case law

id : 20287

id: 20287

Poznań Appellate Court judgment

dated 11 May 2006

Case No. I ACa 1279/05

Summary by arbitraz.laszczuk.pl:

In 2000 G. sp. z o.o. entered into a contract with E. SA under which E. SA was to build a commercial building for G. sp. z o.o. In 2002 the parties entered into a settlement agreement concerning claims by E. SA arising out of the 2000 contract. The settlement was signed for G. sp. z o.o. by its vice president and by an attorney-in-fact under a power of attorney authorizing the attorney to sign the settlement and to take any other related actions. G. sp. z o.o. failed to pay the amount due under the settlement agreement.

In 2003 E. SA filed a claim in arbitration before the Court of Arbitration at the Polish Chamber of Commerce against G. sp. z o.o. for some PLN 11 million due under the settlement agreement. In its response, G. sp. z o.o. asserted that it renounced the settlement agreement because it mistakenly believed at the time that the building had been delivered without defects, and in the alternative sought a setoff for its claims against E. SA. The parties, represented by counsel, made no evidentiary motions, and G. sp. z o.o. failed to object to the jurisdiction of the arbitration court. In 2004 the arbitration court issued an award for E. SA for the full amount sought.

G. sp. z o.o. moved before the Poznań Regional Court to set aside the award, alleging inter alia that there was no arbitration clause because the attorney-in-fact had not been duly authorized to enter into an arbitration clause and that it had been denied the right to present its case before the arbitration court. The regional court denied the motion, and the appellate court denied the appeal.

Excerpts from the text of the court’s ruling:

1. An arbitration agreement, even when set forth in a clause in the “main” agreement, is not a provision of the underlying contract and thus its effectiveness is considered independently.

2. In order to make an arbitration agreement, a generic power of attorney is sufficient (specifying the type of actions which the attorney-in-fact is authorized to take), or a general power of attorney if making the arbitration agreement may be deemed to be an act within the ordinary course of business.

3. The importance of an arbitration agreement concerning a specific legal relationship is a reflection of the importance of the legal relationship subject to the arbitration agreement. There are no grounds for finding that contractual exclusion of the jurisdiction of the state courts, even in the case of a matter that is petty in relation to the subject of the enterprise, is outside the ordinary course of business. Such assumption would hinder the parties’ ability to submit a dispute to the jurisdiction of the arbitration court, which would be inconsistent with the requirements of commerce, and would also create uncertainty in trade. Similarly, an arbitration agreement may be concluded on the basis of a generic power of attorney, which should specify the type of legal acts included within the authority as well as the subject matter. If the type of legal acts was not clearly defined, the canons for interpretation of declarations of will (Civil Code Art. 56 and 65) are applicable in order to determine the true intent of the principal.

4. Under Civil Procedure Code Art. 712 §1(3), a party may seek to set aside an arbitration award if procedures were not followed before the arbitration court as determined by the parties or by the law, particularly provisions concerning the composition of the arbitration court, voting, removal of an arbitrator, and the award. There could be no violation of the procedure established by the parties when, as the appellant itself states, the parties did not establish any procedure. Only establishing the procedure in the agreement creates a duty on the part of the arbitrators to comply with the procedure, under sanction of setting aside the arbitration award if the procedure is not followed (Civil Procedure Code Art. 705 §1 and Art. 712 §1(2)). Otherwise, the arbitration court will apply the procedure it deems fit (Civil Procedure Code Art. 705 §2).

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