case law

id : 20439

id: 20439

Polish Supreme Court order

dated 2 March 2017

Case No. V CSK 392/16

Summary by arbitraz.laszczuk.pl:

In November 2013, D.G., as managing director of the Polish company W., and C.M., representing the Hungarian company P., negotiated by telephone a contract under which W. agreed to purchase 4,000 tonnes of ethanol from P. The terms were confirmed in a contract exchanged as an email attachment, which included a choice of English law and a clause calling for arbitration (apparently before the London Court of International Arbitration).

The first two shipments, in 2013, totalling 2,000 tonnes, were accepted and paid for “for” the Polish company A., an affiliate of W. However, D.G. demanded a reduction in the price of the final two shipments, totalling 2,000 tonnes. Then W. sent P. an email disavowing the contract allegedly entered into for it by D.G., asserting that D.G. was not authorized to represent it, as D.G. was a member of W.’s supervisory board but was employed by its affiliate, A. Consequently, W. refused to accept delivery of the final 2,000 tonnes of ethanol.

P. commenced arbitration against W. (apparently before the LCIA). In the first partial award issued in 2014, the arbitral tribunal found that it had jurisdiction and that D.G. had implied authority to conclude contracts for W., and that W. as buyer and P. as seller had entered into a binding contract for sale of ethanol. In 2015 the arbitral tribunal issued a second partial final award in favour of P., ordering W. to pay damages of over EUR 317,000 for breach of contract.

The Hungarian company P. applied to the regional court in Poland for enforcement of the second partial final award against the Polish company W. W. asserted in its defence that the arbitration agreement was invalid among other reasons because D.G. was not authorized to conclude the arbitration agreement for W.

The regional court held that the exchange of emails was sufficient to meet the formal requirements for conclusion of the arbitration agreement. Under the Polish law governing D.G.’s authority to represent W. in concluding the arbitration agreement, D.G. was not granted power of attorney either orally or in writing. However, in the court’s view this irregularity in the issuance of the authorization to conclude the arbitration agreement was not grounds for refusal to enforce the award under Art. V(1)(a) of the New York Convention due to the invalidity of the arbitration agreement, but instead might be grounds for denial of enforcement under Art. V(2)(b), as it would violate Polish public policy to enforce damages for breach of a contract that the party did not conclude and was unaware of. Consequently, the regional court granted an order enforcing the award.

On interlocutory appeal, the court of appeal found that under the totality of the circumstances, D.G. was duly authorized under Polish law to conclude the principal agreement and the arbitration agreement on behalf of W. The court denied the appeal accordingly.

On cassation appeal, the Supreme Court of Poland found that although the court of appeal had concluded that D.G. had been given authority via internet to enter into the arbitration agreement, it had failed to make factual findings that would support this conclusion. Consequently the court set aside the order of the court of appeal and remanded the case for reconsideration.

Excerpts from the text of the court’s ruling:

1. There is no disagreement in the legal literature or the case law concerning the separability of an arbitration clause from the “main” contract. It is consistently accepted that the validity of an arbitration clause should be evaluated autonomously. Even when it is included in the form of a clause in the “main” contract, the arbitration agreement is not a provision of the contract, and thus its effectiveness is examined independently.

2. The assessment of the existence of authorization of an attorney-in-fact to conclude the arbitration agreement should be made independently of the assessment of the existence of the attorney’s authority to conclude the legal act which is the source of the legal relationship out of which disputes are to be submitted to the jurisdiction of the arbitral tribunal. Consequently, the assessment of the effectiveness of the authorization to conclude the arbitration clause is independent of the assessment of the effectiveness of the authorization to conclude the “main” contract, and a determination that the attorney-in-fact was duly authorized to conclude the contract will not be controlling for the assessment of whether he was also duly authorized on behalf of the principal to submit disputes arising out of the contract to the jurisdiction of the arbitral tribunal. In other words, the law governing the arbitration agreement itself does not extend to issues connected with the power of attorney, i.e. issues connected with the authorization to conclude the arbitration agreement do not fall within the scope of the statute of the arbitration agreement.

3. The requirement of a power of attorney to make a specific transaction must arise pursuant to a statute ([Civil Code] Art. 98, end of the second sentence), which means that the requirements for this cannot be imposed if not expressly provided for a given action by any statute. No statute provides for such a requirement with respect to the type of power of attorney in relation to an arbitration agreement. This means that there are no grounds for holding that an arbitration agreement could be concluded only by an attorney holding a power of attorney for this specific action; such a power of attorney is therefore not essential for the effectiveness of the arbitration agreement, although obviously it is sufficient.

4. Generally, an arbitration agreement is an act exerting a direct impact on the manner of realization of the legal protection to which the party is entitled. The rank of an arbitration agreement and its procedural consequences are thus serious enough that concluding an arbitration agreement should be treated as an act outside the ordinary course of business. Its effects are of a procedural law nature, shaping the procedural situation of the party bound
by the agreement.

5. In the field of international arbitration, written form [for an arbitration agreement] understood [as the exchange of documents by email] is indeed sufficient, even if it does not meet the requirements for written form provided by the Civil Code.

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