1. Between the arbitral tribunal ruling again on the basis of the same arbitration clause (Civil Procedure Code Art. 1211) following setting aside of the previous award under Civil Procedure Code Art. 1205 et seq., and the court that granted the application to set aside the award, there is not a relation analogous to that between the courts of first and second instance in the structure of the state courts. The Civil Procedure Code does not adopt the construction encountered in some legal systems in which a state court granting an application to set aside an arbitration award can remand the case to the arbitral tribunal for reconsideration. The arbitrators’ duties generally last until issuance of the arbitration award (Civil Procedure Code Art. 1199); granting of the application results in setting aside the award, while the further proceedings depend on the decisions of the parties, provided however that the arbitration clause remains in force unless the parties agreed otherwise (Civil Procedure Code Art. 1211). A consequence of this is that there is no room for the arbitral tribunal to be bound by the legal evaluation or directions as to the further proceedings, in line with the rule adopted in Civil Procedure Code Art. 386 §6, and this state of affairs was not changed by the amendment of Civil Procedure Code Art. 1207 made by the Act of 10 September 2015 Amending Certain Acts to Support Amicable Dispute Resolution Methods (Journal of Laws Dz.U. 2015 item 1595), calling for application by analogy of regulations on appeals in proceedings on an application to set aside an arbitration award.
2. The fact that the legal evaluation is not binding as it would be in the model of appellate review does not mean that the findings and legal views expressed in the judgment of the state court granting an application to set aside an arbitration award are irrelevant to the arbitral tribunal considering the case anew; the arbitral tribunal must take the judgment into account and draw the relevant conclusions from it within its general obligation to seek an award that will not be subject to being set aside pursuant to review by the state court. The possibility of indirectly instructing the arbitral tribunal by the court considering an application to set aside an arbitration award is provided for only in Civil Procedure Code Art. 1209, but this provision is exceptional, and considering the autonomy of arbitration it cannot serve as the source of generalizations.
3. Guided by the assumption of the complementarity and equal importance of both aspects of substantive legal finality, as well as purposive considerations, the position should be approved that [Civil Procedure Code Art. 1206 §1(6)] also covers the case where an arbitration award is issued in violation of the binding legal finality of a court judgment. Leaving aside the question of whether in this state of affairs the conflict between the arbitration award and the judgment of a state court can be reviewed pursuant to the public policy clause or must be pleaded in the grounds for cassation as a violation of Civil Procedure Code Art. 1206 §1(6), such a conflict can be said to exist only when the arbitration award substantially interferes with the findings covered by the binding force of the state court judgment.
4. Submission of a case to the jurisdiction of an arbitration court removes the dispute between the parties from the jurisdiction of the state courts. The competence of the arbitral tribunal in this respect is not merely in the nature of a preliminary jurisdiction; to the contrary, pursuant to the parties’ intentions, the arbitral tribunal takes the place of the state court with the purpose of independent and complete resolution of the dispute between the parties. The autonomous position of arbitration as an alternative to the state courts means that the parties to the arbitration must expect that review of the arbitral tribunal’s resolution by the state court does not, and must not, constitute the equivalent of appellate review typical for the state court system. Such review, while necessary and universal in a comparative-law context, must serve first and foremost to eliminate abuses of arbitration and the most far-reaching violations, relevant not only from the perspective of the parties but also for the legal system in general.
5. The nature of the review exercised by the state courts over rulings by arbitral tribunals means that a possible error in interpretation of substantive law cannot per se lead to setting aside the arbitration award, unless the error would result in violation of a fundamental principle of the legal order.
6. One element of public policy is the general assumption of the need for stability of long-term states of facts, while the consequences of application of regulations realizing this assumption in specific situations essentially affect the individual interests of the parties, and possible errors in this respect are generally errors in interpretation, escaping the review of the state courts. This is how the view already expressed in the case law of the Supreme Court that an erroneous interpretation of regulations on the limitation on claims does not make an arbitration award inconsistent with fundamental principles of the legal order, should be understood.
7. Violation of a regulation of mandatory applicability is not tantamount to violation of fundamental principles of the legal order.
Publication date: 26-05-2017 | Case no.: I CSK 464/16Key issues: petition to set aside arbitration award
1. That an arbitrator has knowledge about a given legal institution and presents it, evaluates specific legal institutions and financial instruments, conducts lectures and writes publications, does not constitute a circumstance raising doubts, let alone justified doubts, as to his impartiality and independence.
2. Publication of comments of an expert nature on specific subjects, analyzing them, preparing private opinions for other entities resulting from a broader analysis of practices on the foreign exchange market, reflecting all of the market participants and their intentions, does not constitute a circumstance disqualifying an arbitrator.
