Supreme Court of Poland order
dated 4 April 2019
Case No. III CSK 81/17
Summary by arbitraz.laszczuk.pl:
F., a limited liability company, based in Z., was in business relations with A. (F. purchased cocoa powder from A.). The parties concluded 5 such contracts between 10 October 2012 and 26 April 2013. F. placed orders for a specified amount of cocoa at a given price by a telephone or electronically. A. sent confirmations of conclusion of contracts by e-mail and at the same time by a post and F. proceeded to perform them. The ‘Contract confirmation’ specified, among other things, the data of the sold product, its quantity, the price and delivery conditions, however under this data there was a note: ‘All terms and conditions of the FCC (Federation of Cocoa Chamber) Contract for Palletized Cocoa Products released by the Buyer in force on the date of conclusion of the contract shall be deemed to be included in the contract and considered included into and constituting a part of this contract. The above terms and conditions are available on the FCC website at ‘www.cocoafederation.com’. In connection with the concluded contracts, the employees of both companies responsible for business contacts exchanged e-mail correspondence.
All contracts contained a reference to the FCC Contract Specifications which included an arbitration clause regarding arbitration before the permanent arbitration tribunal at the FCC. Arbitration proceedings were to take place in England in accordance with English law and were to be conducted in English. FCC Contract Specifications were incorporated in contracts concluded by the parties in accordance with the practice established by the parties under which F. placed an order by a telephone or electronically, then A. sent a contract confirmation to the contractor electronically and at the same time by post and F. proceeded to perform the contract. What is interesting, a fee was required to get access to the FCC Contract Specifications.
A dispute arose between the parties. A. decided to file a claim against F. A. claimed that since all contracts had been concluded electronically, a requirement to conclude an arbitration agreement in written form, which results from Art. 1I of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958 (the ‘New York Convention’), had been fulfilled. It also stated that printouts of electronic correspondence of the parties attached to the claim were compliant with the requirement to attach the original contract or a duly authenticated duplicate of the contract to the claim.
F. stated that no arbitration agreement was made. In its assessment, the FCC Contract Specifications were not incorporated into particular contracts concluded by the parties. Even if such incorporation had taken place, it did not contain the arbitration clause. F. argued also that the New York Convention did not allow the parties to conclude an agreement by a reference, and at the same time conditions of conclusion of an agreement by a reference established in the Polish law had not been fulfilled. Moreover F. claimed that in this situation principles of the public order had been infringed.
On 27 July 2015 the Permanent Court of Arbitration (an Arbitral Tribunal) at the Federation of Cocoa Commerce (FCC) in L. issued an award in five joined cases at the suit A. v. F., a limited liability company. According to the award, the respondent was obliged to pay the claimant over EUR 750,000 and interest on this sum, stockholding costs and proceedings costs. F. filed an appeal. As a consequence, the Appeal Tribunal changed the Arbitral Tribunal’s award – reduced, among other things, the principal amount to EUR 710,000. The respondent challenged a jurisdiction of arbitral tribunals in both proceedings.
In an order of 28 October 2016 the Appeal Court dismissed the A.’s demand to declare the award enforceable. The Appeal Court found that under Art. II (2) of the New York Convention ‘an agreement in writing’ means both an arbitration clause contained in a contract and a compromise – both signed by the parties and contained in an exchange of letters or telegrams. In connection with a development of means of distance communication, it should be deemed that correspondence sent electronically meet this requirement. The parties have a free choice to choose the form of an arbitration agreement, but this choice is limited to such ways which cause that the declarations of their will may be recreated in a written form. According to the Appeal Court, in the circumstances of the case, no arbitration agreement was concluded within the meaning of Art. 1162 of the Polish Civil Procedure Code (the ‘PCPC’). Under Art. 1162 § 1 of the PCPC, the arbitration agreement shall be in writing. According to Art. 1162 § 2 of the PCPC, the requirement as to the form of the arbitration agreement shall also be met, if the agreement is contained in correspondence exchanged between the parties or statements made using telecommunications enabling the content thereof to be recorded. Reference in a contract to a document containing a provision on submission of a dispute to arbitration shall meet the requirement as to the form of the arbitration agreement, if the contract is made in writing and the reference is such that it makes the clause an integral part of the contract. The solution regulated in the Polish law differs from the model adopted in the New York Convention, since it makes it possible to conclude an arbitration agreement by reference to other document containing this clause (Art. 1162 § 2 sentence 2 of the PCPC). However, the Appeal Court stated that because the referencing contract had not been concluded in writing, it should be deemed that conditions for the application of this provision had not been fulfilled.
