polish

case law

id : 20413

id: 20413

Katowice Court of Appeal order

dated 2 June 2014

Case No. V ACz 510/14

Summary by arbitraz.laszczuk.pl:

A Polish company entered into a framework agreement with a bank in 2008 for currency option transactions. The framework agreement included a clause calling for arbitration of any disputes arising in connection with performance of the agreement before the Court of Arbitration at the Polish Bank Association. The customer lost money on the option transactions, and as of August 2009 owed the bank over PLN 5.5 million under the options. Then the bank and the customer entered into a credit agreement where the customer would borrow this amount from the bank and the principal would be used to pay off the amount owed to the bank under the options, with the loan to be repaid by the end of 2013. The credit agreement did not contain an arbitration clause.

The customer filed suit against the bank in the Katowice Regional Court seeking return of the PLN 5.5 million collected by the bank from the loan and a declaration that the loan obligation did not exist, because the debts under the currency options did not exist and consequently the credit agreement was invalid. The bank asserted the arbitration clause in the framework currency options agreement as a defence. The plaintiff argued that the credit agreement constituted an implied novation of the framework agreement and thus the prior agreement (with the arbitration clause) was no longer in force. The regional court found that there was no implied novation; the purpose of the credit agreement was not to replace the framework currency options agreement and redeem the debts allegedly due thereunder, but to extinguish those debts by applying the principal borrowed under the credit agreement to pay off those debts. Consequently, the framework currency options agreement remained in force, and as the dispute was related to performance of that agreement it was covered by the arbitration clause. The regional court thus dismissed the customer’s suit.

On interlocutory appeal, the Katowice Court of Appeal found that although the dispute was framed in terms of the validity of the credit agreement, it essentially boiled down to a determination of whether the customers’ debts existed under the framework options agreement, and thus the dispute was related to performance of that agreement and covered by the arbitration clause in that agreement. It was irrelevant whether a novation had occurred (replacing the framework options agreement with the credit agreement) because the arbitration clause in the framework agreement continued to function as an independent agreement. In any event, the court pointed out, there could be no implied novation. The obligations under the credit agreement did not replace the obligations under the framework options agreement, but the purpose of the credit agreement was only to provide the customer the funds to pay the customer’s obligations to the bank under currency option transactions.

The court of appeal denied the interlocutory appeal accordingly.

Excerpt from the text of the court’s ruling:

The objective scope of a clause under which arbitration is provided not only for disputes arising out of the contract but also for disputes related to the contract extends to disputes concerning a novation of the existing obligation related to the contract.

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