Respondent, an Italian company, was declared bankrupt after the commencement of the arbitration, brought by Claimant, a Dutch company. As a consequence of its compulsory liquidation, Respondent pleaded the arbitral tribunal's lack of jurisdiction. During the course of the arbitration, the EC Regulation on Insolvency Proceedings of 29 May 2000 entered into force. The arbitral tribunal pointed out to the parties that the provisions of this Regulation corresponded to those of the 1996 European Convention on Insolvency Proceedings, which Italy had approved. A majority of the members of the arbitral tribunal invited the parties to comment on the relevance of that approval under Article 177(1) of the Swiss Private International Law Statute, applicable to an arbitration seated in Switzerland.

'7. Article 177(1) of the Swiss Private International Law Statute ("PILS")

7.1 Since Lugano, Switzerland, is the place of arbitration in the present matter . . . Articles 176 to 194 PILS apply (Terms of Reference Sec. 9.2). Article 177(1) PILS establishes, as to the arbitrability, a material rule of international private law reading as follows: "Any dispute involving property can be the subject matter of an arbitration".

7.2 The term "involving property" is to be understood in a wide sense to include all rights which have a "pecuniary value" (cf. Robert Briner, N. 10 to Art. 177, in: Berti/Honsell/Vogt/Schnyder, International Arbitration in Switzerland, Kluwer 2000). However, in view of the involvement of debt collecting and bankruptcy authorities, certain matters having an effect on third parties such as declarations of bankruptcy or attachment orders are in the State court's exclusive jurisdiction under most laws. On the other hand, all matters regarding the existence and the quantum of claims against the bankrupt party or in favour of that party are arbitrable under Article 177(1) PILS (cf. Briner, loc. cit., N. 14).

7.3 Article 177(1) PILS being a material rule of international private law as part of the lex arbitri, arbitrability of a dispute is not to be assessed, in principle, under the national law of the parties or, if different from Swiss law, under any of the laws to which Article 178(2) PILS refers, as to the validity of the arbitration agreement, i.e. the law chosen in this respect by the parties or the law applicable to the merits of the dispute. It follows, subject to the limits resulting from ordre public considerations (cf. Sec. 7.4 hereinafter) that independently from the provisions of Italian bankruptcy law both [Claimant's] daim and [Respondent's] counterclaim, both undoubtedly of a pecuniary nature, are arbitrable.

7.4 The above provisional finding is to be reviewed under the reservation of international public policy. In the context of the decision regarding the merits of a dispute, the relevant limits to be respected independently from the provisions of the applicable law, are the fundamental legal principles and system of values which include the maxim pacta sunt servanda, the prohibition of the misuse of the law, the principle of good faith, the prohibition of uncompensated expropriation, the prohibition of discrimination and the protection of the incapacitated (cf. decision of the Swiss Federal Tribunal "DTF" 116 II 634 cons. 4; Briner, loc. cit., N. 13; Schnyder/Berti, N. 71-76 to Art. 190 PILS, in Berti/Honsell/Vogt/Schnyder, International Arbitration in Switzerland, Kluwer 2000).

7.5 Transferring the above principles to the jurisdictional issue, the arbitrability resulting from Article 177(1) PILS could only be disregarded if "a foreign rule providing that a specific dispute must be decided by a foreign State authority were of such a nature that refusing to apply such rule would amount to a violation of fundamental principles of law and therefore fundamentally offend the sense of justice and equity" (Briner , loc. cit., N. 18 with reference, i.a., to DTF 118 II 353, the Fincantieri/Oto Melara decision, dated 23 June 1992, also published in ASA Bulletin 1993 pp. 58 et seq.; p. 65: ". . . l'ordre public ne pourrait avoir de l'importance que s'il exigeait impérativement que la prétention litigieuse soit soumise à une autorité étatique"; cf. also Dominique Brown-Berset/Laurent Lévy, Faillite et arbitrage, Bulletin ASA 1998, pp. 664 et seq., pp. 672/673; Bernard Hanotiau, La loi applicable par l'arbitre en cas de faillite d'une des parties à la procedure, RDAI 1996, pp. 29 et seq.).

7.6 Accordingly, the Arbitral Tribunal shall review hereinafter the Italian law provisions referred to in Respondent's plea of lack of jurisdiction under the restricted view of the international public policy as defined above.

