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Polish Supreme Court judgment dated 28 November 2013 Case No. IV CSK 187/13

1. Because an arbitration award may be set aside only for grounds set forth in the law which are generally considered at the court’s own motion, while, with the exception of the invalidity of the proceedings before the court of second instance, a cassation appeal is considered within the bounds of the grounds stated for the cassation appeal, a cassation appeal in a proceeding seeking to set aside an arbitration award may — apart from the instance of invalidity of the proceedings before the court of second instance — be granted only if one of the grounds asserted in the cassation appeal is upheld containing an allegation which justifies or may justify a finding of grounds for setting aside the arbitration award asserted in the petition to set aside the award or considered at the court’s own motion.

2. The separate listing of the circumstances [in Civil Procedure Code Art. 1206 § 1 (2), (4) and (5)] as grounds for setting aside an arbitration award leads to the conclusion that they are excluded from the scope of application of the public policy clause.

3. For the arbitration court to conduct the proceeding ignoring the proffer of evidence, when the party has not given up introduction of the evidence and the evidence was necessary for resolution of the case, will constitute a violation of [the second sentence of Civil Procedure Code Art. 1183], setting forth one of the fundamental principles of arbitration procedure.

Publication date: 28-11-2013 | Case no.: IV CSK 187/13

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

id: 20158

Gdańsk Court of Appeal judgment dated 28 November 2013 Case No. I ACa 550/13

1. The view cannot be shared that in connection with the dispute that had arisen the contractor should have brought about the appointment of a dispute adjudication board and presented the dispute to it, and the consequence of failure to take such actions is the loss of the possibility of effectively pursuing the claim. The section [of the FIDIC contract conditions] on Claims, Disputes and Arbitration does not provide for such sanctions.

2. In proceedings before the arbitration court the arbitrators are not bound by decisions of the [FIDIC] dispute adjudication board, whose decisions should be treated as evidence in the case. The decision by the dispute adjudication board cannot be treated analogously to an arbitration award, nor is the proceeding before the board a part of the proceeding before the arbitration court.

3. The contracting entity was properly informed of the need to perform additional works and did not dispute the need to perform them. It thus may not effectively allege that payment for such works violates fundamental principles of the legal order because public monies were involved in financing the works.

Publication date: 28-11-2013 | Case no.: I ACa 550/13

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

id: 20396

Polish Supreme Court order dated 7 November 2013 Case No. V CSK 545/12

1. Under the circumstances of the specific case, it is essential that the parties making an arbitration clause fulfilled the requirements set forth in Civil Procedure Code Art. 1161 §1 to adequately identify the subject matter of the arbitration clause. Precise determination of this must adequately identify the legal relationship which is subject to submission to the arbitration court for consideration.

2. Submission to an arbitration court of disputes arising out of a contractual relationship demarcates its authority to determine the existence, effectiveness and validity of the contract, any claims for performance of the contract, claims arising in the event of non-performance or improper performance of the contract, claims for restoration of consideration provided without foundation which arise in the event of the ineffectiveness of the contract or renunciation of the contract, tort claims if they arise out of an event which constitutes non-performance or improper performance of the contract, and, depending on the parties’ agreement, disputes arising against the background of a settlement concluded with respect to a claim arising out of the contract which contained an arbitration clause.

3. An arbitration clause concerns the broadly understood jurisdiction of the court to consider a case, and its fundamental effect is exclusion of the jurisdiction of the state courts in favour of the authority of the arbitration court. It therefore falls within the broadly understood functional definition of a procedural act, highlighting its subject matter and effects and the assumption that procedural acts should not be limited to unilateral acts.

4. There are exceptions to the rule that an arbitration clause is binding on the parties that made it, including exceptions concerning expansion of the bounds of the arbitration clause to include persons who are legal successors of the parties, under general as well as specific grounds, within the legal relationship submitted to consideration by the arbitration court.

