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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

Katowice Court of Appeal order dated 12 December 2012 Case No. V ACz 914/12

1. The ineffectiveness of an arbitration clause results from events arising after the clause is made which nonetheless do not affect its validity. It must be stressed in this respect that the arbitration clause itself is treated as an act of a dual nature, that is, of both substantive and procedural law. This leads to the conclusion that when making an arbitration clause, the parties can condition its effectiveness, as with any other contract, on the passage of a certain time or fulfilment of a certain suspensory condition. The Convention on the Recognition and Enforcement of [Foreign] Arbitral Awards, in particular Art. II, does not provide for limitations in this respect. On the contrary, Art. II(2) indicates a broad interpretation of the concept of “agreement in writing under which the parties undertake to submit to arbitration all or any differences”, which justifies the conclusion that this wording is not infringed by introduction into the agreement of regulations prior to the arbitration proceeding.

2. The essence of the New York Convention is the requirement for the parties to proceed in accordance with good faith and fair practice, and thus a prohibition against acting contrary to these principles. This interpretation stands in the way of actions disloyal to the other participants and the arbitration court, and deprives of justification objections by a party to the proceeding of the non-existence or invalidity of the arbitration clause in a proceeding for recognition or enforcement of an arbitration award in Poland, even though preclusion of such an objection is not expressly provided for in the regulations of the convention, if the party joined issue on the merits of the dispute before the arbitration court without asserting the court’s lack of jurisdiction.

Publication date: 12-12-2012 | Case no.: V ACz 914/12

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

id: 20414

Polish Supreme Court order dated 24 October 2012 Case No. III CSK 35/12

1. The claim for restitution of unjust enrichment pursued in this case fits within the catalogue of disputes covered by the arbitration clause, as it was stated in the agreement for provision of promotional services that the arbitration clause covers, inter alia, “claims for return of consideration provided without due grounds or not owed, arising in the event of invalidity of the agreement.” Thus if the subject of the agreement was factual activities allegedly constituting a tortious act (charging fees other than a commercial margin), the validity of such agreement should be considered in the light of Civil Code Art. 58 §1 or 2. If however the very conclusion of the agreement for provision of promotional services alongside the agreement of sale allegedly constituted an act of unfair competition, the claim stated in the statement of claim fits within the category of “tort claims, if they arise out of a legal event connected with performance of the agreement of sale or also constituting non-performance or improper performance of the agreement.” The tort claim undoubtedly arises out of a legal event (an act of unfair competition) connected with performance of the agreement of sale.

2. The mere fact of submission of a dispute for resolution by an arbitration court cannot demonstrate the inconsistency of such agreement with principles of social coexistence, because this method of dispute resolution is permissible by law. Moreover, alternative methods of resolving disputes often result in faster resolution of the dispute, which is thus less expensive and more beneficial for parties conducting business activity. Civil Procedure Code Art. 1161 §2 serves to eliminate irregularities in arbitration clauses violating the equality of the parties.

Publication date: 24-10-2012 | Case no.: III CSK 35/12

Key issues: arbitration agreement

id: 20379

Polish Supreme Court order dated 19 October 2012 Case No. V CSK 503/11

1. Violation of the principle of the equality of the parties may also occur through adoption of the specific wording of the rules of an arbitration court (Civil Procedure Code Art. 1161 §3). … Under the Civil Procedure Code provisions on arbitration, the equality of the parties means—generally speaking—awarding the parties equal rights, both within the main arbitration clause itself and in the rules of the permanent arbitration court, creating equal opportunities for the parties in the definitive resolution of the dispute covered by the agreement.

2. In determining whether the principle [of the equality of the parties] is complied with in the arbitration agreement, a clear distinction should be made between the content of the arbitration agreement itself (also including the provisions of the rules of the permanent arbitration court) and the general rules of operation of the permanent arbitration court. … The principle of the equality of the parties within the meaning of Civil Procedure Code Art. 1161 should be addressed to the content of the arbitration agreement itself, and not to such elements of an organizational nature, which only establish the necessary and proper legal and organizational infrastructure to assure the parties the ability to establish the appropriate panel of arbitrators within the individual legal dispute.