A. filed a cassation appeal to the Polish Supreme Court. It argued that some provisions of the New York Convention had been infringed, because the Appeal Court misinterpreted them.
The Polish Supreme Court found that in this situation requirements resulting from Art. II (2) of the New York Convention and Art. 1161 in connection with Art. 1162 § 1 of the PCPC had not been fulfilled. An implicit or oral agreement of the parties to refer a dispute to a state court did not comply with the requirement of the written form. The same must be said if one party sends via e-mail or by post a contract confirmation which includes a reference to general conditions of the contract including, among other things, an order to submit disputes to arbitration and the second party proceeds to perform the contract. Even if the contractor accepts an arbitration agreement under such circumstances, it should be noted that this will is still not expressed in the written form prescribed by the law.
Excerpts from the text of the court’s ruling:
1. [T]he concept of an ‘agreement in writing’, whereunder parties undertake to refer a dispute to arbitration, has been explained as meaning both an arbitration clause contained in a contract (i.e. relating to disputes which may arise in the future) as well as a compromise, i.e. an agreement to refer a dispute to arbitration concluded after a dispute has arisen.
2. [D]evelopment of means of distance communication results in acceptance of the viewpoint that the intent of Art. II (2) sentence 2 of the New York Convention is fulfilled also if a declaration of will is made by new technical methods, including an exchange of e-mails or faxes. In any of these situations, however, two requirements need to be fulfilled. Firstly, since we are dealing with a contract, it is necessary for each of the parties to clearly express its will to refer the dispute to arbitration, which is tantamount to acceptance of exclusion of a case from jurisdiction of a state court. Secondly, mutual acceptance of the idea to refer a dispute to arbitration is not sufficient. It is necessary for the parties to make a declaration of will in a way that fulfils the requirement of written form within the meaning of Art. II (2) sentence 2 of the New York Convention.
3. To conclude an ‘agreement in writing’ within the meaning of Art. II of the New York Convention it would be also necessary in the situation at hand to make another declaration, whose content would express the will of the contractor agreeing to having a case recognized by an arbitration court. Only then it could be possible to say that was ‘an exchange of letters or telegrams’ (also faxes, e-mails, etc.) within the meaning of Art. II (2) sentence 2 of the New York Convention, understood as documents referring or corresponding to each other and containing consistent declarations of will of the parties to refer a dispute to arbitration. This criterion is not fulfilled, if the parties correspond with each other about matters related to the contract, but from the content of this correspondence it does not follow that an ‘exchange’ took place within the meaning of Art. II (2) sentence 2 of the New York Convention, so an ‘exchange’ of declarations concerning establishment of jurisdiction of an arbitration court.
4. [C]onclusion of an ‘agreement in writing’ or making an arbitration agreement is always a subject to assessment by an arbitration tribunal or a state court which decides on its jurisdiction or lack of jurisdiction to hear the case.
5. Effective reliance on the grounds for application of Art. 1162 § 2 sentence 2 of the Polish Civil Procedure Code is (…) possible only if a contract is concluded with respect to which a dispute may arise, i.e. the so-called main contract (…).
6. [T]o effectively rely on existence of an arbitration clause, it is not sufficient for the contractor to challenge the conclusion of the main contract (for example, a sales contract) in which reference is made to the arbitration agreement contained in another document. The issue of existence of the arbitration agreement always requires a separate assessment and a decision on the validity and effectiveness of the arbitration clause.
7. Competence of an arbitration tribunal to settle a dispute results from the will of the parties. This will should be (in legal categories, i.e. terms of assignability of the declaration) unquestionable (…).