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Warsaw Court of Appeal judgment dated 2 August 2018 Case No. VII AGa 1162/18

1. The scope of a state court’s review and its determinations are limited to allegations raised in a petition to set aside an arbitration award. A state court has the authority only to review whether the reasons for setting aside of an award are present (…) and only in this limited scope the proceedings are similar to the proceedings before a state court of II instance.

2. [I]f a party had the possibility to raise before an arbitral tribunal an allegation of being deprived of the right to protect their rights, but they did not do that, it is inadmissible to raise a plea that the party was deprived of the ability to protect their rights before the arbitral tribunal in view of the party not being actually deprived of the ability to protect their rights.

3. [I]n the proceedings commenced as a result of a petition to set aside an arbitration award, a state court does not examine the arbitral tribunal’s assessment of the accuracy of evidence, the correctness of factual findings or interpretation and application of substantive law. The legitimacy of particular means by way of which an arbitral tribunal has resolved the disputed legal relationship is neither subject to a state court’s assessment (…). The essence of a petition to set aside an arbitration award is to create a control mechanism respecting, on the one hand, separateness and autonomy of arbitration, and on the other hand, preventing non-state courts’ rulings infringing the rule of law from functioning in the legal circulation.

4. Competence of the court hearing a petition to set aside an arbitration award does not – as a matter of principle – include the control of the award’s compliance with substantive law and review of correctness of factual findings, except for ruling based on obviously selective and unreliable examination of evidence.

5. [T]he proceedings concerning a petition to set aside an arbitration award do not result in reconsideration of the merits of the dispute between the parties, but are intended only to verify the applicant’s allegations as to the existence of the grounds raised in the application provided for in Art. 1206 § 1 of the PCPC and assess whether any of the prerequisites provided for in Art. 1206 § 2 of the PCPC exist, whether or not asserted by the applicant.

6. “The public policy clause”, like any general clause, is not precisely defined, which leaves great discretion to the court ruling on a specific case. Nevertheless, on the basis of this clause, review of the constitutive elements of an arbitration award may not take on the dimensions proper for a review of the merits (correctness) of the award. The prohibition of a review of the merits of an award is related to the essence of the application of the public policy clause. By application of this clause, the point is not to determine whether the award is consistent with all relevant mandatorily applicable legal regulations, but only to determine whether the award effected a result contrary to the fundamental principles of the domestic legal order (…).

7. In the case-law, it is indicated that an infringement, by an arbitral tribunal, of substantive law applicable to the resolved relationship, compliance with which – as a matter of principle – is prescribed in Art. 1194 § 1 of the PCPC, may result in setting aside of an award of this tribunal only when it is connected with an infringement of the fundamental principles of the legal order (…). The primary difference between proceedings commenced by an appeal and proceedings commenced by a petition to set aside an arbitration award is demonstrated by the permitted scope of interference of a state court in the rulings of arbitral tribunals.

Publication date: 02-08-2018 | Case no.: VII AGa 1162/18

Key issues: arbitration procedure, petition to set aside arbitration award

id: 20547

Katowice Court of Appeal order dated 12 July 2018 Case No. V AGo 20/18

1. [A]rt. 1215 § 2 of the PCPC … applies to … foreign arbitral awards when the parties (or one of them) have a registered office in a state which is not a party to the Convention on Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958 … .

2. Deprivation of a party of the ability to defend its rights and also unlawful deprivation of a party of the possibility to present its case need to be understood in a strict way. Such a situation may take place only when a party was not heard at all (in any form) by an arbitral tribunal or a party was not given a possibility to present its explanations and make statements in the face of the opposing party’s statements.

Publication date: 12-07-2018 | Case no.: V AGo 20/18

Key issues: recognition and enforcement of foreign arbitration award

id: 20635

Poznań Court of Appeal judgment dated 27 June 2018 Case No. I ACa 232/17

1. The consequence of submitting a dispute to arbitration is the limitation of the influence of common courts on how the dispute is resolved. When considering a petition to set aside an arbitration award, state courts do not examine arbitration awards on the merits. They review them only to a limited extent – only as regards the conditions provided for in Art. 1206 of the PCPC.

