Polish Supreme Court judgment
dated 7 October 2016
Case No. I CSK 592/15
Summary by arbitraz.laszczuk.pl:
Company C. filed a claim before the Court of Arbitration at the Polish Chamber of Commerce against life insurance company PZUŻ seeking about EUR 8.4 million (ultimately modified to about PLN 36 million) for fees allegedly due under a contract for an integrated IT system. PZUŻ alleged that the claimant had not properly performed the contract, and filed a counterclaim for about PLN 72 million as a refund of amounts already paid or as damages for breach of contract. In support of its counterclaim, PZUŻ submitted an expert report on the contract prepared by consultancy firm Accenture. The arbitral tribunal refused to admit the report as evidence, finding that it did not address facts supporting the claim of improper performance but only covered the issue of contract management. After the close of the hearing C. sought to modify its claim again. The tribunal did not give PZUŻ an opportunity to reply to that request, but proceeded to issue an award. The award granted C.’s claim in the amount of about PLN 17 million, denied the rest of C.’s claim (including the portion in which it sought to modify the claim after the close of the hearing) and denied the counterclaim by PZUŻ.
PZUŻ applied to the regional court to set aside the award, alleging inter alia that it was denied the right to be heard by the arbitral tribunal’s rejection of the Accenture report and its failure to give PZUŻ an opportunity to respond to C.’s final attempt to modify its claim. The regional court found that the arbitral tribunal had adequately explained its reason for refusing to consider the Accenture report, and found that PZUŻ had not been prejudiced by the lack of an opportunity to respond to C.’s attempt to modify its claim after the close of the hearing, because that portion of C.’s claim was denied. The court denied the application to set aside the award accordingly.
On appeal, the court of appeal adopted the factual and legal findings of the regional court and denied the appeal.
On cassation appeal, the Supreme Court found, like the lower courts, that the arbitral tribunal’s refusal to consider the Accenture report was adequately justified, and the correctness of that decision could not be considered in an action to set aside the award. Similarly, where PZUŻ was not prejudiced by the lack of an opportunity to respond to C.’s unsuccessful attempt to modify its claim after the close of the hearing, that could not be grounds for setting aside the award. The Supreme Court denied the cassation appeal accordingly.
Excerpts from the text of the court’s ruling:
1. The essence of an action to set aside an arbitration award is to provide a review mechanism respecting on one hand the separateness and autonomy of arbitration, and on the other hand preventing the functioning in legal circulation of rulings by non-state courts infringing the rule of law. A proceeding to set aside an arbitration award does not lead to reconsideration of the merits of the dispute between the parties, but is intended only to verify the applicant’s allegations of the existence of the grounds raised in the application provided for in Civil Procedure Code Art. 1206 §1, and assess whether any of the grounds provided for in Civil Procedure Code Art. 1206 §2 exist, whether or not asserted by the applicant.
2. Depriving a party of the ability to defend its rights before the arbitral tribunal occurs when the arbitral tribunal for example failed to notify the party of the date of the hearing after which the award was announced, when it did not hear out the party at all or give the party the opportunity to submit statements with respect to the matter in dispute. It does not constitute depriving a party of a defence to fail to admit and consider evidence offered by the party, if the arbitral tribunal justifies that procedural decision duly and in accordance with the accepted rules.
3. Violation of the fundamental principles of the Polish legal system may occur in the realm of both substantive law and procedural law, which leads to a distinction between the substantive legal system and the procedural legal system. The fundamental principles of the Polish legal system should be understood to mean constitutional principles as well as the leading principles of other fields of substantive and procedural law; the latter undoubtedly include the principle of the equality of the parties.