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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

Polish Supreme Court judgment dated 27 March 2013 V CSK 222/12

1. The regulations of the Civil Procedure Code governing arbitration are not uniform in character. The provisions governing issues involving the permissibility of a petition to set aside an award and the formal requirements and procedure for the petition are strictly procedural in nature, but the provisions setting forth the grounds for the petition, constituting the basis for the court’s ruling on the merits of the dispute and the justification for the petition, are the functional equivalent of provisions of substantive law.

2. Assertion of new grounds for the petition to set aside an arbitration award after the deadline for filing of the petition is impermissible. … The court ruling on a case seeking to set aside an arbitration award may not consider on its own motion the ground set forth in Civil Procedure Code Art. 1206 §1(1) which was not asserted in the petition and was precluded.

3. Recognizing as binding an agreement which does not specify the essential terms of the contract would be irreconcilable with the fundamental principles of the legal order of the Republic of Poland.

Publication date: 27-03-2013 | Case no.: V CSK 222/12

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

id: 20268

Szczecin Court of Appeal judgment Dated 21 March 2013 Case No. I ACa 855/12

1. Even though (if the parties did not agree otherwise) the arbitral tribunal shall resolve a dispute applying the regulations of substantive law applicable to the legal relationship, violation of substantive law by the arbitral tribunal is grounds for a petition to set aside the award only if as a result of the violation, the award is contrary to fundamental principles of the legal order of the Republic of Poland. In other words, if despite a violation of substantive law the award cannot be said to be contrary to fundamental principles of the legal order, the mere violation cannot constitute an effective basis for demanding that the award be set aside.

2. The construction of a petition to set aside an arbitration award indicates that this measure is not used to conduct substantive review by the state court of the correctness of the resolution by the arbitral tribunal, similar to appellate review in judicial proceedings.

3. An award is contrary to fundamental principles of the legal order when this concerns constitutional principles of the socio-economic system or leading principles governing specific fields of substantive law. The fundamental principles of the legal order constituting the basis for evaluation of an arbitration award should be understood not only as constitutional norms, but also the leading norms in specific fields of law. … The procedural legal order may be the basis for evaluation of an arbitration award in two aspects. First, the compliance of the procedure which led to issuance of the arbitration award with fundamental procedural principles of the legal order is subject to evaluation. Second, the consequences of the arbitration award from the point of view of their compliance with the procedural public order are subject to evaluation, i.e., whether they are reconcilable with the system of procedural law, e.g. whether they violate res judicata or the rights of third parties.

4. A party forfeits the right to challenge an arbitration award through a petition to set aside the award due to failure to raise objections to an arbitrator subject, in the party’s view, to removal, if the party did not demand removal in the proceeding before the arbitral tribunal.

5. The requirements established for persons serving as arbitrator should be combined with the entitlement of a party to the proceeding to obtain knowledge about any potential ties between the arbitrator and the entities appearing in the proceeding. Generally it is left to the party to evaluate whether the circumstances constitute grounds for a decision whether to select an arbitrator or a decision to challenge the arbitrator. In this sense, the arbitrator’s own assessment is irrelevant, as the essence of the fairness of the procedure is connected with external evaluations made by others.

6. Indeed, the right to a fair trial provided in Art. 45(1) of the Polish Constitution, an element of which is consideration of the case by an independent court in a fairly conducted proceeding, does fall within the fundamental principles of the legal order whose violation the state court must examine at its own initiative. However, it is indicated in the case law and the legal literature that Art. 45 of the Constitution does not apply at all to arbitration, only the state courts.

7. The institution of recusal of a judge is provided for by the Civil Procedure Code both in proceedings before the state court and in proceedings before an arbitration court. The fundamental difference in the regulation of this institution is that in a proceeding before an arbitration court, the code does not provide for removal of the arbitrator or presiding arbitrator by operation of law, as is the case with respect to a judge in proceedings before the state court (Civil Procedure Code Art. 48). The grounds for challenging an arbitrator indicated in Civil Procedure Code Art. 1174 §2 are circumstances raising justified doubts as to his impartiality or independence, as well as lack of qualifications specified in the parties’ agreement. The grounds for recusal of a judge listed in Art. 48 and 49 do not apply to challenge of an arbitrator, but in interpreting the concept of circumstances raising justified doubts as to impartiality or independence Art. 48 and 49 may have auxiliary application. In a proceeding before a state court, under Civil Procedure Code Art. 379(4), participation by a judge recused by operation of law becomes grounds for the invalidity of the proceeding and constitutes grounds to vacate the judgment by the appellate court, as well as by the Supreme Court, and this ground shall be considered by both of these courts at their own initiative (Civil Procedure Code Art. 378 §2 and 39311). … The Civil Procedure Code does not provide for such absolute invalidity in proceedings before an arbitration court. If a party did not challenge an arbitrator or presiding arbitrator despite possessing knowledge of the grounds for challenge, there are no legal grounds to challenge the arbitration award. As an exception only, participation in an arbitration panel by an arbitrator or presiding arbitrator whose rights and obligations could be affected by the result in the case could constitute grounds for setting aside the award, which did not occur in this case. This is because violation of the principle that no one can be a judge in his own case (nemo in re sua judex) would undoubtedly conflict with the fundamental principles of the legal order of the Republic of Poland.

