case law

id : 20230

id: 20230

Supreme Court judgment

dated 18 October 2006

Case No. II CSK 123/06

Summary by arbitraz.laszczuk.pl:

In 1993 Wojciech G., in a partnership with his brothers, entered into a tenancy agreement for agricultural land with the Agricultural Property Agency. Following a change in the tenants’ partnership agreement involving the persons entitled to represent the partnership, Wojciech G. claimed that the agency had terminated the tenancy and prevented him from using the property. He obtained an arbitration award against the Agricultural Property Agency in 2002 for lost profit and other damages in the amount of PLN 1.5 million.

The regional court set aside the award in 2003, finding that it was unclear and violated public policy. A set of appeals followed, leading to a 2004 decision by the appellate court and a Supreme Court decision dated 14 April 2005 rejecting the agency’s allegation of lack of an arbitration clause.

In November 2005, on remand, the appellate court denied the appeal from the original order of the regional court, finding that there was no basis for any finding that the agency had terminated the tenancy or prevented the tenant from using the land, but he had ceased to use the land for his own subjective reasons.

The claimant filed another cassation appeal alleging that the appellate court had failed to apply the law of the case as established in the earlier round of appeals. The Supreme Court rejected this reasoning because there had been an intervening change in the code. On the merits, the Supreme Court agreed with the lower courts that the award was clearly groundless and violated public policy.

Excerpt from the text of the court’s ruling:

The fundamental principles in force under Polish law with respect to liability for loss caused by non-performance or improper performance of an obligation, which are expressed in provisions of the Civil Code concerning the effects of failure to perform obligations, [are] ... the duty to redress loss by the party to an agreement which failed to perform or improperly performed an obligation, and an ordinary causal relationship between the behaviour and the loss. The duty to redress loss in this respect may not be determined arbitrarily or at will, but must correspond to the extent of the loss suffered (even as the result of an assessment based on consideration of all the circumstances of the case), and default interest is due from the date that the debtor falls into arrears. An arbitration award that was issued in violation of these principles is an award violating the rule of law.

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