id: 20234

Polish Supreme Court order

dated 18 January 2007

Case No. I CSK 330/06

Summary by arbitraz.laszczuk.pl:

In 1995 “E.” SA, “T.M.D.” GmbH and others established “P.T.C.” Sp. z o.o., a mobile phone operator, and entered into a shareholders’ agreement that required, inter alia, that a shareholder’s disposal of shares required unanimous consent of the supervisory board of P.T.C. The shareholders’ agreement also included a clause calling for arbitration of disputes by the International Arbitral Centre of the Austrian Federal Economic Chamber in Vienna.

In 1999 E. SA, together with the French company “V.” SA, established another company, “E.T.” Sp. z o.o., to which E. purported to transfer its shares in P.T.C. as an in-kind contribution.

In 2000 “T.M.D.” commenced arbitration in Vienna against E. and E.T., disputing the validity of E.’s transfer of P.T.C. shares to E.T. In November 2004 the arbitration court issued a partial award in which it held, inter alia, that the transfer of shares was ineffective and that it had no jurisdiction over E.T. Sp. z o.o.

In December 2004, E. SA filed a petition with the Warsaw Regional Court for recognition of the Vienna award, naming only T.M.D. as a respondent. E.T. filed a motion for admission to the proceedings as an intervener, which the court denied on 26 January 2005. E.T. filed an interlocutory appeal from that order and in the meantime continued to participate actively in the case pending decision of the interlocutory appeal.

On the same day, 26 January 2005, a motion was filed to recuse one of the judges. The motion was denied, but after a recess the court in a different panel closed the hearing and postponed the announcement of the decision. A decision was then announced in February 2005 granting the motion for recognition of the Vienna award in Poland.

On 11 May 2005, the Warsaw Appellate Court upheld the interlocutory appeal from denial of intervention to E.T.

The appeal by E.T., as an intervener, from the order granting recognition of the Vienna award was denied by the Warsaw Appellate Court on 29 March 2005 and by the Warsaw Regional Court on 17 May 2005.

E.T. then filed a cassation appeal with the Polish Supreme Court, alleging numerous violations of substantive and procedural law, chiefly involving the alleged violation of its right to defend its interests before the regional court.

The Supreme Court found that the intervener was not deprived of a defence, because it did actively participate in the case and the court did consider its position and pleadings when ruling. However, the court held that it was error for the order recognizing the award to be issued in the regional court by a panel of judges different from the panel hearing the case up until just before the hearing was closed. This violated Civil Procedure Code Art. 323 as well as the right to a fair trial guaranteed by Polish Constitution Art. 45(1). Thus the proceeding before both of the lower courts was void, and the case was remanded to the regional court for reconsideration.

Excerpts from the text of the court’s ruling:

1. The fact that the New York Convention defines “substantive” grounds for recognition ... does not change the fact that a proceeding for recognition of a foreign arbitration award must be conducted in accordance with the regulations governing the course of such proceedings, set forth partially in the convention and otherwise in the Civil Procedure Code (Art. 1145–1149, excluding Art. 1146, concerning grounds for recognition, and regulations concerning trials under Art. 13 §2). In terms of the grounds for cassation, it should be concluded that allegations concerning violation of “substantive” conditions for recognition should be asserted under the first ground for cassation (Civil Procedure Code Art. 398³ §1(1) in connection with Art. 13 §2).

2. A proceeding for recognition of a foreign ruling is a specific type of judicial proceeding generally taking a bilateral form. Those who must participate in the proceeding, apart from the movant, whose source of standing to bring suit is a legal interest (Civil Procedure Code Art. 1147 §1), include all of the persons taking part in the foreign proceeding as a party or respondent, as they are subject to the substantive legal finality of the ruling; then they have standing to be sued. This applies respectively to any legal successors of such persons if they are subject to the substantive legal finality of the ruling undergoing recognition. An exception from this rule may be allowed only in a situation in which the motion for recognition of the foreign ruling would concern part of the decision set forth in the ruling and the part does not refer to all the parties or respondents. In such case, it should be found that participation in the proceeding for recognition is necessary only for the parties or respondents in the foreign proceeding affected by the part of the ruling that is included in the motion for recognition.

3. Regulations concerning trials apply as relevant to a proceeding for recognition of a foreign ruling (Civil Procedure Code Art. 13 §2). The specific nature of such proceeding consists in the fact that it does not decide on the rights and obligations of the parties, but whether the ruling issued abroad is to be effective in Poland. For this reasons regulations concerning principal and auxiliary intervention cannot be applicable.