution mechanisms commercial and commercial litigation in Italy. As previously noted, arbitration and mediation in Italy can offer faster and more flexible solutions, even if arbitration tends to be more expensive than litigation. However, commercial litigation may be preferable in the following cases:
- When there is a clear breach of contract and alternative solutions have failed.
- If the financial stakes justify the time and costs involved in litigation.
- When legal action is necessary to protect intellectual property, patents, or trademarks.
- If a company needs to establish a legal precedent or principle for future disputes.
Choice of Forum
When drafting commercial contracts, it is essential to carefully consider jurisdiction clauses. Opting for Italian jurisdiction should take into account factors such as:
- The location of assets subject to enforcement
- The nature of the contract
- Legal and court costs
In some cases, including a multi-step dispute resolution clause that mandates negotiation and mediation before litigation can be beneficial.
Conclusion
While commercial litigation in Italy presents certain challenges, particularly regarding case duration, it offers a well-established legal framework with specialized courts for complex commercial matters and strong enforcement mechanisms. Recent reforms have improved judicial efficiency, particularly in key courts such as those in Milan and Bologna.
Ultimately, the decision to pursue commercial litigation in Italy should be based on a careful assessment of the specific dispute, particularly those involving European economic interests or assets located in Italy, available alternatives, and business objectives.
Success in commercial litigation in Italy often depends on thorough preparation, adherence to procedural deadlines, and early involvement of a knowledgeable local attorney to effectively represent and defend the case.
At LEX IBC, as experts in Italian commercial litigation, we provide assistance to foreign companies both in court and through alternative dispute resolution mechanisms.
Mariangela Balestra
Marie Vanswevelt