Polish Supreme Court ruling
dated 18 August 1932
Case No. R 385/32
Summary by arbitraz.laszczuk.pl:
In 1930, Albert G. and Gedale S. entered into a partnership agreement to lease a mill. The partnership agreement included an arbitration clause under which each of them would appoint one arbitrator and if those two arbitrators differed the two arbitrators would appoint a third, presiding arbitrator. In 1931, a dispute arose between the parties with respect to determination of the profit from the venture. In August 1931, Albert G. summoned Gedale S. to appoint an arbitrator and notified him that on his part he had appointed Kazimierz Ł. as an arbitrator. Gedale S. appointed Karol M. as an arbitrator, but in October 1931 Karol M. informed the parties that he could no longer serve for medical reasons. Albert G. called upon Gedale S. to appoint another arbitrator, but he failed to do so. In November 1931, a petition was filed with the Lwów Regional Court by Albert G. seeking appointment of an arbitrator by the court, and, on the same day, a petition by Gedale S. seeking a declaration that the arbitration clause was ineffective with respect to existing disputes because of Karol M.’s refusal to serve. Two days later, the regional court issued an unappealable order appointing Leopold T. as an arbitrator to replace Karol M. The two arbitrators selected a third, presiding arbitrator, but refrained from issuing a ruling pending the decision on the petition by Gedale S. to hold the arbitration clause to be ineffective. Then, in December 1931, the regional court denied Gedale S.’s petition, holding that his right to seek a declaration that the arbitration clause was ineffective lapsed in October when he was summoned by Albert G. to appoint a new arbitrator.
The Lwów Appellate Court granted Gedale S.’s appeal, holding that when one arbitrator resigned, the parties had an equal right, unlimited in time, either to appoint another arbitrator or to invalidate the arbitration clause, and one party’s election to summon the other party to appoint an arbitrator did not exclude the other party from seeking invalidation of the arbitration clause.
Upon review by the Supreme Court of Poland, the court held that the ineffectiveness of the arbitration clause was cured upon appointment of a replacement arbitrator, pursuant to an order that was legally final. The arbitration clause could be held to be ineffective if an arbitrator refused to perform his duties or was excessively delayed in performing his duties, which was not the case here. The Supreme Court set aside the order of the appellate court and reinstated the order of the regional court accordingly.
Excerpts from the text of the court’s ruling:
In light of the legal finality of the resolution ... appointing an arbitrator ..., there is no legal basis for holding the arbitration clause to be ineffective, because the basis that arose through [the arbitrator’s] resignation was cured as a result of appointment of another arbitrator by the state court. The arbitration clause may be deemed ineffective pursuant to [former Austrian] Civil Procedure Code § 583(2)(2) only if an arbitrator refused to perform his duties or is in excessive delay in performing his duties.