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Wrocław Court of Appeal judgment dated 31 August 2017 Case No. I ACa 536/17

1. Under Civil Procedure Code Art. 1183, “In a proceeding before the arbitral tribunal the parties shall be treated equally. Each party shall have the right to be heard and to present its arguments and evidence in support thereof.” Thus, in light of this requirement of Polish law, it should be recognized that the principle of equality of the parties is an overriding principle of civil procedure, even if not expressly addressed in any other provision of the Civil Procedure Code.

2. Impartiality is maintained when the arbitrator maintains the same distance in relation to each of the parties, is neutral, does not show favour, and also does not discriminate against either of the parties and is not prejudiced against any of the parties. These circumstances involving the failure to maintain impartiality by the arbitrator deciding the case are relevant under the grounds for setting aside an arbitration award. And thus, lack of impartiality of the arbitrator is the basis for an allegation of violation of the fundamental principles of procedure before the arbitral tribunal, as well as an allegation of inconsistency with fundamental principles of the legal order of the Republic of Poland (Civil Procedure Code Art. 1206 §1(4) and 1206 §2(2)).

3. The debtor of an attached claim should tender performance to the creditor. Fulfilment of such performance results in extinguishment of the debt to the original creditor. It is irrelevant whether this performance occurred outside a judicial enforcement proceeding or during the course of such proceeding as a result of measures taken by the court bailiff. Thus including such claim in an arbitration award violated a fundamental principle of the public policy of the Republic of Poland.

Publication date: 31-08-2017 | Case no.: I ACa 536/17

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

id: 20446

Białystok Court of Appeal judgment dated 28 June 2017 Case No. I ACa 79/17

1. [T]he claimant and the respondent agreed (…) that “the parties shall try to resolve any disputes which may result from performance of the contract in an amicable way. Should it prove impossible to resolve a dispute in such a way, the dispute shall be resolved by the Polish state court based in O.”. (…) the phrase “in an amicable way” should rather be interpreted as a call for pre-litigation mediation. (…). The fact that the term “arbitral tribunal” was omitted from the analysed fragment makes it impossible (…) to conclude that in this case the dispute was to be resolved by means of arbitration.

2. [T]he essence of the institution of the arbitration agreement is a firm referral of a dispute to arbitration. If a contract does not stipulate that a dispute is to be resolved by an arbitral tribunal, then no arbitration agreement is effectively concluded (…); an arbitration agreement is neither concluded, if an arbitral tribunal (or an abstract procedure of amicable dispute resolution) had only a conciliatory function, and its actions were limited only to mediation aimed at having the parties conclude a settlement (…).  

Publication date: 28-06-2017 | Case no.: I ACa 79/17

Key issues: arbitration agreement

id: 20560

Supreme Court of Poland judgment of 14 June 2017 Case No. IV CSK 482/16

The Supreme Court is authorized to interpret the content of the arbitration clause, as the scope of its application is subject to examination by the court on its own initiative because it may result in dismissal of the claim (Art. 1165 §1 of the Civil Procedure Code). In making such interpretation, it must be assumed that the principal route for pursuing claims is through the courts. The interpretation of the arbitration clause thus may not extend so far that the competence of the arbitral tribunal is accepted contrary to the express intention of the parties as set forth in the agreement.

Publication date: 14-06-2017 | Case no.: IV CSK 482/16

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

id: 20518

Warsaw Court of Appeal judgment dated 13 June 2017 Case No. VI ACa 1387/16

1. [T]he proceedings before an arbitral tribunal do not have to consist of two instances. It depends only on the choice of the parties. So unless the parties agree otherwise, the proceedings before an arbitral tribunal consist of one instance (…).

2. [A]n arbitration award issued in the Republic of Poland may be set aside by a state court solely in proceedings initiated by filing of a petition to set aside the award. Therefore, it is not possible to control other verdicts of an arbitral tribunal, unless a special provision provides otherwise (…).

3. [O]nly such absolutely binding norms (…) which are deemed to be of fundamental (special) importance in a particular legal order, may justify a reference to the public policy clause. After all, application of the public policy clause is not intended to correct all shortcomings of an arbitration award. This results from the autonomy granted to arbitration. Certainly, a wrong settlement of the case in terms of facts or law is generally not sufficient to consider that an arbitration award is contrary to public policy clause. A state court is not entitled to examine the substantive legitimacy of an arbitration award.

4. [A]rt. 123 of the Polish Civil Code shall not be considered as a fundamental (basic) norm of the legal order. (…). Therefore, a possible infringement of Art. 123 of the Polish Civil Code cannot constitute an effective basis for a petition to set aside an arbitration award.

Publication date: 13-06-2017 | Case no.: VI ACa 1387/16

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

id: 20574

Polish Supreme Court judgment dated 26 May 2017 Case I CSK 464/16

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 464/16

Key issues: petition to set aside arbitration award

id: 20440

Warsaw Court of Appeal judgment dated 12 May 2017 Case No. I ACa 340/16

1. The mere fact that the parties referred a dispute to arbitration cannot (…) make such an agreement contrary to the principles of community life, if such method of dispute resolution is permitted by law.

2. The principle of equal rights of the parties is one of the main assumptions of arbitration in general. A special manifestation thereof is the requirement that no provision of the arbitration agreement violates the equality of the parties (Art. 1161 § 2 of the Polish Civil Procedure Code). First of all, this requirement applies to the constitutive elements of an arbitration agreement. Nonetheless, it should be assumed that it also applies to provisions which are included together with the arbitration agreement in the same document, therefore, in particular to provisions covering the elements of understandings (contracts, agreements) of the parties as to proceedings before an arbitral tribunal. 

3. The fact that a petitioner is not at the moment interested in having the dispute resolved by an arbitral tribunal does not make the arbitration agreement contrary to principles of community life.

Publication date: 12-05-2017 | Case no.: I ACa 340/16

Key issues: arbitration agreement

id: 20567

Katowice Court of Appeal judgment dated 23 March 2017 Case No. V ACa 415/16

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 415/16

Key issues: arbitrator, petition to set aside arbitration award

id: 20441

Warsaw Court of Appeal judgment dated 16 March 2017 Case No. I ACa 1070/16

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 1070/16

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

id: 20442

Polish Supreme Court order dated 2 March 2017 Case No. V CSK 392/16

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 392/16

Key issues: arbitration agreement

id: 20439

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