5. The scope of examination of a court considering the defence of an arbitration clause which if granted would result in dismissal of the statement of claim (Civil Procedure Code Art. 1165 §1) includes not only determination of the fact of existence of the agreement submitting the dispute to consideration by the arbitration court, but also whether the plaintiff’s claim, as expressed in the relief sought and the factual allegations in support of the claim, falls within the subjective and objective scope of the agreement. The necessity to consider this defence at the stage before joining issue on the merits of the case cannot be regarded as meaning that it is impermissible to address any substantive legal issues at all. If therefore the allegation that the claim asserted in the statement of claim falls within the scope of an arbitration clause requires examination of the content of the contract and the mutual intent of the parties that concluded it, the court may not decline to make such findings and resolve these issues.

Publication date: 07-11-2013 | Case no.: V CSK 545/12

Key issues: arbitration agreement, jurisdiction of arbitral tribunal

id: 20226

Kraków Court of Appeal order dated 24 October 2013 Case no. I ACz 1722/13

1. Under Art. 1197 §3 of the Civil Procedure Code, an arbitration award is a less formalized document than a state court judgment. In particular, it should be agreed that the identification of the parties to the proceeding before the arbitral tribunal does not have to be included in the caption of the award, but at any place in the award. It should be deemed sufficient to include the designation of the parties in the operative wording of the award using the phrase “awards against respondent X in favour of claimant Y the amount Z,” or to identify the parties in the justification for the award, which is an integral part of the award.

2. Art. 1214 §3 of the Civil Procedure Code has to do with a situation in which enforcement of the arbitration award would result in violation of [fundamental principles of the legal order]. This provision thus requires attention to the substantive content of the arbitration award, that is, to assess the adjudicated claim in terms of the permissibility of its realization in light of fundamental principles of the legal order of the Republic of Poland. This does not refer however to formal irregularities committed by the arbitral tribunal.

Publication date: 24-10-2013 | Case no.: I ACz 1722/13

Key issues: arbitration award, recognition and enforcement of domestic arbitration award

id: 20426

Polish Supreme Court judgment dated 11 October 2013 Case No. I CSK 769/12

1. Participation in a judicial proceeding by entities lacking judicial capacity would result in the invalidity of the proceeding, while issuance of an arbitration award with respect to such entities would be regarded as a violation of the fundamental principles of the legal order of the Republic of Poland, because it would violate one of the fundamental procedural rules that only a party vested with judicial capacity can be a party to proceedings. Moreover, such an award would also violate the fundamental principle of civil law that only entities vested with legal capacity can be the subject of civil-law rights and obligations.

2. If a party raises the objection that the arbitration court lacks jurisdiction or the objection that a demand asserted by the opposing party exceeds the bounds of the arbitration clause (Civil Procedure Code Art. 1180 §2), and the arbitration court deems these objections unfounded, the arbitration court may issue an award, stating therein that it deemed the objections raised to be unfounded, or overrule the objections in a separate order. In the first instance, the correctness of the position of the arbitration court on the objection raised by the party may be reviewed in a petition to set aside the arbitration award. However, if the arbitration court issues an order overruling the objection, review of the correctness of this position by the state court may occur only under the procedure provided for in Civil Procedure Code Art. 1180 §3, i.e. by the party who raised the objection applying to the state court for a ruling within two weeks after service of the order on the party. The party’s failure to initiate such procedure for review of the order issued by the arbitration court deprives the party of the possibility of effectively basing a petition to set aside the arbitration award on the same objections constituting grounds for a petition to set aside an arbitration award under Civil Procedure Code Art. 1206 §1 (1) and (3).

3. The arbitration court’s violation of regulations of law, even regulations that are mandatorily applicable, does not necessarily mean violation of fundamental principles of the legal order, even if the arbitration court resolves the dispute according to the law governing the given relationship, when under Civil Procedure Code Art. 1194 §1 the parties did not authorize it to decide on the basis of general principles of law or equity.

4. The intervention by the arbitration court with respect to the demand presented concerned … the method of fulfilment of the performance demanded. In procedural law there are no more specific rules of a fundamental nature referring to ruling on the manner of fulfilling the performance demanded in the statement of claim by several persons. The case law permits a certain intervention by the court here, e.g. awarding the demanded amount in solidum instead of jointly and severally, and vice versa. … From the point of view of the principle that it is up to the parties to frame their demands [dyspozytywność] it is essential that the identity of the subject of the demand be maintained, and the scope and factual grounds justifying upholding the demand. With respect to the demand that was asserted, the arbitration award maintained the identity of the debtor and the creditor, the type of relief, its amount and indivisibility, and also the factual grounds justifying granting the relief.

