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Order of the Supreme Court of Poland dated 24 May 2018 Case No. V CSK 6/18

Prohibition of substantive control (of legitimacy) of an arbitration award is related to the essence of the application of the public policy clause. When the clause is used, it is not the point that the award which is subject to the assessment must be consistent with all relevant absolutely binding provisions of law. The point is whether the award has had an effect contrary to the fundamental principles of the national legal order. Procedural public policy may be a basis for assessment of an award in two respects. Firstly, subject to assessment is the compliance of the procedure which has led to issue of the arbitration award with the fundamental procedural principles of legal order, and secondly, subject to assessment are the effects of the award from the point of view of their compliance with the procedural legal order, i.e. whether they are compatible with the procedural law system.   

Publication date: 24-05-2018 | Case no.: V CSK 6/18

Key issues: petition to set aside arbitration award

id: 20531

Warsaw Court of Appeal order dated 24 May 2018 Case No. VII AGo 40/18

[A]rt. 1213 § 1 of the Polish Civil Procedure Code is a lex specialis (special provision) with respect to Art. 129 § 2 of the PCPC. Therefore, in proceedings concerning enforcement of an arbitration award it is not permissible to file – instead of an original or officially certified arbitration agreement – a copy thereof certified to be a true copy of the original by an advocate.

Publication date: 24-05-2018 | Case no.: VII AGo 40/18

Key issues: recognition and enforcement of domestic arbitration award

id: 20554

Łódź Court of Appeal judgment dated 19 April 2018 Case No. I ACa 1557/16

1. If (…) a petition to set aside an arbitration award is based on the fact that the award was obtained by means of an offence or the award was issued on the basis of a forged or altered document or the petition is based on the charge of res iuducata, the petition may be filed within the time limit calculated from the day when the party learned of that ground. 

2. An arbitration agreement is a contract to which provisions of the Polish Civil Code apply.

Publication date: 19-04-2018 | Case no.: I ACa 1557/16

Key issues: arbitration agreement, petition to set aside arbitration award

id: 20553

Kraków Court of Appeal judgment dated 15 March 2018 Case No. I Aga 90/18

1. Relying on objective illegality of actions of the other party to an agreement and possible concurrent grounds of liability does not override the competence of an arbitral tribunal.

2. [A]n arbitration award may be assessed in the context of procedural public order. Subject to assessment is the compliance with the fundamental procedural principles of legal order of procedure that have led to the delivery of the arbitration award (…).

3. An allegation of infringement of Art. 1183 of the Polish Civil Procedure Code may be justified, if an arbitral tribunal conducts proceedings in omission of evidence offered by a party, but only if this evidence was necessary to resolve the case (…).

4. The control of elements comprising an arbitration award cannot be of the same scope as substantive control (of validity) of such an award.

5. When hearing a case, an arbitral tribunal may be guided by legal intuition, and it does not need to – unlike a state court – strictly apply the provisions of substantive law, but may base its ruling also on the principles of equity or good faith. According to the public policy clause expressed in Art. 1206 § 2 point 2 of the Polish Civil Procedure Code, an arbitration award shall be set aside when effects determined by the award are incompatible with a specific norm which is one of the fundamental principles of this public policy (…).

6. The arbitration award that protects one of the partners encumbered with the contractual risk of failure of the business venture does not infringe upon trading certainty and the principle of trading security, in the situation when the investor (the Fund) could limit its own economic risk resulting from engagement of funds by correct, consistent with the agreement, and, above all, loyal conduct.

7. Application of the public policy clause is not aimed at verification whether the assessed arbitration award id compliant with all applicable absolutely binding provisions of law, but whether effects of such an award are contrary to the fundamental principles of national legal order.

Publication date: 15-03-2018 | Case no.: I Aga 90/18

Key issues: arbitration award, arbitration procedure, jurisdiction of arbitral tribunal, petition to set aside arbitration award

id: 20559

Judgment of the Court of Justice of 6 March 2018, C-284/16, Slovak Republic v. Achmea BV

Articles 267 and 344 TFEU must be interpreted as precluding a provision in an international agreement concluded between Member States, such as Article 8 of the Agreement on encouragement and reciprocal protection of investments between the Kingdom of the Netherlands and the Czech and Slovak Federative Republic, under which an investor from one of those Member States may, in the event of a dispute concerning investments in the other Member State, bring proceedings against the latter Member State before an arbitral tribunal whose jurisdiction that Member State has undertaken to accept.

