Polish Supreme Court judgment
dated 11 July 2002
Case No. IV CKN 1211/00
Summary by arbitraz.laszczuk.pl:
In a military procurement procedure, an unsuccessful bidder, G. sp. z o.o., appealed to a panel of arbitrators from the award of the contract to another bidder, alleging that the successful bidder did not comply with the terms of reference because it failed to submit a required safety certificate at the time it filed its bid, rather than at the time of delivery under the contract—a point that was allegedly ambiguous under the terms of reference. The panel of arbitrators ruled against G. sp. z o.o., and it filed a petition in the district court to set aside the award, against the contracting authority, the State Treasury—Naval Command. Neither the district court nor the regional court on appeal found any substantive violation that would rise to the level of violation of public policy.
On cassation appeal, the Supreme Court found that the public policy behind the Public Procurement—and in particular the constitutionally protected principles of economic freedom and equal treatment of commercial entities—supported the principle that a safety certificate should be presented when filing a bid. However, the regional court had not inquired into this issue thoroughly enough, and thus the court reversed the judgment below and remanded the case to the regional court for reconsideration.
Excerpts from the text of the court’s ruling:
1. Arbitration awards may be reviewed only to a limited extent. Setting aside an arbitration award is thus justified only by such an abuse of substantive law that it also constitutes a decision that violates the leading principles of law in force in the Republic of Poland. In other words, an arbitration award may violate the rule of law only if it results in a resolution violating the principles of a state governed by the rule of law.
2. An arbitration award also requires examination in terms of whether it violates the principle of the freedom of economic activity, enshrined in Art. 20 of the Constitution. Under Art. 5 of the Economic Activity Law dated 19 November 1999 (Journal of Laws Dz.U. 1999 No. 101 item 1178, as amended), this constitutional principle is manifest in the rule that taking up and conducting economic activity shall be free for all persons, under equal rights, and compliance with conditions defined by law is a statutory requirement for limiting the application of this principle.
3. A finding cannot be upheld … that an arbitration court did not violate principles of social coexistence without an attempt to address specific principles more closely. In the context of contractual relations, these principles are manifest in the existence of the universally accepted rules of decent behaviour, with respect to a potential counterparty as well. With respect to commercial relations, of particular relevance are the principles of fair dealing and commercial honesty, which may be demanded of a business entity—a professional on the market—namely observance of good practice, fair dealing, honest treatment, loyalty and trust.