Spotlight on Milan Chamber of Arbitration’s proceedings

On 17 July 2024 Milan hosted a significant event called "Arbitration and commercial litigation: history of a costly procedure. True or false?". This gathering, led by the SDA Bocconi School of Management's professors in collaboration with the Milan Chamber of Arbitration (CAM) and the Milan Monza Brianza Lodi Chamber of Commerce, presented a ground-breaking study titled "Arbitration and judicial proceedings: comparative cost-effectiveness", aimed to aimed to demystify the financial implications of arbitration, offering a fresh perspective on its efficiency and cost.

The study unfolded through a structured three-stage process:

1. case analysis: 345 CAM arbitration cases from 2019 to 2021 were examined, focusing on their value, duration, and associated costs;

2. targeted surveys: questionnaires were presented to three target groups for a total of over 250 participants who have taken part to CAM arbitration proceedings, i.e. lawyers, court-appointed technical expert witnesses, and in-house lawyers, in order to gather insights on the costs and timelines associated with both arbitration and court proceedings;

3. economic-financial comparison: an economic-financial methodology was applied to compare the efficiency and financial viability of arbitration versus judicial proceedings.

The research revealed several critical insights into arbitration, emphasizing the significance of these key findings. First of all, CAM proceedings are notably swift, with an average duration of 307 days. This timeframe slightly extends to 367 days for international disputes and to 585 days for high-value litigations, yet remains impressively under two years. On a financial perspective, CAM proceedings reveals an average total cost of Euro 38,000, which escalates to Euro 61,000 for cases culminating in a final award. A detailed cost analysis of 206 cases highlighted that disputes valued between Euro 52,000 and Euro 260,000 incurred an average cost of just over Euro 3,000 without an award, and just under Euro 13,000 with an award.

Furthermore, a significant portion of the CAM proceedings (74% of the 206 cases analysed) were characterized by a low average cost (Euro 4,000 to Euro 16,000) and duration (5 months to one year). For cases concluded with an award, the duration and cost correlated directly with the dispute's value, emphasizing the cost-effectiveness of arbitration for a wide range of disputes.
From the survey it emerged that lawyers perceive arbitration as a quicker alternative to first-instance court proceedings. Its non-appealable nature, alike a second-instance judgment, adds a layer of finality and efficiency, making it a convincing choice for resolving disputes.

One of the most relevant finding of the study is that it underscores the critical importance of recognizing the financial value of time when comparing arbitration to traditional court proceedings. Arbitration's capacity to swiftly release and deploy funds to the winning party following a successful resolution of the claim, thanks to its shorter timelines (often unattainable in the slower-paced court system), stands out as a potentially lucrative advantage. This ability to quickly provide sums that would otherwise remain tied up in lengthy legal battles showcases the economic advantage of opting for arbitration.

In the closing remarks of the event, CAM President Mr. Stefano Azzali emphasized the significance of the study, highlighting the increasing reliance on arbitration for resolving disputes of low and medium value, particularly for small and medium-sized enterprises within Italy's economic landscape. He further underscored the pivotal role of arbitration in attracting investments to the country, noting the general apprehension international investors have towards the inefficiencies of the traditional Italian judicial system. Mr. Azzali concluded by distinguishing the superior quality of arbitration from state court proceedings, and stated that in general arbitration should not be deemed expensive, as quality necessarily comes at a cost.