Publication date: 06-03-2018 | Case no.: C-284/16

Key issues: arbitrability of dispute, arbitration agreement, investment arbitration, jurisdiction of arbitral tribunal

id: 20532

Polish Supreme Court judgment dated 7 February 2018 Case No. V CSK 301/17

1. The phrase “fundamental principles of the legal order” used in Art. 1206 §2(2) of the Civil Procedure Code refers to such a violation of provisions of substantive law that will result in violation of the principles of the rule of law, and the award infringes the overriding legal principles in force in the Republic of Poland and conflicts with the legal order, that is, it violates principles of the political and socioeconomic system.

2. The evaluation conducted in the specific case as to whether the ruling violates fundamental principles of the legal order must be made cautiously, and the wording used in the code should be interpreted narrowly.

3. When deciding to include an arbitration clause in a contract, the parties to a civil relationship consciously waive the formal protection provided to the participants in a judicial trial by various provisions of the Civil Procedure Code…. Consequently, they also agree to procedural conditions that are subject to significant autonomy in the course of the arbitration proceeding, leading to minimal external oversight of awards by the arbitral tribunal….

4. Procedural public policy may also be grounds for review of an arbitration award, in two aspects: the evaluation of the consistency of the procedure leading to issuance of the ruling by the tribunal with the fundamental procedural principles of the legal order, and the effects of such ruling from the point of view of their compliance with procedural public policy, that is, whether they can be reconciled with the system of procedural law.

5. The notion of the “grounds” [for an award] within the meaning of Art. 1197 §2 of the Civil Procedure Code does not literally mean “justification” [of a judgment] within the meaning of the Civil Procedure Code, and this provision deliberately uses the word “grounds” and not “justification.” However, the grounds must contain the elements of reasoning of the arbitral tribunal which demonstrate the correctness (soundness) of the ruling in light of the entirety of the material gathered in the case.

6. Conduct of a fair proceeding is the task of both the state court and the arbitral tribunal. That the arbitral tribunal is not bound by regulations of procedure before a state court and under the Civil Procedure Code itself establishes the rules and method of proceeding before it, as agreed by the parties and as it deems proper, does not mean arbitrariness with respect to the principles of judicial civil procedure of an adversarial nature.

Publication date: 07-02-2018 | Case no.: V CSK 301/17

Key issues: petition to set aside arbitration award

id: 20521

Warsaw Court of Appeal judgment dated 20 February 2017 Case No. VI ACa 871/16

1. A state court takes into account the grounds for setting aside an arbitration award set out in Art. 1206 § 1 of the Polish Civil Procedure Code (…) only upon a request of a party. Therefore, a state court is, in this regard, bound by the grounds cited in the petition.

2. [I]n proceedings initiated by a petition to set aside an arbitration award, a state court does not examine the accuracy of the assessment of evidence made by the arbitral tribunal, the correctness of factual findings, the accuracy of interpretation and application of the substantive law. The legitimacy of a specific method of resolving the disputed legal relationship by an arbitral tribunal is neither the subject to assessment by a state court. The essence of a petition to set aside an arbitration award is to provide a review mechanism respecting, on the one hand, the separateness and autonomy of arbitration, and, on the other hand, preventing the functioning in the legal system of rulings rendered by non-state courts in breach of the rule of law. Proceedings initiated by a petition to set aside an arbitration award do not, therefore, result in reconsideration of the merits of the dispute between the parties, but is only to verify the petitioner’s allegations concerning the existence of the grounds raised in the petition and set out in Art. 1206 § 1 of the PCPC, and provide an assessment as to whether any of the grounds provided for in Art. 1206 § 2 of the PCPC exist (…).

3. [T]he notion of the public policy clause within the meaning of Art. 1206 § 2 (2) of the PCPC is commonly identified with the fundamental constitutional principles and the prime principles of particular fields of law, including civil, family and procedural law. An arbitration award may be set aside on the basis of the public policy clause, if such an award is contrary to a specific, mandatory legal norm included in the aforementioned principles. In the case law of the Polish Supreme Court (…) it has been indicated, for example, that the fundamental principles of the Polish legal order include, among others, the principle of freedom of will in civil law, the pacta sund servanda principle and the principles setting limits of the freedom to form contracts and consequently the limits of the pacta sund servanda principle, as wells as the principle of freedom of business activity, the principle of contractual justice and the principle of compensatory nature of liability for damages (…).

