Supreme Court of Poland order
dated 7 June 2019
Case No. I CSK 76/19
Summary by arbitraz.laszczuk.pl:
The city of W. and F. Sp. z o.o., a limited liability company, based in W. entered into a lease agreement on 22 August 2000. A dispute arose between the parties. F. Sp. z o.o. initiated proceedings before the Court of Arbitration at the Polish Chamber of Commerce (the ‘Arbitration Court’). An arbitration award was delivered in the case on 30 January 2014 whereunder the respondent was obliged to pay cumulatively over PLN 150,000 (point 1) and the claim was dismissed in relation to the amount of over PLN 480,000 at the cost of the claimant (point 2).
The city of W. filed a petition to set aside the arbitration award with respect to 1. In the judgement of 1 July 2016 the Regional Court dismissed the petition. As a consequence, the respondent filed an appeal. The city of W. maintained that substantive law had been violated because the court of first instance had found the lease agreement to be valid. The city of W. argued that this agreement was invalid, because, among other things, W., as an organisational unit of the State Treasury had been represented by persons who had not been entitled to make declarations of will on behalf of the State Treasury. The Appeal Court delivered a judgement of 7 December 2017 and dismissed the appeal. It agreed with the above allegation and stated that there had been grounds for finding – as had been found by the Arbitration Court and the Regional Court – that by its actions the city of W. had given an implied consent to the wording of the lease agreement and entered into rights and obligations arising therefrom. The court of second instance assessed on the basis of, among other things, Art. 60 of the Polish Civil Code, that adoption of such a concept is not a ground for finding that an award is contrary to fundamental principles of the legal order of the Republic of Poland. The Appeal Court found that for a petition to set aside an arbitration award to be effective it is required not only to demonstrate that a provision of substantive law may have been violated, but this needs to be an aggravated violation resulting in violation of the principles of the rule of law, hence the award would have to violate the fundamental legal principles which are in force in the Republic of Poland.
As a result of the previous occurrences, the city of W. filed a cassation appeal to the Polish Supreme Court. In the reasoning the respondent indicated the ground specified in Art. 3989 § 1 (1) of the Polish Civil Procedure Code (the ‘PCPC’). In W.’s opinion, there had been significant legal questions in the case.
The Polish Supreme Court refused to hear the cassation appeal and ordered the city of W. to pay for the benefit of F. Sp. z o.o., a limited liability company, PLN 1,200 as a reimbursement of the costs of the cassation appeal proceedings.
The Polish Supreme Court found that it results from Art. 3981 § 1 of the PCPC that, in principle, a cassation appeal may be filed against a final judgment of a court of second instance, i.e. a judgment that closes two-instance judicial proceedings in which courts of both instances have jurisdiction over facts and evidence. However, according to Art. 3989 § 1 of the PCPC, the Polish Supreme Court allows a cassation appeal, only if there is a significant legal question in the case, there is a need for interpretation of legal provisions which cause serious doubts or discrepancies in case law, proceedings are invalid or the cassation appeal is clearly justified. It is the intention of the lawmaker for the cassation appeal to be an extraordinary remedy at law, consideration whereof by the Polish Supreme Court is justified by circumstances of particular importance, going beyond the individual interest of the applicant and having their source in public interest, especially by ensuring consistent interpretation and application of law. Cassation reasons indicated in a cassation appeal with reasoning are the only basis for assessment of acceptance of a cassation appeal for consideration (Art. 3984 § 2 of the PCPC).
According to the established view of the Polish Supreme Court, an applicant who indicated the ground specified in Art. 3989 § 1 of the PCPC as a reason for a request to have a cassation appeal heard, should formulate legal questions correctly, indicate legal provisions with respect to which a question has emerged and present juridical interpretation demonstrating feasibility of divergent legal assessments and the importance of this question. An question is significant, if its resolution has bearing on the direction of the court practice and resolution of the case in which the question arose raises serious doubts and the question has not been resolved in the case law so far, or the existing case law needs to be changed.
The Polish Supreme Court found that the legal issues presented in the cassation appeal had not satisfied the aforementioned conditions.
Moreover, it found that there should be no doubt that violation of rules concerning conclusion by an organisational unit of the State Treasury of a lease agreement with the reservation of the rent whose amount has not been questioned as grossly understated should not be deemed contrary to the fundamental principles of legal order of the Republic of Poland. Additionally, the Polish Supreme Court reminded that in its case law it had been explained repeatedly that not every inconsistency of an arbitration award with mandatory provisions of law justifies setting aside of an award under Art. 1206 § 2 point 2 of the PCPC, but only an aggravated violation of law provides a relevant basis for such setting aside (cf. for example, the Polish Supreme Court judgments dated: 9 March 2012, Case No. I CSK 312/11, 11 October 2013, Case No. I CSK 769/12, 29 October 2015, Case No. I CSK 922/14, 26 May 2017, Case No. I CSK 464/16, 9 January 2019, I CSK 743/17).
Excerpt from the text of the court’s ruling:
1. [P]roceedings initiated by a petition to set aside an arbitration award do not lead to a repeated substantive consideration of the dispute, but their purpose is only to verify the applicant’s pleadings presented in the petition as to existence of grounds referred to in Art. 1206 § 1 of the Polish Civil Procedure Code, and to assess if any of the conditions referred to in Art. Art. 1206 § 2 of the Polish Civil Procedure Code exist, regardless of whether the applicant relied thereon (…).
2. Application by an arbitral tribunal of the substantive law applicable in the case is subject to control by a common court, only inasmuch as it is required to assess the award in terms of compliance with the public policy clause specified in Art. 1206 § 2 (2) of the Polish Civil Procedure Code (…).
3. An arbitration award may be set aside pursuant to the public policy clause, only if violation of substantive law by an arbitral tribunal has consequences which are impossible to be consistent with the fundamental principles of Polish legal order, i.e. which are clearly and grossly contrary to these principles (…). An ad casum assessment whether an award violates the fundamental principles of legal order shall be made with caution, with a preference for restrictive interpretation of its wording (…).
4. Abstractedly speaking, there are no doubts that an assessment of an arbitral tribunal under Art. 1206 § 1 and 2 of the Polish Civil Procedure Code requires – to a smaller or larger extent – determination of the course of broadly understood arbitration proceedings (procedural actions of the parties, procedural decisions of the arbitration tribunal, examination of evidence, factual findings and interpretation, as well as application by the arbitral tribunal of relevant provisions of substantive law (…)), which also applies to the appellate court.