5. The essence of this agreement [a consortium] is at least similar to the agreement of an ordinary partnership [spółka cywilna], and sometimes contains the essential elements thereof, which justifies application of the regulations governing ordinary partnerships as relevant to the relations between members of the consortium, including the regulations concerning joint commonality [wspólność łączna]. … It does not violate the public policy clause for the arbitration court to award damages to three entities “jointly” despite the lack of a legal relationship among these entities creating joint commonality among them.

6. The arbitration court’s ruling on the basis of the regulations of applicable law, if the parties do not provide otherwise (Civil Procedure Code Art. 1194 §1), is one of the fundamental principles of procedure before the arbitration court. Therefore violation of this principle by the arbitration court may be asserted as an allegation of violation of Civil Procedure Code Art. 1206 §1(4). Under this allegation, however, the state court cannot be expected to review the substantive correctness of the award issued by the arbitration court.

7. The position that suffering injury as a result of non-performance or improper performance of an obligation arising out of a contract does not justify wilful satisfaction of the claim for damages out of the established security, contrary to the conditions agreed with the counterparty, does not violate fundamental principles of the legal order, i.e. the principles of the rule of law (Constitution Art. 2), protection of property rights and equality of counterparties cooperating with one another (Constitution Art. 20), economic liberty (Constitution Art. 22), and equality before the law (Constitution Art. 32(2)).

Publication date: 11-10-2013 | Case no.: I CSK 769/12

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

id: 20394

Kraków Court of Appeal order dated 24 September 2013 Case No. I ACz 1427/13

1. The mere filing of a petition to set aside an arbitration award (Civil Procedure Code Art. 1206 §1) is not a barrier to issuance of an [enforcement] clause under Civil Procedure Code Art. 1214, but may lead to postponement of consideration of the case seeking enforcement by way of issuance of an [enforcement] clause (Civil Procedure Code Art. 1216 §1). Similarly, issuance of an enforcement clause for an arbitration award is not a barrier to subsequent setting aside of the award through a petition, as under Civil Procedure Code Art. 1210 the court in closed session may stay enforcement of the arbitration award.

2. In a proceeding for recognition or enforcement of an arbitration award, the subject of examination is not the correctness of the claim or the substantive basis for its existence, or formal issues concerning the course of the arbitration proceeding. But this does not mean that the proceeding on the petition to set aside the arbitration award is a predicate in relation to the proceeding for recognition or enforcement of the arbitration award. On the contrary, both of these proceedings are independent of one another and based on different grounds. If the proceedings on the petition to set aside the arbitration award and on the application for recognition or enforcement of the award coincide, the consequences of this coincidence for the latter proceeding are governed by Civil Procedure Code Art. 1216.

3. The fact of issuance of an enforcement clause by the state court for a ruling by an arbitration court does not affect in any way the ability to file a petition to set aside the arbitration award. After all, stay of enforcement of the arbitration award as a result of filing of the petition to set aside the award may occur if and only if the award was also held to be enforceable under Civil Procedure Code Art. 1212 and following. Before that the arbitration award does not have legal force and is not subject to enforcement. … Therefore, considering that both proceedings are regulated in Part Five of the Civil Procedure Code, and the legal situation of the coincidence of the two proceedings, application of Civil Procedure Code Art. 177 §1(1) should be approached cautiously, as pursuant to Civil Procedure Code Art. 13 §2 this provision is applicable to both of these proceedings only by analogy.

Publication date: 24-09-2013 | Case no.: I ACz 1427/13

Key issues: petition to set aside arbitration award, recognition and enforcement of domestic arbitration award

id: 20410

Kraków Court of Appeal order dated 7 August 2013 Case No. I ACz 1251/13

1. The absence in the Polish system of a legal regulation concerning relief from the costs of arbitration proceedings is a subject not lying within the jurisdiction (justiciability) of the state court. This excludes the permissibility of implementing through a judicial ruling the standards of procedural law reserved for judicial proceedings for the sake of a proceeding before an arbitration court. … The “law of indigents” within the meaning of the Act on Court Costs in Civil Cases is not of a substantive civil nature, but is a systemic regulation guaranteeing the fulfilment of Art. 45(1) of the Polish Constitution, ensuring the right of access to the courts, and Art. 177 of the Polish Constitution, which establishes the presumption of the jurisdiction of the state court. Following the rules of interpretation of the Act on Court Costs in Civil Cases, there are therefore no grounds for finding that an application for relief from the costs of an arbitration proceeding may be resolved through the courts.