3. Organizational ties between permanent arbitration courts and various professional associations or business organizations are not determinative of a specific dependence on the organizations where the arbitration courts operate or a lack of impartiality of specific arbitrators.

Publication date: 19-10-2012 | Case no.: V CSK 503/11

Key issues: arbitration agreement, arbitration procedure, arbitrator

id: 20278

Polish Supreme Court order dated 17 October 2012 Case No. I CSK 119/12

1. The demand pursued by the plaintiff on the basis of Art. 18(1)(5) in connection with Art. 15(1)(4) of the Act on Combating Unfair Competition, as a property claim, could be submitted to an arbitration court for resolution pursuant to Civil Procedure Code Art. 1157.

2. The wording that the jurisdiction of the arbitration court should extend to “any and all disputes between the parties arising out of the prior commercial cooperation of the parties on the basis of commercial contracts concluded previously…” leads to the conclusion that it covers the broadest possible category of disputes arising out of the commercial cooperation conducted on the basis of prior contracts. Use of the linguistic rules of interpretation does not allow elimination from this category of disputes arising out of the defendant’s commission of the act of unfair competition defined in Art. 15(1)(4) of the Act on Combating Unfair Competition, if it was connected with the commercial cooperation between the parties conducted on the basis of prior contracts between the parties.

3. Under the circumstances as determined, the arbitration clause adequately identified the legal relationship out of which the dispute arose, by indicating that it concerns any and all claims connected with the parties’ previous cooperation on the basis of contracts concluded by the parties, which also included claims connected with the defendant’s commission of the act of unfair competition referred to in Art. 15(1)(4).

4. This agreement [the arbitration clause] may also be assessed pursuant to the Civil Code, including in accordance with the criteria set forth in Civil Code Art. 58 §2.

5. It cannot be accepted that it was contrary to principles of social coexistence to submit to the arbitration court for resolution a future dispute caused by the lack of acceptance by a party or the parties to a contract containing an arbitration clause of a line of precedent of the state courts concerning the method of resolution of specific types of disputes and motivated by the hope for a different result from the resolution of the dispute before the arbitration court.

Publication date: 17-10-2012 | Case no.: I CSK 119/12

Key issues: arbitrability of dispute, arbitration agreement

id: 20283

Polish Supreme Court judgment dated 12 October 2012 Case No. IV CSK 82/12

1. The essence of establishment of an “arbitration clause by reference” is that the intention to submit a dispute to an arbitration court for resolution is not stated in the agreement signed by the parties or documents exchanged by the parties, but in a separate document which is not signed by the parties but which the parties only refer to through another document, i.e. the main (basic) agreement. The condition for making an arbitration clause in this manner is fulfilled if the following conditions are all met. First, the main (basic) agreement itself, in connection with which the document containing the arbitration clause is to be applied, must be made in writing. Second, such agreement must contain an express reference to the document in which there is a provision on submission of disputes that may arise out of the agreement to an arbitration court for resolution, where the reference is of a type that makes the clause an integral part of the agreement.

2. From the point of view of the form of an arbitration clause, the solution adopted [in Civil Procedure Code Art. 1163] is a specific form of an “arbitration clause by reference,” where an arbitration clause is set forth only in the articles of association or statute of a company, or the statute of a cooperative or association, and the act or deed of joining the company, cooperative or association includes only submission to the articles of association or statute, including the arbitration clause contained therein. The scope of the binding force of such arbitration clause is limited in terms of entities: It binds the company and its shareholders, or the cooperative or association and its members. Moreover, this regulation expressly provides that the binding force of an arbitration clause contained in the articles of association or statute of a company or the statute of a cooperative or association applies to disputes arising out of the corporate relationship or disputes arising out of the relationship of membership in the cooperative or association.

Publication date: 12-10-2012 | Case no.: IV CSK 82/12

Key issues: arbitration agreement

id: 20293

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