Polish Supreme Court judgment
dated 14 May 2010
Case No. II CSK 592/09
Summary by arbitraz.laszczuk.pl:
The company Domy Towarowe C. (subsequently M.R.E. sp. z o.o.) filed a claim with the Court of Arbitration at the Polish Chamber of Commerce against Rafał and Maria K., operating as an ordinary partnership, for PLN 533,000 for improper performance of a construction contract, including expenses incurred to complete the work properly, and a contractual penalty of PLN 700,000. (The claimant had previously assessed a portion of such contractual penalty, in the amount of PLN 482,000, by setoff against the fee payable to the respondents. In the arbitration, the claimant sought, in the alternative, to split the PLN 700,000 into a contractual penalty of PLN 218,000 and a claim for unjust enrichment in the amount of PLN 482,000, if the arbitration court held that the previous setoff was ineffective.) The arbitration court issued an award for the claimant in January 2005 in the amounts of PLN 533,000 and PLN 350,000 on these two claims, respectively.
The respondents filed a petition with the regional court to set aside the award on the grounds that it violated public policy. The petition was denied in 2007.
On appeal, in 2009 the appellate court vacated the judgment of the regional court and set aside the award. The appellate court found that the claimant had not proved its claim for the amount of PLN 533,000. With respect to the contractual penalty, the court found that the declaration of setoff was made too late, after the contractors’ fee was also collected by the bailiff, an act which could be challenged only by commencing an action to block the execution.
The Supreme Court of Poland granted the cassation appeal by the claimant. The Supreme Court held that as a matter of civil procedure, contrary to the holding of the appellate court, once the contractors’ fee had been executed by the bailiff no action to block the execution could be commenced. Moreover, the court had failed to give thorough consideration to the facts surrounding the setoff made by the claimant. On the principal amount of the claim, the Supreme Court held that the appellate court had impermissibly reviewed the merits of the case decided by the arbitration court, yet had failed to find any grounds for holding that the award violated public policy. The court vacated the judgment of the appellate court accordingly and remanded the case for reconsideration.
Excerpt from the text of the court’s ruling:
The court hearing a petition to set aside an arbitration award does not reconsider the case in which the arbitration court issued the award. The review by the court in such case is limited only to an examination of whether the ground asserted in the petition, which may be one of the circumstances listed in Civil Procedure Code Art. 712 §1, exists, and the court will take into consideration at its own initiative only whether the arbitration award violates the rule of law or principles of social coexistence (Civil Procedure Code Art. 714). Not only the proceeding before the court of first instance, but also the proceeding before the court of second instance, is subject to these rules.