8. The Italian law regarding the jurisdiction of the bankruptcy judge

8.1 The Parties agree that there is no legal provision in the Italian law explicitly dealing with the issue of whether the jurisdiction of an arbitral tribunal ends in the event of a party being declared bankrupt. In particular, Article 806 of the Italian Civil Procedure Code ("CPC") which lists exhaustively the non-arbitrable matters, does not explicitly refer to disputes involving a party which has been declared bankrupt. Such list provides, however, for the non-arbitrability of disputes relating to matters not capable of settlement. This is to be understood, in conjunction with Article 1966(2) of the Italian Civil Code, as a prohibition of arbitration with regard to disputes relating to rights which may not be disposed of by the parties (Piero Bernardini, National Report on Italy, p. 12, 2000, in: International Handbook on Commercial Arbitration).

8.2 When determining which rights may not be freely disposed of by the parties, Italian court decisions and scholarly writings frequently refer to subject matters as to which a State court has exclusive jurisdiction and, in the context of bankrupt parties, to the vis attractiva of the bankruptcy court's exclusive jurisdiction under Art. 24 of the Italian Bankruptcy Law of 26 March 1942 (cf. Giorgio Bernini, Lezioni di diritto dell'arbitrato, Bologna 1992, Sec. 44.4). However, such concentrating effect of the bankruptcy declaration in favour of the State court's jurisdiction applies only to disputes which are not yet pending before the arbitral tribunal at the point of time in which the bankruptcy declaration intervenes. Disputes pending in the arbitration at such date continue to be arbitrable (Piero Bernardini, loc. cit., p. 13).

8.3 Within the category of disputes already pending before the arbitrator when a party to the arbitration is declared bankrupt, part of the Italian doctrine and court cases submit that a distinction is to be made between disputes involving a credit against the bankrupt party (which become non-arbitrable) and disputes involving an asset of the bankrupt party (which remain arbitrable). According to some authors, the receiver has an option and may choose in his own discretion whether the arbitration continues or not also with respect to pending disputes involving claims of the party declared bankrupt (cf. the references listed in Azienda municipale X v. Soc. Y, Arbitral Tribunal, January 29, 1998, Riv. Arb., 1999, 105; Soc. X v. Soc. Y e Z, Arbitral Tribunal, February 20, 1997, Riv. Arb., 1998, 102; Fall. Codelfa, Court of Milan, May 28, 1985, Fall., 1986, 1083; amongst writers: Capaccioli, L'amministrazione fallimentare di fronte all'arbitrato, Riv. dir. proc. 1959, 533; Vecchione, Compromessi in arbitri e fallimento, L'arbitrato, Studi vari coordinati in sistema, Milano, 1959, 317 et seq.; Profeta, L'opponibilità dell'arbitrato rituale al fallimento, Dir. Fall., 1991, I, 1186; Bozza, Arbitrato e fallimento, Fall., 1993, 477 et seq.; G. Caselli, Gli organi preposti al fallimento, Commentario alla legge fallimentare Scialoja-Branca, Bologna-Roma, 1977, 65; cf. Vecchione, L'arbitrato nel sistema del diritto civile, Milano, 1971, pp. 347 et seq.; Bonsignori, Compromesso, arbitrato e fallimento, 1996, pp. 413 et seq.).

8.4 In the present international context, reference is to be made to the Regulation of the Council of the European Union (Council Regulation No. 1346/2000) on Insolvency Proceedings of 29 May 2000, which has entered into force on 31 May 2002 (hereinafter "Council Regulation"):

a) Under Article 4 of the Council Regulation, the law applicable determining the effects of the insolvency proceedings on proceedings brought by individual creditors is, in principle, the law of the State within the territory of which such proceedings are opened, accordingly in the instant case by Italian law, however "with the exception of lawsuits pending" (Art. 4-2f of the Council Regulation). "The effects of insolvency proceedings on a lawsuit pending concerning an asset or a right of which the debtor has been divested shall be governed solely by the law of the Contracting State in which that lawsuit is pending." (Art. 15 of the Council Regulation)

b) The present arbitration is pending in Switzerland. Although Switzerland is not a Member State of the European Union, the Arbitral Tribunal takes into account that Italy did not insist, when the Council Regulation was prepared, on the principle of the vis attractiva in favour of the Italian court's exclusive jurisdiction as far as pending lawsuits are concerned since there are jurisdictions, among the Member States of the European Union, under the laws of which disputes involving a party declared bankrupt remain arbitrable: e.g., under Austrian law, an arbitration agreement concluded by the debtor before the declaration of bankruptcy remains valid (cf. Werner Melis, National Report on Austria, 1989, p. 5, in: International Handbook of Commercial Arbitration). The same is true, to give a second example, under Danish law, cf. Alan Philipp, National Report on Denmark, 2001, p. 7, in the Handbook referred to above).

c) Such waiver, by the Italian authorities, as to the vis attractiva principle results from Italy's approval of the predecessor of the Council Regulation, i.e. the European Convention on Insolvency Proceedings, dated 23 November 1995 ("Convention") which did not enter into force since it has not been ratified, accepted or approved by all the Member States of the European Union as constituted on the date on which the Convention was closed for signature (23 May 1996). Articles 4-2f and 15 of the Convention correspond to Articles 4-2f and 15 of the Council Regulation referred to above.

