Warsaw Court of Appeal judgment
dated 21 November 2014
Case No. VI ACa 199/14
Summary by arbitraz.laszczuk.pl:
An IT company brought a claim before the Court of Arbitration at the Polish Chamber of Commerce in 2010 against its customer for over EUR 8 million (later quantified at a figure of over PLN 35 million) pursuant to a contract for installation and start-up of a software system and related licence fees, service fees, interest and other charges. The customer counterclaimed for over PLN 71 million for reimbursement of fees it had paid under the contract and damages for improper performance of the contract. The respondent sought to support its counterclaim by filing an expert opinion showing that the contract was not properly performed; this request was denied by the arbitral tribunal. In 2012 the arbitral tribunal issued an award in favour of the claimant for over PLN 17 million and denied the respondent’s counterclaim. The tribunal found that a large part of the claim had been acknowledged by the respondent in a table circulated and approved by the steering committee for the project made up of representatives of both parties. The final amount of the award was partially based on a modification of the claims circulated after the close of the hearing, involving a recalculation of the claim for interest.
The respondent applied to the regional court to set aside the award, alleging inter alia that the award violated public policy and that the arbitral tribunal had violated fundamental rules of procedure and denied it a defence because the arbitral tribunal had relied on a modified version of the table agreed by the parties as grounds for acknowledgement of the claim, refused to admit into evidence the expert opinion in support of its counterclaim, and allowed modification of the claim after the close of the hearing. The regional court found that the versions of the table relied on the arbitral tribunal accurately reflected the details of performance agreed by the parties. The expert opinion was supposed to explain facts in evidence, but the respondent had not presented other evidence of improper performance of the contract, and it was in the discretion of the arbitral tribunal whether to admit the expert report; therefore it was proper for the tribunal to exclude the report. Finally, the modification of the claim after the end of the hearing did not materially affect the respondent’s position. The regional court denied the petition to set aside the award accordingly.
On appeal, the court of appeal upheld and adopted the factual findings and legal reasoning of the regional court, and agreed that the arbitral tribunal had not violated fundamental rules of procedure or denied the respondent its right to a defence, and the award did not violate public policy. The court of appeal denied the appeal accordingly.
Excerpts from the text of the court’s ruling:
1. The arbitration court’s ignoring evidence offered by a party because it deemed the evidence to be unnecessary cannot be regarded as depriving the party of the possibility of defending its rights, and examination of the correctness of ignoring of the evidence by the arbitration court is impermissible because that would encroach on the merits of the case. … A party is deprived of the possibility of acting only when it has been totally deprived of the ability to defend its rights, and thus when it has found itself in a situation that prevents, and not only hinders or limits the support before the arbitration court of the demands asserted by the party.
2. Since the parties voluntarily submitted disputes arising out of the contract agreed between them to the judgment of the arbitral tribunal, aware of the limitations flowing therefrom, the petitioner cannot effective accuse the arbitral tribunal of not admitting evidence it raised, particularly in a situation where the arbitral tribunal exhaustively explained the reasons for denying the application.
3. Denial of an evidentiary application cannot be grounds for alleging that an award is inconsistent with the fundamental principles of the legal order of the Republic of Poland. It should be stressed that the public policy clause, like any general clause, is indefinite, which leaves to the court considering a specific case a great degree of discretion; nonetheless, review on this basis of the elements comprising the ruling of the arbitral tribunal cannot assume the dimensions proper to a review of the merits (correctness) of the ruling. The prohibition of the review of the merits (correctness) of such ruling is connected with the essence of application of the public policy clause. In applying the clause, the point is not that the ruling being evaluated was consistent with all of the mandatorily applicable provisions of law entering into play, but that it did not exert an effect inconsistent with the fundamental principles of the national legal order.