polish

case law

id : 20268

id: 20268

Polish Supreme Court judgment

dated 27 March 2013

V CSK 222/12

Summary by arbitraz.laszczuk.pl:

In 2007, a partnership, P. s.j., entered into a framework agreement with I. SA, a member of the Polish Bank Association, for conducting transactions on the financial markets, and in 2008 the customer and the bank entered into a further hedging agreement involving offsetting call and put contracts. The framework agreement called for arbitration before the Court of Arbitration at the Polish Bank Association. Over 2007 and 2008 the parties entered into numerous transactions based on these agreements. Twelve of them generated a profit for the customer of PLN 200,000, while the others generated a loss of over PLN 18 million, which the customer refused to pay.

The customer commenced arbitration against the bank seeking a declaration that the losing contracts were invalid. The bank asserted a counterclaim for payment of the amounts owed under those contracts. Under the rules of the arbitration court, each party appointed one arbitrator, who did not have to be included in the arbitration court’s list of recommended arbitrators, and those two arbitrators would select a third, presiding arbitrator, who had to be from the list of recommended arbitrators. The arbitration panel issued an award denying the claim but granting the counterclaim.

The claimant filed a petition with the regional court to set aside the award on public policy and other grounds. During the proceeding, after the deadline for filing the petition to set aside the award, the claimant asserted as a further basis for the petition that the arbitration clause was invalid because it violated the principle of the equality of the parties, as the respondent was a member of the Polish Bank Association and the claimant was ineligible for membership in the association, and the presiding arbitrator had to be selected from the list of approved arbitrators.

The regional court denied the claimant’s petition to set aside the award, and the court of appeal denied the claimant’s appeal.

On cassation appeal, the Supreme Court of Poland held that the claim that the arbitration clause was invalid could not be considered because it was not asserted in the petition to set aside the award or before the deadline for filing the petition to set aside the award. If the parties’ agreement did not contain the required minimum elements to constitute a contract, an award enforcing the contract would violate public policy, but, as the lower courts had found, such was not the case. The award also did not violate public policy because, as the claimant alleged, it was not aware of the option contracts being concluded with the respondent, as the lower courts had found that it was aware of the contracts. The Supreme Court denied the cassation appeal accordingly.

Excerpts from the text of the court’s ruling:

1. The regulations of the Civil Procedure Code governing arbitration are not uniform in character. The provisions governing issues involving the permissibility of a petition to set aside an award and the formal requirements and procedure for the petition are strictly procedural in nature, but the provisions setting forth the grounds for the petition, constituting the basis for the court’s ruling on the merits of the dispute and the justification for the petition, are the functional equivalent of provisions of substantive law.

2. Assertion of new grounds for the petition to set aside an arbitration award after the deadline for filing of the petition is impermissible. … The court ruling on a case seeking to set aside an arbitration award may not consider on its own motion the ground set forth in Civil Procedure Code Art. 1206 §1(1) which was not asserted in the petition and was precluded.

3. Recognizing as binding an agreement which does not specify the essential terms of the contract would be irreconcilable with the fundamental principles of the legal order of the Republic of Poland.

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