3. Under Civil Procedure Code Art. 1173 §1, an arbitrator must be an independent and impartial person. These are fundamental characteristics required of an arbitrator, as an element of the right to a fair trial is the party’s right to consideration of its case by an impartial and independent court. This has to do with the absence of relations between the arbitrator and the parties to the dispute that could affect the substance of the award.
4. The IBA Guidelines on Conflicts of Interest in International Arbitration … are designed to assist in the practice of determining the circumstances that may generate justified doubts as to an arbitrator’s impartiality and independence, which circumstances are subject under applicable national law to mandatory disclosure by a candidate for arbitrator, and which are justified by the open-ended nature of the concepts of “impartiality” and “independence.” The guidelines are not of normative relevance, but establish certain standards on how to evaluate specific situations from the point of view of the requirement for the arbitrator’s impartiality and independence. They are commonly recognized in arbitration practice as a document in the nature of best practice, indicating circumstances that enable an assessment, particularly in ambiguous situations. The document sets forth general standards concerning impartiality, independence and disclosure, and a detailed section with examples of conflict of interest, classifying them in terms of the possible occurrence of justified doubts as to an arbitrator’s impartiality and independence.
5. Civil Procedure Code Art. 1174 §2 is devoted to the issue of removal of an arbitrator, providing that an arbitrator may be removed only when circumstances exist generating justified doubts as to his impartiality or independence, although there is a sound argument that the circumstances involving a state court judge can help interpret this section by analogy. When evaluating this condition, objective criteria of assessment are relevant, not the subjective beliefs of the party filing the challenge.
6. In a situation where a party aware of circumstances that could give rise to justified doubts as to an arbitrator’s impartiality or independence does not exercise its rights, it forfeits the right to reserve them until filing an application to set aside the arbitration award (Civil Procedure Code Art. 1193). A party aware of a given circumstance cannot passively wait to see what kind of award is issued in the case and then condition its actions with respect to challenging the arbitrator on the result. What is relevant is that the circumstances relied on by the party were known to the party, and when they were known.
7. Whether a party exercised its right to present to the state court the ruling on the issue of the existence of grounds to remove an arbitrator is relevant to the further course of the proceedings. In a situation where the party did not challenge the arbitrator before the state court pursuant to Civil Procedure Code Art. 1176 §2, the party forfeits this basis for subsequent challenge to the arbitration award using an application to set aside the award relying on the grounds concerning the arbitrator which were previously existing and known to the party.
Publication date: 23-03-2017 | Case no.: V ACa 415/16Key issues: arbitrator, petition to set aside arbitration award
1. Although it is a form of review, a petition [to set aside an arbitration award] is not an appellate instrument, as unlike in an appellate proceeding, the role of the state court is not to reconsider the case resolved by the arbitration award, applying provisions of substantive and procedural law. In the proceeding before the state court initiated by the petition, the court does not examine whether the arbitration award is contrary to substantive law or is grounded in the facts cited in the award, or whether these facts were properly established. The state court considers the case only from the perspective of the grounds for setting aside the award and evaluates the soundness of the petition only in light of the grounds set forth in Civil Procedure Code Art. 1206 §§ 1 and 2, considering at its own initiative only the grounds set forth in Art. 1206 §2.
2. By adopting an arbitration clause, the parties limit their own constitutional right to resort to the courts. When deciding to submit a potential dispute to an arbitration court for resolution, they must be aware of both the positive and negative consequences of including relevant provisions in the arbitration clause. Unlike a state court, an arbitration court considering cases need not strictly apply provisions of substantive law, but may also base its ruling on principles of equity, or rule on the basis of general principles of law. Consequently, review by the state court of rulings by arbitration courts is limited to the instances strictly defined by law.
3. Ruling under principles of equity (ex aequo et bono) consists of seeking a resolution to a dispute in accordance with the directives of fairness and justice, as understood by the arbitrators, regardless of the legal norms in force. This does not mean arbitrariness in the assessment of the case or the ability to ignore the state of facts, and thus the arbitrators must also admit evidence, analyze the collected material, and take into consideration the provisions of the contract in force between the parties.
Publication date: 16-03-2017 | Case no.: I ACa 1070/16Key issues: arbitration agreement, petition to set aside arbitration award
1. There is no disagreement in the legal literature or the case law concerning the separability of an arbitration clause from the “main” contract. It is consistently accepted that the validity of an arbitration clause should be evaluated autonomously. Even when it is included in the form of a clause in the “main” contract, the arbitration agreement is not a provision of the contract, and thus its effectiveness is examined independently.
