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Katowice Court of Appeal judgment dated 25 October 2018 Case No. V AGa 18/18

1. [T]he proceedings initiated by a petition to set aside an arbitration award is not intended at a substantive review of an award corresponding to a review provided for in civil appeal procedure. The substantive review of an arbitration award by the court is limited to the assessment whether the issued award violates the principles of the legal order. The phrase ‘fundamental principles of the legal order’ used by the lawmaker (Art. 1206 § 2 point 2 of the Polish Civil Procedure Code) indicates unequivocally that it concerns such violations of provisions of substantive law that result in violation of the principles of the rule of law, and the award infringes the fundamental legal principles in force in the Republic of Poland and is in conflict with the applicable legal order, that is, it violates the principles of the political and socio-economic system. An assessment made ad casum, whether an arbitration award violates the fundamental principles of the legal order, should be made with caution and the interpretation of the phrase contained in the law should be rather of a constrictive character.

2. [T]he pacta sunt servanda principle should be considered one of the principles of the legal order of the Republic of Poland.

Publication date: 25-10-2018 | Case no.: V AGa 18/18

Key issues: petition to set aside arbitration award

id: 20543

Łódź Court of Appeal judgment dated 25 October 2018 Case No. I AGa 220/18

1. [A] petition to set aside an arbitration award is admissible only in strictly stipulated circumstances, enumeratively specified in Art. 1206 of the Polish Civil Procedure Code. A state court cannot consider a dispute on the merits in the proceedings initiated by a petition to set aside an arbitration award between the parties to arbitration proceedings … . Therefore, a consequence of submitting a dispute to arbitration is limitation of the state courts’ impact on how a dispute is resolved.

2. [T]he aforementioned Convention (the Convention on the Contract for the International Carriage of Goods by Road (CMR) – insertion added] is a ratified international agreement, to which the Republic of Poland is also a party. According to Art. 87 (1) of the Constitution, the Convention is a source of commonly binding law in the Republic of Poland. Therefore, it should not be accepted that an application of the provision [Art. 32 (1) and (2) – insertion added] of the Convention would infringe fundamental principles of the legal order of the Republic of Poland.

3. [E]ven if one assumed (but the Court of Appeal does not do that) that the interpretation of substantive law, in this case regarding a limitation of claims, made by the arbitral tribunal turned out to be incorrect, it should not be stated that such shortcomings infringe fundamental principles of the legal order. … .  The assessment is not in any way altered by the fact that in very similar factual circumstances, in cases between the same parties, the same arbitral tribunal as in this case, rendered rulings in favor of the petitioner.

Publication date: 25-10-2018 | Case no.: I AGa 220/18

Key issues: petition to set aside arbitration award

id: 20636

Warsaw Court of Appeal judgment dated 17 October 2018 Case No. I AGa 11/18

1. [B]y entering into an arbitration agreement, the parties consciously waived submission to the strictures in place for the proceedings before a state court, including some procedural guarantees in such proceedings. Therefore, it is not unreasonable to state that by concluding an arbitration agreement, the parties limit their constitutional right to court. When deciding to submit a dispute for resolution by an arbitral tribunal, the parties must be aware of both positive and negative effects of including particular statements in an arbitration agreement.

2. Unlike a state court, an arbitral tribunal considering cases does not need to strictly apply the provisions of substantive law, but may also base its ruling on principles of equity or rule on the basis of general principles of law. Consequently, review by the state court of awards made by arbitral tribunals is limited to the instances strictly defined by the law … .

3. [E]xamination of a case with respect to the grounds for setting aside an arbitration award under Art. 1206 § 2 of the Polish Civil Procedure Code may not proceed beyond aggravated violations of law, and the parties cannot challenge an arbitration award when such an award was delivered after properly conducted proceedings, but does not satisfy their expectations. A petition is possible only when it has been demonstrated that an arbitration award violates the fundamental principles of the Polish legal order … .

4. [P]ursuant to Art. 1197 § 2 of the PCPC, an arbitration award shall contain the reasons for the award, but this does not mean, however, that the reasoning shall be constructed strictly according to the rules indicated in Art. 328 § 2 of the PCPC … . This follows from the character of the proceedings before an arbitral tribunal, which are not as formalized as the proceedings in civil procedure. Without any doubt, however, the grounds of an arbitration award should be clear and reflect a reasoning analyzable in terms of the grounds to dismiss the petition … .

Publication date: 17-10-2018 | Case no.: I AGa 11/18

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

id: 20540

Katowice Court of Appeal judgment dated 9 October 2018 Case No. V AGa 411/18

1. A state court… examines the legitimacy of a petition [to set aside an arbitration award – insertion added] only within the prerequisites indicated in Art. 1206 § 1 and 2 of the PCPC, but ex officio takes into account only the grounds provided for in Art. 1206 § 2 of the PCPC.

2. A violation of general provisions of civil procedure law or overriding principles of civil procedure may serve as a reasonable ground for setting aside an arbitration award only if it results in violation of fundamental principles of the legal order of the Republic of Poland or principles of social coexistence. A violation of overriding principles in force in the Republic of Poland must result – if it is to constitute a ground for setting aside an arbitration award – in an infringement of the substantive law.

3. The party would be deprived of the possibility to defend its rights if the arbitral tribunal had entirely prevented the petitioner or its ad litem attorney from making statements or taking a procedural position in writing or in speech.

4. [I]f an arbitration award is contrary to the public policy of the Republic of Poland, this does not mean that such an award could be contrary to any of the principles of the state legal order, but that it is contrary only to the fundamental principles of the legal order of the Republic of Poland, i.e., constitutional principles, but also principles resulting from the procedural civil law and substantive civil law.

5. The concept of public policy is a concept narrower than the concept of the rule of law which entails the obligation to apply, in principle, all legal standards, including absolutely binding legal standards.

Publication date: 09-10-2018 | Case no.: V AGa 411/18

Key issues: petition to set aside arbitration award

id: 20629

Warsaw Court of Appeal judgment dated 27 August 2018 Case No. VII Aga 386/18

1. Under the current legislation, it is assumed that pursuant to Art. 1161 § 1 of the Polish Civil Procedure Code in each case an arbitration agreement is required to refer a dispute to arbitration. 

2. An arbitration agreement should unequivocally and precisely indicate that the parties covenant to refer specified disputes to arbitration.

Publication date: 27-08-2018 | Case no.: VII AGa 386/18

Key issues: arbitration agreement

id: 20544

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

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