4. [P]ursuant to Art. 1197 § 2 of the PCPC, an arbitration award shall contain the reasons for the award. However (…) it should be assumed that the requirement set out in Art. 1197 § 2 of the PCPC is not equivalent to the obligation of an arbitral tribunal to draw up a reasoning containing all elements provided for in Art. 328 § 2 of the PCPC. As the Polish Supreme Court indicates, to recognize that the requirements set out in Art. 1197 § 2 of the PCPC have been fulfilled, it is sufficient to be able infer from the reasons drawn up by the arbitral tribunal what premises were applied by the arbitral tribunal when the tribunal ruled on the parties’ demands (…)

5. No award with respect to capitalised interest may also justify (…) the allegation that the arbitration award violated Art. 481 § 1 of the Polish Civil Code. However, taking into account particularly the dispositive nature of this legal norm, it cannot be classified as one of the prime principles of civil law. Therefore, such a violation cannot be deemed a ground for setting aside an arbitration award on the basis of Art. 1206 § 2 (2) of the PCPC. 

Publication date: 20-12-2017 | Case no.: VI ACa 871/16

Key issues: arbitration award, petition to set aside arbitration award

id: 20573

Supreme Court of Poland order dated 1 December 2017 Case No. I CSK 170/17

1. If an assigned claim was covered by an arbitration clause, the clause also exerts effects with respect to the assignee, which means that the assignee is bound inter alia by the negative effect of the clause in the form of exclusion of the jurisdiction of the state courts over disputes concerning the claim.

2. Declaration of the bankruptcy of the assignor of a claim after the assignment is made does not affect the effectiveness of the arbitration clause covering the assigned claim in relations between the current holder—the legal successor of the bankrupt (the assignee)—and the defendant. In that situation, at the time of declaration of bankruptcy the bankrupt is no longer a party to the clause, the effects of which passed to the assignee as properties of the assigned claim. Art. 142 and 147 of the Bankruptcy Law [prior to the 2015 overhaul introducing the Reorganization Law] referred to disputes to which the bankrupt is a party.

3. Although Art. 142 and 147 of the Bankruptcy Law used the broad phrase “arbitration clause made by the debtor,” this provision cannot be understood to mean that it provides for the loss of force of an arbitration clause to which the bankrupt was originally a party, regardless of whether this entity is still a party to the legal relationship covered by the clause.

4. Under Art. 1161 §1 of the Civil Procedure Code, an arbitration clause must indicate the subject of the dispute or the legal relationship under which the dispute has arisen or may arise. This necessity is intended to eliminate clauses covering the totality of existing or future disputes between the parties. However, the assessment of whether the clause meets this requirement must consider not only the wording of the clause, but also, in interpreting it, the other relevant circumstances in which the parties’ declarations were made, in this context linguistic and situational circumstances, as well as the parties’ intent.

5. The legal relationship to which the arbitration clause applies need not be expressly stated in the clause, but may also be determined through interpretation of the clause. As an arbitration clause is an expression of the autonomy of will of rationally acting parties, its interpretation should also comply with the principle of favor validatis, seeking, within the limits of permissible interpretation, to uphold the effectiveness of the parties’ declarations.

6. The recent legal literature and case law stress the trend toward broad interpretation of an arbitration clause, based on avoiding a split of competencies between the arbitral tribunal and the state court within the same legal relationship. The demand of this interpretation of an arbitration clause (in favorem jurisdictionis arbitrii) is apt, particularly in international trade, in disputes between businesses.

7. Submission to an arbitral tribunal of disputes arising out of a contractual relationship means that the competence of the tribunal extends to all claims for performance of the contract, claims arising in the event of non-performance or improper performance of the contract, claims for disgorgement of unjust enrichment arising in the event of invalidity or repudiation of the contract, as well as tort claims if they arise out of an event that also constitutes non-performance or improper performance of the contract.

Publication date: 01-12-2017 | Case no.: I CSK 170/17

Key issues: arbitration agreement, jurisdiction of arbitral tribunal

id: 20520

Supreme Court of Poland order dated 13 October 2017 Case No. I CSK 33/17

1. The provisions of the Civil Code may be applied to an arbitration agreement only on issues not covered by a separate procedural regulation, and taking into account the specific nature of an arbitration agreement as an institution of procedural law. In other words, reference to substantive law in the event of a gap in the procedural regulation must be preceded in each instance by a consideration of whether the provisions of substantive law are appropriate in this case, given the procedural nature of an arbitration agreement, and if so, in what shape they should be applied.