2. The assessment of the existence of authorization of an attorney-in-fact to conclude the arbitration agreement should be made independently of the assessment of the existence of the attorney’s authority to conclude the legal act which is the source of the legal relationship out of which disputes are to be submitted to the jurisdiction of the arbitral tribunal. Consequently, the assessment of the effectiveness of the authorization to conclude the arbitration clause is independent of the assessment of the effectiveness of the authorization to conclude the “main” contract, and a determination that the attorney-in-fact was duly authorized to conclude the contract will not be controlling for the assessment of whether he was also duly authorized on behalf of the principal to submit disputes arising out of the contract to the jurisdiction of the arbitral tribunal. In other words, the law governing the arbitration agreement itself does not extend to issues connected with the power of attorney, i.e. issues connected with the authorization to conclude the arbitration agreement do not fall within the scope of the statute of the arbitration agreement.
3. The requirement of a power of attorney to make a specific transaction must arise pursuant to a statute ([Civil Code] Art. 98, end of the second sentence), which means that the requirements for this cannot be imposed if not expressly provided for a given action by any statute. No statute provides for such a requirement with respect to the type of power of attorney in relation to an arbitration agreement. This means that there are no grounds for holding that an arbitration agreement could be concluded only by an attorney holding a power of attorney for this specific action; such a power of attorney is therefore not essential for the effectiveness of the arbitration agreement, although obviously it is sufficient.
4. Generally, an arbitration agreement is an act exerting a direct impact on the manner of realization of the legal protection to which the party is entitled. The rank of an arbitration agreement and its procedural consequences are thus serious enough that concluding an arbitration agreement should be treated as an act outside the ordinary course of business. Its effects are of a procedural law nature, shaping the procedural situation of the party bound
by the agreement.
5. In the field of international arbitration, written form [for an arbitration agreement] understood [as the exchange of documents by email] is indeed sufficient, even if it does not meet the requirements for written form provided by the Civil Code.
Publication date: 02-03-2017 | Case no.: V CSK 392/16Key issues: arbitration agreement
Filing of a petition to set aside an arbitration award is an action immediately aimed at enforcement of a claim and consequently interrupts the running of the statute of limitations on the claim.
Publication date: 25-01-2017 | Case no.: VI ACa 1468/16Key issues: arbitration procedure, petition to set aside arbitration award
1. The validity of an arbitration agreement is determined by the regulations in force at the time it was made.
2. Under Art. 697 §1 of the Civil Procedure Code, arbitrability meant the capacity of the parties to independently decide on their rights within the given legal relationship, while under Art. 1157 of the Civil Procedure Code the possibility of submitting a dispute to an arbitral tribunal is determined by its “settleability.” The two definitions of arbitrability differ only on a linguistic level, but on the conceptual level they are essentially the same.
3. The condition of arbitrability is the abstract ability of the parties, leaving aside the concrete circumstances and legal conditions, to dispose of the rights arising out of the legal relation between them, not the possibility of their concluding a specific judicial settlement or whether such a settlement would be permissible under Art. 203 §4, in connection with Art. 223 §2, of the Civil Procedure Code, applying Art. 917 and Art. 58 of the Civil Code. This means that certain categories of legal relations are deprived of arbitrability, not certain categories of claims arising out of them. The possibility of submitting a dispute
to arbitration concerns the abstractly defined legal relations, not the claims arising out of them.
4. Arbitrability is determined by the substance of the legal relation and the disputes arising out of it, which the parties may freely dispose of, and not the nature of the claims arising out of those relations. From this perspective, neither the nature of the claims (for performance, for a declaration, or for determination of a legal relation or right), nor the nature of the court’s ruling concerning the given claim (e.g. declarative or constitutive), nor the effects are such ruling are relevant.
5. A dispute concerning exclusion of a shareholder from a limited-liability company may be the subject of an effective arbitration agreement under Art. 1157 in connection with Art. 1163 §1 of the Civil Procedure Code.
Publication date: 15-12-2016 | Case no.: V ACz 1309/16Key issues: arbitrability of dispute, arbitration agreement
1. Under Art. 1194 §2 of the Civil Procedure Code, in every instance, and thus also when ruling under general principles of law and equity, the arbitral tribunal shall take into consideration the provisions of the contract and the established customs applicable to the given legal relation. Such established customs include lex mercatoria (autonomous commercial law). Under either field, the basis for the resolution of the validity of the claim by the arbitral tribunal, depending on the procedural stance of the respondent, may be the relevant institution connected with the defence of setoff.
