Polish Supreme Court judgment
dated 9 September 2010
Case No. I CSK 535/09
Summary by arbitraz.laszczuk.pl:
In 1990 a state enterprise operating a health spa in the town of K. entered into a 30-year tenancy agreement for a landmark villa in the town, owned by the spa, with a company represented by businessman Zdzisław M. M. moved in and treated the villa as his personal home and regarded himself personally as the tenant. The spa was later converted into a limited-liability company, Uzdrowisko K. Sp. z o.o., which disputed M.’s right to the property. In an earlier arbitration, an award was issued in October 2002 upholding M.’s claim to hold a tenancy to the property, but that award was set aside by the court.
In the meantime, in July 2002, the CEO of the spa had entered into an understanding with M. acknowledging M.’s tenancy of the property, retroactive to 1990. This subsequently led to an investigation (later dropped) of the CEO for criminal malfeasance in entering into the understanding. The spa sought to evict M., and he countered by filing another arbitration case before the Court of Arbitration at the Polish Chamber of Commerce seeking a declaration that he personally held the tenancy to the property pursuant to the July 2002 understanding. The arbitration court issued an award in April 2006 holding that M. had a valid tenancy in the property. The district court recognized the award.
Uzdrowisko K. Sp. z o.o. filed a petition with the regional court to set aside the award. During the proceeding before the regional court, the company learned that one of the arbitrators, Wojciech T., was not impartial but had personal, political and professional ties to Zdzisław M., for example performing services for companies headed by M. and attending Easter and Christmas parties hosted by M. at the very landmark villa in dispute during the arbitration. The arbitrator had failed to disclose such ties earlier, in violation of the code of ethics for arbitrators of the Court of Arbitration at the Polish Chamber of Commerce. Uzdrowisko K. Sp. z o.o. then raised the issue of T.’s lack of impartiality as grounds to set aside the award, but the court rejected the claim as having been asserted too late.
On appeal, the appellate court set aside the arbitration award in its entirety, finding that although the allegation of bias was asserted late by the petitioner, the suspicion of bias on the part of the arbitrator meant that the award was issued in violation of public policy, which the court must consider on its own motion. The appellate court also found a violation of public policy in the arbitration court’s upholding the retroactive effect of the 2002 settlement.
The Supreme Court denied the cassation appeal by Zdzisław M.
Excerpt from the text of the court’s ruling:
1. A petition to set aside an arbitration award is an extraordinary means of review intended to set aside the award if at least one of the grounds exhaustively set forth in Civil Procedure Code Art. 1206 is justified.
2. When considering a petition [to set aside an arbitration award], the state court is bound by the grounds alleged by the petitioner. Only two of the grounds set forth in Civil Procedure Code Art. 1206 §2 are considered on the court’s motion: the non-arbitrability if the dispute and inconsistency of the arbitration award with the fundamental principles of the legal order of the Republic of Poland.
3. The assessment of whether an arbitration award is contrary to fundamental principles of the legal order is addressed to the content of the award, and not the correctness of the procedure before the arbitration court or the composition of the panel. … An arbitration award may be set aside under the public policy clause if it is found that the results included in the content of the award are not consistent with a specific norm which is regarded as one of the fundamental principles of the legal order in force in Poland. ... These principles include not only constitutional norms, but also the overriding norms in specific fields of law.
4. The requirements made of persons serving as arbitrators should be combined with a party’s right to learn about any ties the arbitrator may have to entities appearing in the proceeding. It is up to the party to evaluate such circumstances as grounds for a decision to select an arbitrator or to seek removal of an arbitrator. The arbitrator’s self-assessment is irrelevant, because the essence of a fair procedure is tied to objective judgment by others. ... The fundamental principles of the legal order include the right to a court as provided in Art. 45(1) of the Polish Constitution, an element of which is a party’s right to have its case heard by an independent court, in a fairly conducted procedure.