2. Only the absolutely binding legal standards (ius cogens) – and only those that are deemed to be of fundamental importance – may justify resorting to the public policy clause. These may be standards of a systematic, substantive or procedural nature – however, their role in the national legal system has to be significant. Application of the public policy clause is not intended to correct any and all shortcomings of an arbitration award, but rather to protect the integrity of the public order. Therefore, the assessment whether there are grounds for applying the public policy clause need to be formulated ad casum in a restrictive manner… .

3. In particular, it is not the task of the state court to inspect whether an arbitration award has been founded on the facts relied upon in the reasons for the arbitration award and whether these facts have been properly determined… .

4. The public policy clause, according to Art. 1206 § 2 of the PCPC, has the character of a general clause. Therefore, its concretization is the task of courts… . Because of the indefiniteness of the public policy clause, judges enjoy considerable discretion. Moreover, taking into account that an arbitration award is an expression of specific will of the persons competent to resolve a dispute, the clause is to be a kind of “safety valve” protecting the legal system against the unacceptable consequences of functioning, in the legal circulation, of an arbitration award delivered in violation of the fundamental principles of the legal order.

5. Only an allegation (or threat) of violation of the public policy clause may justify review of an arbitration award on merits.

6. The fundamental… principles [of the legal system of the Republic of Poland – insertion added] shall be understood to mean constitutional principles as well as the principles of other fields of law including civil law, family law, labour law and procedural law… .

7. The following principles are accepted by the doctrine and the case-law as the fundamental principles of the legal order: with regard to the procedural law, among other things: the principle of equal treatment of the parties; and with regard to the substantive law, among other things: the principle of the restitutive nature of liability for damages, the principle of the autonomy of the will of the parties and the principle of equity of the entities, the pacta sunt servanda principle, the principle of equal treatment of creditors in arrangement proceedings, the principle of economic freedom. Referring to the procedural legal order, it should be emphasized that two issues are assessed: firstly – the legal compliance of the arbitration resulting in the delivery of an arbitration award, and secondly – the effects of the arbitration award after its recognition and enforcement from the point of view of consistency with the system of procedural law, including the effects of the award on the legal position of third parties. Nevertheless, in terms of substantive legal order, review of an arbitration award should consist in comparison of the ruling contained in the arbitration award with a hypothetical ruling which should be delivered account taken of the fundamental principles of the legal order. It is then only by confronting it with the arbitrators' award that it is possible to assess whether or not there has been a breach of public policy. Any finding of contradiction is not sufficient, but only such that involves a violation of the fundamental values (principles) which are expressed or protected by specific legal standards.

8. A state court ruling on recognition (enforcement) of another award cannot overlook the fact that another state court has already delivered a ruling in the same case. Therefore, it should be found that it follows from Art. 365 § 1 of the PCPC that by the state court ruling on recognition of the second arbitration award which is bound by the previous state court ruling, should not allow for the existence of two rulings in the legal circulation which, in the same case and between the same parties, would address the same issue differently, as this would undermine the authority of the justice system and the confidence in the courts, i.e. it would be contrary to the fundamental principles of the legal order of the Republic of Poland.

Publication date: 27-06-2018 | Case no.: I ACa 232/17

Key issues: arbitration award, petition to set aside arbitration award

id: 20549

Polish Supreme Court order dated 24 May 2018 Case No. V CSK 6/18

Prohibition of substantive control (of legitimacy) of an arbitration award is related to the essence of the application of the public policy clause. When the clause is used, it is not the point that the award which is subject to the assessment must be consistent with all relevant absolutely binding provisions of law. The point is whether the award has had an effect contrary to the fundamental principles of the national legal order. Procedural public policy may be a basis for assessment of an award in two respects. Firstly, subject to assessment is the compliance of the procedure which has led to issue of the arbitration award with the fundamental procedural principles of legal order, and secondly, subject to assessment are the effects of the award from the point of view of their compliance with the procedural legal order, i.e. whether they are compatible with the procedural law system.   