Publication date: 21-03-2013 | Case no.: I ACa 855/12

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

id: 20405

Warsaw Court of Appeal judgment dated 25 January 2013 Case No. I ACa 374/12

1. A proceeding on a petition to set aside an arbitration award is not an appellate review proceeding by the state court. No ordinary means of appeal lies against an arbitration award, but only a petition to set aside the award. As stressed in the legal literature, such a petition is not an appellate measure but an extraordinary means of judicial oversight by the state court over the activity of the arbitration court. This has the fundamental consequence that the state court generally does not examine the resolution by the arbitration court, and in particular does not review whether it is founded on the facts cited in the justification for the award, or whether the appropriate provisions of substantive law were applied. The state court may set aside an arbitration award only in exceptional instances, indicated in narrowly interpreted provisions of the code. Consequently, in the event of doubt the award should be upheld rather than set aside.

2. In examining the grounds and conditions set forth in Civil Procedure Code Art. 1206 §1(4), what is essential is failure to comply with the requirements for the fundamental rules of procedure before the [arbitration] court arising out of statute or specified by the parties. Such rules include basing the award on the established state of facts, which occurs after considering evidence.

3. The judicial discretion (of the arbitration court) in evaluating the relevance of specific evidence or allegations for making factual findings and issuing a ruling is appropriately broader than that referred to in Civil Procedure Code Art. 233 §1, and the state court “reviews” it only in terms of the “fundamental principles” of procedure before the arbitration court. Thus only if the state court finds that such procedure was not conducted at all or was conducted incompletely, or was obviously conducted defectively, violating the rules of logical understanding, connecting of facts in a chain of cause and effect, selective admission of evidence in the case, taking evidence only from one party, unjustifiably ignoring evidence offered by the opposing party, and so on, can it be found that the requirements referred to in Civil Procedure Art. 1206 §1(4) were not met. The cited provision should be interpreted narrowly, limiting the possibility of setting aside an arbitration award to the principles of a fair trial and procedural violations which could have had an impact on the arbitration award.

4. Violation of substantive law may be grounds for setting aside an arbitration award only when the substance of the award violates fundamental principles of the legal order. It should be borne in mind that the arbitration court is not bound not only by civil procedure regulations (Civil Procedure Code Art. 1184 §2), but also regulations of substantive civil law.

5. The rules establishing the obligation to pay damages may be regarded as comprising one of the fundamental principles of the legal order in the state; in other words, if anyone suffers an injury and the grounds for liability under any of the civil liability regimes are met, then within the bounds provided by law (Civil Code Art. 361 §§ 1 and 2) damages should be awarded against the person responsible.

Publication date: 25-01-2013 | Case no.: I ACa 374/12

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

id: 20422

Polish Supreme Court order dated 23 January 2013 Case No. I CSK 186/12

1. Pursuant to Civil Procedure Code Art. 1215 §1, the court shall rule on recognition or enforcement of an arbitration award issued abroad or a settlement concluded before an arbitration court abroad after conducting a hearing. This provision confirms the rule provided for adversarial proceedings in Civil Procedure Code Art. 148 §1 that cases are considered at a hearing. A departure from this rule should be interpreted narrowly. Therefore, if a provision specifies the type of cases that are considered at a hearing, this method of consideration applies regardless of whether the court upholds the claim (or application) or denies it.

2. The [New York] Convention sets forth the material conditions for recognition (primarily in Art. IV and V), and therefore a proceeding for recognition of a foreign arbitration award should be conducted primarily in accordance with the provisions set forth in the Convention, and on the basis of the Civil Procedure Code in other respects not governed there.

3. The requirements with respect to the form of conclusion of an arbitration agreement should be assessed according to the [New York] Convention, and not according to Civil Procedure Code Art. 1162.

4. A liberal interpretation of [New York Convention Art. II(2)] is accepted in practice, recognizing that the enumeration therein of methods of concluding an agreement is not exhaustive, but also includes other techniques used for reaching agreement at a distance.

5. It should be accepted that the law of the state in which an arbitration award was issued should decide on the issue of certification of the contents of the award.

6. The view that failure to enclose the documents specified in Civil Procedure Code Art. 1213 with an application for recognition does not constitute a formal defect that is subject to supplementation pursuant to Civil Procedure Code Art. 130 §1 in connection with Art. 13 §2 is incorrect.

7. The respondent was not named in the arbitration award, but only the business name under which he trades was stated. The correctness and effectiveness of such identification should be decided by the law of the state of origin of the award.

Publication date: 23-01-2013 | Case no.: I CSK 186/12

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

id: 20269

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