8.5 Since Italy, when approving the Convention, deferred, as to the arbitrability of disputes pending in lawsuits in a foreign State, to the provisions of the State in which such lawsuit is pending, without reserving the vis attractiva of the Italian Bankruptcy Court, the majority of the Arbitral Tribunal concludes that the vis attractiva principle is not to be placed, in the Italian authorities' own view, on the high level of an indispensable maxim pertaining to the international public policy.

9. Conclusions of the majority of the Arbitral Tribunal

9.1 On the basis of the considerations made in Secs. 7 and 8 above, the majority of the Arbitral Tribunal concludes that Article 177(1) PILS is to be applied, when determining the arbitrability of the dispute, without being restricted therein by a principle pertaining to the international public policy. Since both Claim and Counterclaim are of a financial nature (cf. Sec. 7.3 above), the dispute pending in the present arbitration is arbitrable.

9.2 The Arbitral Tribunal is aware of its duty to "make every effort to make sure that the Award is enforceable at law" (Article 35 ICC Rules). In this regard, the Arbitral Tribunal notes that, if Claimant is successful, Claimant will be satisfied that the award is enforceable in the Netherlands (cf. submission of 18 December 2001). Should Respondent be successful in its counterclaim, it will seek to enforce the award in the Netherlands as well. Accordingly, enforceability in Italy does not appear to be the Parties' main concern. Under Dutch law, an arbitration which is pending at the moment that the bankruptcy is opened, may be continued (cf. Albert Jan van den Berg, National Report on the Netherlands, 1987, p. 7, in: Jan Paulsson (Gen. Ed.), International Handbook on Commercial Arbitration, Vol. III); thus, the conclusions reached in the present Interim Award are not in conflict with any principles applicable in the jurisdiction where the Parties may most probably wish to enforce this Award.

9.3 In further support of the conclusion reached above, reference may be made to the principle of pacta sunt servanda in favour of maintaining the validity of the arbitration agreement beyond the declaration of bankruptcy of one of the parties: In an international relationship as in the present matter, the parties very often agree on arbitration as the dispute settlement procedure in order to avoid that disputes have to be decided by the courts in the country of one of the two parties; by opting for arbitration, the parties express their willingness to submit any dispute to a neutral panel of which one member is normally designated by each party. There are no sufficiently strong reasons which could justify that a foreign contractual partner be frustrated in his reasonable expectations to see his case decided by such panel and be compelled to submit the dispute to the Bankruptcy Court of the State in which the opposing party has its place of business.

9.4 The majority of the Arbitral Tribunal concludes that Respondent's plea of lack of jurisdiction must be rejected. . . .

10. Appreciation by a minority

10.1 The challenge of the jurisdiction of this Arbitral Tribunal made by the Respondent arises from its steady refusal to appear in the proceedings, after it was put into compulsory liquidation, on the ground that as a consequence of such insolvency proceedings in its view the Arbitral Tribunal no longer has jurisdiction.

10.2 Under Italian law claims against an insolvent company which, if granted, will amount to a liability of the insolvent company may be heard exclusively by the Bankruptcy Court, while writers and precedents are divided as to the other claims. It follows from this that as to such first class of claims the Receiver of the compulsory liquidation has no capacity to act in arbitral proceedings (and loses the capacity to be a party in any arbitral proceedings which were pending before the insolvency).

10.3 The capacity to act is governed, in the dissenting arbitrator's view, by the national law and not by the lex loci arbitratus.

The claims made by the Respondent do not belong to the first class of claims. As to the claims made by Claimant, they do not seek that Respondent's liability be established except for the costs of the proceedings, but they aim to obtain a finding which excludes its liability.

10.4 In Fassi v. Fall. ALES et al., the Italian Court of Cassation (Cass. March 10, 1992 no. 2902, Dir. Fall. 1992, I, 613), has held that "the Bankruptcy Court's jurisdiction attracts the matter if the remedy which is sought is merely declaratory but in reality aims to obtain a decision which be the immediate basis for a second judgment which would prevent the Bankruptcy Court, being seized of a proof of debt quantifying that right, from challenging the existence of the right.

10.5 Since the declaratory judgment which is sought by Claimant may then be the basis for a second judgment which might affect the Bankruptcy Court's freedom to decide, the dissenting arbitrator takes the view that the Respondent's Receiver has no capacity to act and the Arbitral Tribunal consequently has not jurisdiction to continue these proceedings.'