Publication date: 24-05-2018 | Case no.: V CSK 6/18

Key issues: petition to set aside arbitration award

id: 20531

Warsaw Court of Appeal order dated 24 May 2018 Case No. VII AGo 40/18

[A]rt. 1213 § 1 of the Polish Civil Procedure Code is a lex specialis (special provision) with respect to Art. 129 § 2 of the PCPC. Therefore, in proceedings concerning enforcement of an arbitration award it is not permissible to file – instead of an original or officially certified arbitration agreement – a copy thereof certified to be a true copy of the original by an advocate.

Publication date: 24-05-2018 | Case no.: VII AGo 40/18

Key issues: recognition and enforcement of domestic arbitration award

id: 20554

Łódź Court of Appeal judgment dated 19 April 2018 Case No. I ACa 1557/16

1. If (…) a petition to set aside an arbitration award is based on the fact that the award was obtained by means of an offence or the award was issued on the basis of a forged or altered document or the petition is based on the charge of res iuducata, the petition may be filed within the time limit calculated from the day when the party learned of that ground. 

2. An arbitration agreement is a contract to which provisions of the Polish Civil Code apply.

Publication date: 19-04-2018 | Case no.: I ACa 1557/16

Key issues: arbitration agreement, petition to set aside arbitration award

id: 20553

Rzeszów Court of Appeal judgment dated 22 March 2018 Case No. I AGa 53/18

1. An arbitration agreement is unenforceable when, for example, it stipulates such requirements towards persons who are set to be arbitrators, that in effect it is impossible for an arbitral tribunal to be constituted, since it is impossible to indicate persons who meet the requirements. An arbitration agreement is also unenforceable when commencement of proceedings before a tribunal is not possible due to other reasons. An arbitration agreement that has been formulated so vaguely that it is impossible to determine its content may be deemed unenforceable.

2. [W]hen an arbitration agreement turns out to be unenforceable, for example, because of improper indication of the arbitral tribunal, no such thing as conversion of such an agreement into an ad hoc tribunal arbitration agreement is possible.

Publication date: 22-03-2018 | Case no.: I AGa 53/18

Key issues: arbitration agreement

id: 20550

Katowice Court of Appeal order dated 19 March 2018 Case No. V AGo 3/18

1. Assessment of an arbitration award submitted for enforcement from the point of view of the public policy clause cannot be made without reference to the content of the award, its factual and substantive law basis; consequently, it cannot be limited only to a formal review of the award and of the documents attached to the motion. Within the public policy clause, the court is authorized to examine the existence and legitimacy of acknowledgement of a debt covered by an arbitration award.

2. The purpose of application of the public policy clause is not to protect the interest of the party affected by the outcome of the arbitration proceedings, but to protect the legal order of the state.

3. [T]here is no basis for enforcement of an arbitration award if the material available leads to the conclusion that the award may be intended to infringe the legally protected interests of third parties (creditors) from outside of the circle of affiliated companies and persons or is intended to serve objectives other than the objectives which it should serve in view of its character.

Publication date: 19-03-2018 | Case no.: V AGo 3/18

Key issues: recognition and enforcement of domestic arbitration award

id: 20602

Katowice Court of Appeal order dated 19 March 2018 Case No. V AGo 13/18

1. Assessment of an arbitration award submitted for enforcement from the point of view of the public policy clause cannot be made without reference to the content of the award, its factual and substantive law basis; consequently, it cannot be limited only to a formal review of the award and of the documents attached to the motion. Within the public policy clause, the court is authorized to examine the existence and legitimacy of acknowledgement of a debt covered by an arbitration award.

2. The purpose of application of the public policy clause is not to protect the interest of the party affected by the outcome of the arbitration proceedings, but to protect the legal order of the state.

3. [T]here is no basis for enforcement of an arbitration award if the material available leads to the conclusion that the award may serve objectives other than the objectives which it should serve in view of its character.

4. Legalization of legally dubious business transactions is contrary to the fundamental principles of the legal order of the Republic of Poland… .

Publication date: 19-03-2018 | Case no.: V AGo 13/18

Key issues: recognition and enforcement of domestic arbitration award

id: 20603

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