2. The presumption of justiciability (Civil Procedure Code Art. 1 and 2) does not exclude commencement of a judicial proceeding despite the commencement of an arbitration proceeding. … It is not a barrier to consideration of a case by the state court that the case is also pending at the same time before an arbitration court.

3. An application for relief from the costs of an arbitration proceeding cannot be resolved through the courts (Civil Procedure Code Art. 199 §1(1)).

4. A finding of the lapse of legal force of an arbitration agreement may result from the inability of the arbitration court to consider the case in light of the objective inability (the proportion of the degree of wealth of the interested person and the foreseeability of such costs as of the date of the arbitration agreement in relation to the level of the fees, constituting an excessive barrier to the accessibility of the arbitration court) to cover the advance arbitration costs by an interested person who has commenced the proceeding before the arbitration court. The evaluation of the circumstances connected with the existence of the last of these grounds is reserved for the state court deciding a possible objection by the defendant under Civil Procedure Code Art. 1165 §1 in proceedings connected with the dispute formally covered by the wording of the arbitration agreement.

Publication date: 07-08-2013 | Case no.: I ACz 1251/13

Key issues: arbitration agreement, arbitration procedure

id: 20407

Warsaw Court of Appeal judgment dated 13 May 2013 Case No. I ACa 1298/12

1. The proceeding on a petition to set aside an arbitration award is not a “review” proceeding, by instances, of a state court. No ordinary means of appeal lies against an arbitration award, but only a petition to set aside the arbitration award. Such petition, as stressed in the literature, is not a means of appeal but an extraordinary means of judicial oversight by the state court of the activity of the arbitration court.

 2. It does not appear warranted to conclude from the wording of Art. 1213 of the Civil Procedure Code (referring to a proceeding for recognition or enforcement of an arbitration award) that it is necessary to present the original of the [arbitration agreement] or a certified copy thereof in the arbitration proceeding. This is primarily because it would extend the grounds for the petition under Art. 1206 of the Civil Procedure Code.

3. Art. 1197 §§ 1 and 2 of the Civil Procedure Code should be read together, meaning that the arbitration award must contain both the operative wording and the grounds, as necessary elements; the award must be signed and then served on the parties (Civil Procedure Code Art. 1197 §4).

4. Violation of the public policy clause must refer to the operative wording of [the award], which will function in legal circulation, and not to the level of the grounds.

5. Only if the state court finds that the [evidentiary] procedure was not conducted at all, or was conducted incompletely, or in an obviously defective way, violating principles of logical reasoning connecting facts in a chain of cause and effect, selective admission of evidence in the case, admitting evidence only from one party, unjustifiably ignoring evidence submitted by the opposing party, and the like, can it be found that the requirements referred to in Art. 1206 §1(4) of the Civil Procedure Code were not met.

Publication date: 13-05-2013 | Case no.: I ACa 1298/12

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

id: 20429

Warsaw Court of Appeal judgment dated 11 April 2013 Case No. I ACa 1223/12

There is a great deal of autonomy in arbitration procedure, entirely consistent with the intentions of the Parliament, distinctly limiting the possibilities for review by the state court. The basic goal of this law is the speed of the procedure for resolving civil disputes, and not creation of an additional phase of pre-litigation proceedings. Parties deciding to submit a dispute to an arbitration court must count on these conditions, including minimal external review of its awards. The jurisdiction of the court considering a petition to set aside an arbitration award generally does not include review of the consistency of the award with substantive law or the correctness of the factual findings, apart from a ruling based on an obviously selective, unfair evaluation of the evidence.

Publication date: 11-04-2013 | Case no.: I ACa 1223/12

Key issues: petition to set aside arbitration award

id: 20420

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