2. The legal construction of setoff may be relevant also for the dispute before the arbitral tribunal. In particular, once the dispute is pending before the tribunal, assertion by the opposing party of an effective defence (under substantive and procedural law) of setoff, depending on the substance of the overall procedural defence by the respondent in that proceeding, may exert the effect of acknowledgement of the debt by the party asserting that defence in the proceeding, and in further consequence lead to a kind of modification of the dispute in the proceeding (depending on the position of the party initiating the proceeding), which becomes an evaluation of the existence of the claim covered by that defence.
3. In a situation in which the existence of the claim determined exclusively by the defence of setoff constitutes the subject of the dispute in another proceeding, there are no grounds for finding that the plaintiff has a legal interest in obtaining a declaration that it was effectively set off. … Given such arrangement of the procedural relations between the parties, the arbitration agreement made by the parties applies to issues covered by the agreement within the meaning of Civil Procedure Code Art. 1161 (as it is connected with the issue of effective performance by the respondent of the obligation covered by the agreement), and it cannot be found that the agreement has ceased to be in force (Art. 1165 §2).
4. The construction of the institution of setoff in the specific conditions of the proceeding before the arbitral tribunal may speak in favour of considering it in that proceeding (if it was connected with acknowledgement of the claim covered by the arbitration agreement), unless the permissibility of asserting such defence (e.g. in a proceeding for an order for payment) is expressly excluded. Analogous reasons may constitute a basis for refusing enforcement of the arbitration award by the state court under Civil Procedure Code Art. 1214 §3(2).
5. After an arbitration award is enforced by issuance of an enforcement clause for the award pursuant to Civil Procedure Code Art. 1214 §2 (also considering the repealed portion of Art. 777 §1(2)) of the code), the award constitutes a writ of enforcement coming from a court, and consequently Art. 840 of the code may be applicable.
6. Leaving to the court the discretion to select the method of security does not mean that the choice can be arbitrary. The court is bound by the demand stated by the party applying for the security as to the method of security, the nature of which may relate only to the purpose of the proceeding, and in consequence may not affect the realm of procedural actions the other party is entitled to by law in terms of its freedom to exercise the legal means afforded to it in another proceeding. There is no justification in the civil procedure regulations in question for obstructing the course of proceedings before an arbitral tribunal.
Publication date: 22-11-2016 | Case no.: I ACz 1997/16Key issues: interim measures, jurisdiction of arbitral tribunal
1. The set of fundamental principles of procedure before the arbitral tribunal includes only the rules arising under the Civil Procedure Code and the rules agreed by the parties, which does not include the custom [under §9(3) of the Code of Best Practice for Permanent Arbitration Courts, providing that a party applying for default appointment of an arbitrator subject to nomination by both parties or by the previously appointed arbitrators should notify the appointment authority of all candidacies considered and rejected by the parties or the arbitrators and none of those persons should be appointed in the default procedure].
2. The legal classification of a contract by the arbitral tribunal is not subject to review on a petition to set aside an arbitration award.
Publication date: 18-11-2016 | Case no.: V ACa 67/16Key issues: arbitration procedure, arbitrator, petition to set aside arbitration award
The assertion of the impermissibility of the cassation appeal because it does not meet the requirement set forth in Art. 3982 §1 of the Civil Procedure Code concerning the amount in dispute in the cassation appeal is groundless. The requirement set forth in that provision does not apply to a cassation appeal in a proceeding for recognition and enforcement of an arbitration award or a settlement concluded before an arbitral tribunal (Civil Procedure Code Art. 1215 §3), because the permissibility of a cassation appeal is governed in each proceeding in a specific manner, which means that the reference provided in Civil Procedure Code Art. 13 §2 does not apply to the issue of the permissibility of this instrument of review in proceedings other than a civil trial.
Publication date: 27-10-2016 | Case no.: V CSK 66/16Key issues: arbitration agreement, recognition and enforcement of foreign arbitration award
The rule provided in Art. 5 of the Civil Code cannot be applied to institutions of procedural law. … Thus abuse of a subjective right is not, for example, a procedural act such as filing a statement of claim, but pursuing claims via the courts when this constitutes exercise of a right contrary to principles of social coexistence or the socioeconomic purpose of the right. … In asserting the defence of the arbitration clause, the defendant did not exercise any subjective right arising out of a civil-law relationship, but only a procedural entitlement arising under Art. 1165 §1 of the Civil Procedure Code.
Publication date: 24-10-2016 | Case no.: V ACz 1118/16Key issues: arbitration agreement