polish

case law

id : 20389

id: 20389

Warsaw Court of Appeal judgment

dated 24 July 2014

Case No. I ACa 154/14

Summary by arbitraz.laszczuk.pl:

A registered partnership brought two ad hoc arbitration cases seeking payment against a limited-liability company arising out of a construction contract between the parties, before the same arbitrators (presiding arbitrator A.Z. and arbitrators M.K., appointed by the claimant, and W.P., appointed by the respondent), for a total of over PLN 500,000. The proceedings were apparently governed by the 2007 Arbitration Rules of the Court of Arbitration at the Polish Chamber of Commerce. Two awards were issued in the cases on the same day in April 2012 in favour of the claimant for a total of over PLN 200,000. The awards were signed by arbitrators A.Z. and M.K., while arbitrator W.P. filed a dissenting opinion.

The respondent company applied to the Warsaw Regional Court to set aside the awards, alleging inter alia that it had been denied a defence and had not received equal treatment because its requests to admit evidence (in the form of expert opinions) were denied by the tribunal, and fundamental arbitration procedures were not followed because no deliberations concerning the awards were held and the award was determined solely by the president arbitrator (A.Z.) and the arbitrator appointed by the claimant (M.K.), ignoring the arbitrator appointed by the respondent (W.P.)

The regional court heard testimony by the arbitrators and the clerk concerning the circumstances surrounding the deliberations by the arbitrators and issuance of the awards. The regional court held that the respondent had not been denied a right to present a defence because it was permitted to seek the introduction of evidence; the arbitral tribunal merely found that the evidence offered was unnecessary and irrelevant for the resolution of the case. That was a legal determination to be made by the arbitral tribunal and was not reviewable by the state court.

Concerning the deliberations by the arbitral tribunal, the court accepted the explanation presented by the two arbitrators in the majority and rejected the conflicting testimony offered by the dissenting arbitrator, finding that deliberations were in fact held on one day in February 2012, although the dissenting arbitrator objected to the lack of preparation for the deliberations by the other arbitrators. During the deliberations, the substance of the awards was determined. After the deliberations, A.Z. drafted and signed the awards and forwarded them to the other arbitrators for their signature. W.P. wrote to them raising objections to the awards for their consideration, which they rejected as moot because they regarded the awards as already having been reached. The regional court denied the petition to set aside the awards.

On appeal by the respondent, the Warsaw Court of Appeal upheld the finding by the lower court that the respondent had not been denied a defence because the evidence it offered was rejected as unnecessary and irrelevant. However, the court of appeal corrected the findings of the regional court concerning the arbitrators’ deliberations over the awards. The court of appeal found that the regional court had not addressed the testimony by W.P. that during the deliberations in February 2012, it was agreed that W.P. would provide the other arbitrators with his reasoning in writing for them to consider before voting on the awards. Six weeks later A.Z. distributed his draft of the awards, telling W.P. that his analysis could not be accepted. W.P. then called the presiding arbitrator asking to meet to continue the deliberations, but the presiding arbitrator refused because he and the third arbitrator had already reached a decision, and because they constituted a majority the awards were already issued. The court of appeal concluded from this that the deliberations begun in February 2012 had never been completed and no vote had actually been held. This violated fundamental rules of arbitration procedure. (The rule that an award may be signed by only two of three arbitrators if the third arbitrator refuses to participate did not apply because the third arbitrator had not refused to participate.) Consequently, the court of appeal amended the judgment of the regional court and set aside the awards.

Excerpts from the text of the court’s ruling:

1. The fact that two arbitrators, constituting a majority of the panel, had already signed drafts of the awards was certainly not valid grounds for the presiding arbitrator to refuse to continue deliberations over the awards. This was not equivalent to the act of voting, not to mention equivalent to deliberations on the resolution and the grounds for the resolution. Refusal to continue the deliberations in order to discuss the comments means that it cannot be said that the deliberations were completed and voting was held on the awards. … As pointed out in the legal literature, the list of examples of violations with respect to regulations on voting, removal of an arbitrator and the award which were set forth in Civil Procedure Code Art. 712 §1(3) (in force through 16 October 2005) were not expressly carried over to the wording of Civil Procedure Code Art. 1206 §1(4). There is no doubt, however, that a violation of these rules should generally be treated as a violation of fundamental rules of procedure.

2. Ignoring evidence offered by a party because the arbitration court found the evidence to be unnecessary will not qualify as depriving the party of the ability to present a defence. Examination by the state court of whether the arbitration court correctly found such evidence to be unnecessary would constitute impermissible encroachment into the merits of the case. If the arbitration court ignored a certain portion of the defence presented by the party, while including in the grounds for the award a substantive explanation of the reasons it found the defence to be irrelevant, then the party’s allegation with respect to ignoring its defence is in reality directed against the substantive defence of the dispute and as such is impermissible.

 

scroll up