case law

id : 20190

Gdańsk Appellate Court order

dated 11 February 2014

Case No. I ACz 1475/13

Summary by arbitraz.laszczuk.pl:

In 2007, a Polish company, C. sp. z o.o., entered into a number of contracts to sell crankshafts for construction of ship engines to a Chinese company, J. The contracts called for application of Incoterms FOB Gdynia for shipment to Shanghai, and included a clause calling for arbitration before the London Court of International Arbitration. After a dispute arose between the parties, the seller commenced LCIA arbitration in June 2010 seeking an award declaring that the contracts were binding and seeking a monetary award in the form of an advance payment of over EUR 1.5 m.

An English junior barrister was appointed in September 2010 as the sole arbitrator. In November 2010 he wrote to the parties informing them that he had been offered a place as a tenant at the same barristers’ chambers as counsel for the respondent, who was Queen’s Counsel. The arbitrator stated that he did not know the other barrister and they had never met. He also stated that he did not believe he had a conflict of interest because the barristers in the chambers conducted independent practices and only shared office expenses. Nonetheless, he decided to inform the parties of the situation because they were from other countries and might not be aware of the structure of the English bar. He stated that if either party objected within 15 days to his continuing to serve as the arbitrator, he would resign. Neither party objected, and he continued to serve. In September 2011 he issued an award denying the claimant’s claims in their entirety. Then, in February 2012, he issued a second partial award of costs and attorneys’ fees in favour of the respondent in the amount of over GBP 60,000 and over RMB 260,000.

The Chinese company applied to the Gdańsk Regional Court for enforcement of the award on costs. The Polish company alleged in defence that enforcement should be denied because the arbitrator was not impartial and therefore the award violated public policy, and also alleged that the costs awarded were excessive, possibly due to the allegedly biased arbitrator’s uncritical approval of all the fees charged by respondent’s counsel with whom the arbitrator shared barristers’ chambers and who, as QC, was supposedly a superior to the arbitrator, a Junior. The court found that the claimant had waived any objection to the arbitrator’s alleged lack of impartiality, pursuant to the LCIA rules, and therefore enforcement could not be denied on this basis. The court also held that it no authority to review the merits of the award in terms of the amount of costs. The court granted enforcement accordingly by issuing an enforcement clause for the award. The claimant filed an interlocutory appeal, which was denied by the Gdańsk Appellate Court.

The claimant’s interlocutory appeal to the Gdańsk Appellate Court was based chiefly on the allegation that enforcement should be denied because the award violated public policy due to the lack of impartiality of the arbitrator because he shared barristers’ chambers with the respondent’s counsel. The court found that, given the structure of the English bar, there was no automatic conflict of interest in this situation due to the arbitrator, a Junior, sharing chambers with counsel for the respondent, QC. The two barristers had independent practices, were not partners and did not share their fees but only shared office expenses. The court also found that the arbitrator had acted properly in a situation covered by the “Orange List” in the IBA Guidelines on Conflicts of Interest in International Arbitration, and the subsequent award thus could not be regarded as violating public policy. The Gdańsk Appellate Court denied the interlocutory appeal accordingly.

Excerpts from the text of the court’s ruling:

1. Because the [New York] Convention exhaustively governs the grounds for recognition and enforcement of a foreign arbitration award (Art. V of the Convention), the Polish court may not resort to Art. 1215 § 2 in connection with Art. 1214 § 3 (2) of the Civil Procedure Code.

2. The arbitrator’s and counsel’s membership in the same barristers’ chambers does not automatically constitute a source of a conflict of interest but should be considered on a case-by-case basis.

3. In a proceeding for enforcement of a foreign arbitration award, the public policy clause cannot take the place of the procedure for appointment of an arbitrator which the party to the arbitration proceeding declined to follow and which served to reduce the risk of abuse of non-meritorious objections concerning the independence and impartiality of the arbitrator after the completion of the arbitration proceeding.

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