case law

id : 20270

id: 20270

Polish Supreme Court order
               dated 13 September 2012
              Case No. V CSK 323/11

Summary by arbitraz.laszczuk.pl:

G-N. Ltd from Tbilisi, Georgia, entered into a contract with the Polish company R.-H. SA for the sale of a quantity of hazelnuts. The contract was concluded through an exchange of electronic correspondence and included a clause calling for arbitration before the Permanent Court of Arbitration at Waren-Verein der Hamburger Börse e.V., a food industry trade association in Hamburg, Germany. The seller pursued arbitration in Hamburg against the buyer for the outstanding portion of the purchase price. The parties confirmed the jurisdiction of the arbitration court, and the respondent appeared in the arbitration, defended the case on the merits, and did not object to the jurisdiction of the arbitration court. The arbitration court issued an award for the claimant of over USD 100,000. The respondent did not dispute the award.

The claimant then applied to the regional court in Poland for enforcement of the award and issuance of an enforcement clause. The respondent alleged as a defence that there was no arbitration clause. The regional court found that it was undisputed that the parties had entered into a contract through an exchange of electronic correspondence, including the arbitration clause, which could also be concluded through an exchange of electronic correspondence, and moreover the contract bore the seal of the respondent and had been performed by the claimant. The court granted the application for enforcement of the award.

On appeal by the respondent, the court of appeal found that it was unclear exactly what contract the parties had entered into. Furthermore, with the application for enforcement the claimant had failed to submit the original arbitration agreement but only a scan of the documents. The court held that no arbitration clause existed, and the absence of an arbitration clause could not be cured by the respondent’s actually appearing before the arbitration court, defending on the merits, and failing to object to the jurisdiction of the arbitration court. The court of appeal amended the judgment below and denied the application for enforcement.

On cassation appeal, the Supreme Court of Poland found that because the New York Convention permits conclusion of an arbitration agreement through an exchange of electronic correspondence, the requirement to submit the original arbitration agreement when seeking enforcement of an award under the convention should be interpreted in light of the manner in which the arbitration agreement was concluded.

Because the respondent appeared before the arbitration court and defended the case on the merits without objecting to the jurisdiction of the arbitration court, it waived the objection that there was no arbitration agreement and could not assert the defence of the lack of an arbitration agreement in a proceeding seeking enforcement of the award in Poland. The Supreme Court granted the claimant’s cassation appeal accordingly and denied the respondent’s appeal.

Excerpts from the text of the court’s ruling:

1. A proceeding for recognition and enforcement of foreign rulings is a proceeding on the merits of the case, which is based on substantive law…. The court of appeal could therefore apply the law of the [New York] Convention as the applicable substantive law.

2. Art. II(2) [of the New York Convention] is more liberal, also permitting conclusion of an arbitration clause by electronic means, even without the signatures of the parties. This is also a fundamental provision, determining the permissible form of the agreement, while the requirements connected with submission of the arbitration agreement included in Art. IV( 1) should be considered in light of the form in which the agreement could be concluded. Consequently, Art. IV is derivative in nature and thus cannot undermine the rationale of the rule set forth in Art. II of the convention.

3. A party which joined issue on the merits of the dispute before the arbitration court without alleging the lack of jurisdiction of such court (e.g. because of the ineffectiveness of the clause) loses such allegation in the proceeding for recognition or enforcement of the arbitration award before the national court. … The essence of the New York Convention is a requirement for the parties to act in accordance with principles of good faith and fair dealing, and hence a prohibition against acting in violation of such principles. Such interpretation frustrates actions disloyal to the other parties and the arbitration court, causing unnecessary costs and a waste of time. There is no concern in this respect that the party’s procedural rights will be limited, because the party decides on the arbitration clause autonomously.

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