Polish Supreme Court ruling
dated 29 November 1937
Case No. C II 1252/37
Summary by arbitraz.laszczuk.pl:
Partners in a printing plant entered into arbitration seeking a division of the assets of the enterprise. The arbitration court issued an award that included not only a division of the assets, but also included a non-competition provision against one of the parties and ordered the other party to pay a sum of money to the party who was ordered not to compete.
The party who was ordered not to compete brought an action in the Drohobycz Municipal Court to set aside the award. The matter reached the Polish Supreme Court on the issue of whether the award could be set aside in part, specifically the part involving the non-competition provision.
The Supreme Court held that the award could be set aside in part, so long as the parts of the award were not so intertwined that setting aside one part of the award would distort the award as a whole. The court found that the non-competition provision fell outside the scope of the arbitration clause, which was limited to a division of the assets of the enterprise.
The defendant in the action to set aside the award argued that setting aside the non-competition provision of the award should release it from the duty to pay the plaintiff a sum of money, which is regarded as mutual consideration for the non-competition. The Supreme Court held that this claim could not be considered as it did not raise any of the statutory grounds for setting aside an award.
Excerpts from the text of the court’s ruling:
1. Civil Procedure Code Art. 503 §1 is limited to an enumeration of the grounds for setting aside an arbitration award, while Art. 505 requires the regulations concerning a proceeding initiated by a statement of claim to be applied in a proceeding upon a petition to set aside an arbitration award. It follows from this that Civil Procedure Code Art. 408 §2 and Art. 437 concerning partial setting aside of a judgment are also applicable to arbitration awards.
2. The substance of the arbitration award determines whether in the given instance it may be set aside in part and to what extent, obviously within the bounds of Civil Procedure Code Art. 503 §1. Partial setting aside of an award will not be permissible if the specific parts of the award are interconnected in such a way that none of them may be removed from the others without materially deforming the whole. If, however, the arbitration court exceeded the bounds of the arbitration clause (Civil Procedure Code Art. 503 §1(4)), and the ruling in this regard may without harm be separated from the rest of the award, there is no barrier preventing partial setting aside of the award.
3. The parties could supplement the arbitration clause during the hearing before the arbitration court, but because of the requirement for written form of the clause (Civil Procedure Code Art. 480 §2), such supplementation would also have to be made in that form, and thus in the minutes signed by the parties.
4. The state court is competent to consider only formal grounds for setting aside an arbitration award, except that it will also consider in substantive terms whether the award violates public policy or good practice (Civil Procedure Code Art. 503 §1(4)).
5. Waiver of the right to challenge the award would have to be express in order to be effective, and the plaintiff’s statement that it accepts the award does not satisfy this requirement, and in any event was made to the arbitration court and not to the defendant.