case law

id : 20256

id: 20256

Polish Supreme Court judgment

dated 26 November 2008

Case No. III CSK 163/08

Summary by arbitraz.laszczuk.pl:

An individual commenced an ad hoc arbitration against a limited-liability company and a partnership for failure to supply contracted quantities of natural gas, and in 2000 won an award of about PLN 5 million as contractual penalties under the supply contract from 1997. The company moved to set aside the award, alleging violation of public policy because the arbitration court refused to reduce the contractual penalties and awarded the claimant an excessive amount. The regional court denied the petition, as did the appellate court on appeal, but in 2002 the Supreme Court granted a cassation appeal and remanded the case for reconsideration. The appellate court then set aside the main portion of the award.

In 2004 the claimant filed a new claim before a new ad hoc arbitration court for about PLN 600,000, thus reducing the amount of contractual penalties claimed. This time the respondent alleged lack of an arbitration clause because the clause relied on did not constitute an arbitration clause. (The clause in question provided: “Any disputes arising in connection with performance of this agreement shall be resolved by the parties amicably with the help of appointed arbitrators. If the parties fail to reach agreement, disputes shall be resolved by the court in Cracow with subject-matter jurisdiction.”) The arbitration court denied the defence and issued an award for over PLN 400,000. The regional court denied a motion to set aside the award, and the appellate court denied the appeal.

In the second cassation appeal, the respondent alleged that there was no arbitration clause and that the ruling by the appellate court setting aside the operative portion of the first award constituted res judicata, and thus it was denied due process. The Supreme Court found that the alleged arbitration clause was unclear, but when interpreted in light of the parties’ intent and behaviour it was held to constitute an agreement to submit to arbitration.

Excerpts from the text of the court’s ruling:

1. [When the state court has set aside an arbitration award] it is necessary for the claimant to file a new claim before a new arbitration court, or at least a written declaration of assertion before such arbitration court of the claims in the previous scope or as amended. From such time (or, currently, from the date of service of such document on the opposing party, Civil Procedure Code Art. 1186), a new proceeding is commenced before the arbitration court which is not a continuation of the previous proceeding that resulted in the arbitration award that was set aside.

2. The petition to set aside the arbitration award ... dated 16 December 2006, filed under the new regulations, commenced a case before the state court to set aside the arbitration award, and under the rule set forth in Art. 2 of the amending act [Act dated 28 July 2005 Amending the Civil Procedure Code (Journal of Laws Dz.U. No. 178 item 1478)] it was conducted in accordance with the new regulations. This means that the petitioner should base it in procedural respects on the new regulations for such procedure provided in Part Five, Title VII of the Civil Procedure Code; however, because the subject of the petition is the award and the proceeding before the arbitration court conducted in accordance with the former regulations, on substantive legal grounds the petition may rely only on the former rules, because the arbitration court was required to apply those rules and not the new ones. The grounds for the petition should thus be based on the former regulations.

3. In light of the circumstances of conclusion of the agreement, its purpose, and the statements by the attorneys before the arbitration court ... and failure for nearly five years to assert the lack of an arbitration clause, the intent of the parties ... was, as correctly found by the courts of both instances, to submit disputes arising under the agreement to the arbitration court for resolution, and not only mediation. … This position ... does not lead to validation of the lack of an arbitration clause by the behaviour of the parties before the arbitration court and the state courts or to avoidance of the requirement for written form of an arbitration clause, but constitutes only an interpretation of the declarations of will of the parties concerning an unclear arbitration clause expressed in written form and made ... in accordance with the requirements of Civil Code Art. 65.

4. An arbitration court is not a “court” or “other state body or body of the public administration” within the meaning of Civil Procedure Code Art. 365 §1, nor is there another “instance provided by statute” in which an arbitration court is bound by the award by another arbitration court, even concerning the same parties and the same claims.

5. An arbitration award, insofar as it denies a petition in some part with legal finality, does not have res judicata effect within the meaning of Civil Procedure Code Art. 365.

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