2. [Art. 1161 §2 of the Civil Procedure Code] excludes framing an arbitration clause so that it violates the principle of equality, in particular by entitling only one of the parties to elect between commencing a case before the state court or the arbitral tribunal. This therefore applies to the wording of the clause and does not bar a situation in which one of the parties to the arbitration agreement, as a consequence of making of the clause by a falsus procurator, obtains the power to ratify it, and in consequence to be bound by the clause. If ratification occurs, both parties will be bound by the clause, and the assessment of its content will be governed inter alia by Civil Procedure Code Art. 1161 §2. This situation does not differ from instances in which ratification under Civil Code Art. 103 would involve an agreement of substantive law.

3. Civil Procedure Code Art. 1167 establishes the rule that a power of attorney to make a legal act granted by a business, regardless of the nature of the act, also empowers the holder to enter into an arbitration agreement. The legislature thus accepted that empowerment to make a transaction also implies empowerment to select arbitration as the procedure for resolving disputes arising out of the transaction, unless otherwise provided in the power of attorney. This provision erases the distinction between authority to enter into a legal act and authority to enter into an arbitration clause with respect to disputes involving that act. The type of power of attorney necessary to make the legal act is determined by statute (Civil Code Art. 98), and if the power of attorney is effectively granted, empowerment to make an arbitration clause is a derivative of that power of attorney.

4. Civil Procedure Code Art. 1167 should be regarded as the legislature’s response to the interpretation adopted in the case law, regarded as rigorous, with respect to the requirements for empowerment to conclude an arbitration clause. Considering that the scope of application of this solution is limited to businesses, this argues for giving it broader meaning than being limited to a power of attorney of a specific nature.

5. Civil Procedure Code Art. 1167 detaches the effectiveness of authority to conclude an arbitration agreement from its autonomous classification as an act that is or is not within the ordinary course of business, making it dependent only on the existence of effective authorization to make a legal act.

Publication date: 13-09-2017 | Case no.: I CSK 33/17

Key issues: jurisdiction of arbitral tribunal, settlement before arbitral tribunal

id: 20519

Katowice Court of Appeal order dated 4 September 2017 Case No. V ACo 11/17

1. From Art. II of the New York Convention it follows that recognition of an agreement as being in writing is not conditional upon a handwritten signature, which – according to Art. 78 § 1 of the Polish Civil Code – is an obligatory element of the written form of a legal act in the national legal order . Art. II (2) of the New York Convention stipulates that an agreement in writing means not only a contract with an arbitral clause contained therein or a compromise, but also an agreement concluded not only by means of an exchange of letters which can be (but do not have to be) signed but also by means of an exchange of telegrams, which do not contain the handwritten signature. In this light, it is undoubtedly important that a relevant contractual provision concerning the arbitration clause should be included in the document containing the content recorded in writing, which enables to determine who made the statement contained therein, so that the other party can get familiar therewith as a result of exchange of the documents.

2. Art. V (1) of the New York Convention stipulates that recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that: a) the parties to the agreement referred to in Article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or b) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or c) the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized or enforced; or d) the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or e) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

3. Pursuant to Art. V (2) of the New York Convention, recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: a) the subject matter of the difference is not capable of settlement by arbitration under the law of that country; or b) the recognition or enforcement of the award would be contrary to the public policy of that country.

4. As regards the public policy clause (…). In the case law of the Polish Supreme Court it was explained that with respect to this issue the views of the judicature concerning the fundamental principles of the legal order, which are currently stipulated in Art. 1214 § 3 (2) of the PCPC, apply. These are therefore the principles arising out of the Constitution and the principles governing particular fields of law, a violation whereof is incompatible with the very concept of a specific legal institution in Poland, not just with particular provisions regulating the same institution in the country of origin of the arbitration award and in Poland as the state of enforcement of this award (…). This leads to the conclusion that in the proceedings concerning enforcement of the arbitration award, its substantive control is not allowed (…).

Publication date: 04-09-2017 | Case no.: V ACo 11/17

Key issues: arbitration agreement, New York Convention, recognition and enforcement of foreign arbitration award

id: 20564

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