Gdańsk Court of Appeal judgment
dated 28 November 2013
Case No. I ACa 550/13
Summary by arbitraz.laszczuk.pl:
In 2006, in a public procurement procedure, the contracting entity P. sp. z o.o. entered into a contract for construction of a water and sewer network with contractor Przedsiębiorstwo Wielobranżowe W.-K.-G. sp. z o.o. based on the FIDIC Red Book conditions (1999). The Particular Conditions provided that the appointing authority for dispute adjudication boards under clause 20 of the contract was the president of the Polish Association of Consulting Engineers and Experts (SIDIR) or the president of the Polish Federation of Engineering Associations (NOT), and provided for arbitration before the Court of Arbitration at the Polish Chamber of Commerce.
In 2009, during the course of performance, a dispute arose over payment for additional water-removal work. The contractor proposed an individual from the FIDIC list to serve as the single-member dispute adjudication board, and reserved the right to seek arbitration if the contracting entity did not agree to the proposed DAB. The contracting entity objected to the person proposed by the contractor, but neither party applied to SIDIR or NOT to appoint the DAB. The contractor commenced arbitration before the Court of Arbitration at the Polish Chamber of Commerce, claiming over EUR 1.5 million. The arbitral tribunal determined that the additional work had been done and the fee had been correctly calculated, and issued an award in 2012 granting the claim in full.
The contracting entity applied to the regional court to set aside the award, claiming that the award exceeded the bounds of the arbitration clause because the contractor was required to obtain a ruling from the dispute adjudication board before seeking arbitration. The contracting entity also alleged that the award violated public policy inter alia because the additional work was not agreed in writing as required under the Public Procurement Law. In 2013, the regional court issued a judgment setting aside the award in its entirety, holding that it was mandatory to obtain a ruling from the DAB before seeking arbitration. The contractor was at fault for not applying to SIDIR or NOT to appoint the DAB; the contracting entity was not at fault because, as the party against whom the claim was made, it had no interest in resolving the dispute.
On appeal, the Gdańsk Court of Appeal held that the arbitration clause calling for disputes to be resolved by the Court of Arbitration at the Polish Chamber of Commerce had been complied with, and first seeking a ruling from the DAB was optional. The court also held that the provisions of the Public Procurement Law relied on for the allegation that the award violated public policy were irrelevant to the dispute. The court amended the judgment of the regional court accordingly to deny the petition to set aside the award.
Excerpts from the text of the court’s ruling:
1. The view cannot be shared that in connection with the dispute that had arisen the contractor should have brought about the appointment of a dispute adjudication board and presented the dispute to it, and the consequence of failure to take such actions is the loss of the possibility of effectively pursuing the claim. The section [of the FIDIC contract conditions] on Claims, Disputes and Arbitration does not provide for such sanctions.
2. In proceedings before the arbitration court the arbitrators are not bound by decisions of the [FIDIC] dispute adjudication board, whose decisions should be treated as evidence in the case. The decision by the dispute adjudication board cannot be treated analogously to an arbitration award, nor is the proceeding before the board a part of the proceeding before the arbitration court.
3. The contracting entity was properly informed of the need to perform additional works and did not dispute the need to perform them. It thus may not effectively allege that payment for such works violates fundamental principles of the legal order because public monies were involved in financing the works.