case law

id : 20160

id: 20160

Polish Supreme Court judgment

dated 16 February 1999

Case No. I CKN 1020/98

Summary by arbitraz.laszczuk.pl:

In 1991 the Polish State Treasury entered into a joint-venture agreement (with an Italian company, L. SpA) which included a clause calling for arbitration in Vienna under UNCITRAL rules. In 1992 the party later known as Agencja K.-R. SA, and Huta L.W. sp. z o.o., respectively, acceded to the joint-venture agreement in place of the original parties.

Subsequently Agencja K.-R. SA filed a complaint in the Polish province court against Huta L.W. sp. z o.o. seeking delivery of a construction site under the joint-venture agreement and the right to usufruct of the site. The defendant asserted the arbitration clause in the joint-venture agreement as a defence.

The province court dismissed the defence, holding that under the Civil Procedure Code at that time, in order to appoint a foreign arbitration court, at least one of the parties had to have its residence or registered address abroad or operate an enterprise abroad, but the parties to the dispute here were both Polish companies.

On interlocutory appeal, the appellate court held that the arbitration clause was effective because upon accession of the new parties the joint-venture agreement had multiple parties, one of whom was foreign, and the New York Convention required that the parties be referred to arbitration.

On cassation appeal, the plaintiff argued that the arbitration clause was not binding on the parties because they did not sign it, and the Polish courts have (exclusive) jurisdiction over the claim.

The Supreme Court held that exclusive jurisdiction of the Polish courts did not prevent appointment of a foreign arbitration court; the arbitration clause was binding on the parties because they had acceded to the joint-venture agreement including the arbitration clause; the arbitration clause appointing a foreign arbitration court was valid because one of the parties was foreign when the clause was adopted; and the New York Convention required that the parties be referred to arbitration. The Supreme Court denied the cassation appeal accordingly.

Excerpts from the text of the court’s ruling:

1. An agreement vesting jurisdiction in a foreign court or an arbitration court operating abroad (Civil Procedure Code Art. 1105 §§ 1 and 2) must be preceded by the existence of domestic jurisdiction. Exclusive jurisdiction of a Polish court may, however, constitute a barrier to effective conclusion of an agreement on jurisdiction. But such barrier functions only with respect to vesting jurisdiction in a foreign state court (Civil Procedure Code Art. 1105 §1, second sentence) and does not apply with respect to vesting jurisdiction in a foreign arbitration court, which is subject only to the limitations provided in Civil Procedure Code Art. 697 §1.

2. The requirement of “foreign status” of one of the parties as a condition for the permissibility of an arbitration clause as provided for in Civil Procedure Code Art. 1105 §2, refers to the phase of conclusion of the agreement on jurisdiction, and thus applies to the parties to such agreement and not the parties to the dispute covered by the arbitration clause.

3. Civil Procedure Code Art. 1105 §2 also applies to multilateral agreements. ... In the case of a multilateral agreement, it may happen that a foreign arbitration court has jurisdiction to hear a dispute between parties that are domestic entities.

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