Szczecin Appellate Court judgment
dated 23 April 2008
Case No. I ACa 204/07
Summary by arbitraż.laszczuk.pl:
In 1999 M.T. sp. z o.o. entered into an agreement with the municipality of Szczecin under which the parties would establish a premier league football club. The founders’ agreement included an arbitration clause covering disputes that might arise under the agreement.
The parties established a joint-stock company to operate the football club and took up registered shares in the company. Under the founders’ agreement, M.T. bought out professional contracts and licenses and certain claims and assumed certain liabilities related to an earlier sports club.
In 2003, alleging that the municipality had not lived up to its obligations under the founders’ agreement, M.T. obtained an arbitration award against the municipality including restoration of consideration M.T. had provided, together with the value of the shares it had taken up and other forms of consideration, plus lost profit, totalling some PLN 10 million.
The regional court set aside most of the award in 2004, finding that the award was unclear and violated public policy. It ruled on matters that were beyond the scope of the founders’ agreement, which was regarded as a preliminary agreement, and thus it had ruled beyond the scope of the arbitration clause. In addition, the portion of the award purporting to unwind the claimant’s taking up of shares in the company was unenforceable because this could be accomplished only pursuant to the provisions of the Commercial Companies Code.
After a first round of appeals, the Supreme Court issued a judgment dated 13 December 2006 (Case No. II CSK 289/06) remanding the case for clarification.
On remand the appellate court, bound by the findings of the Supreme Court, reinstated the arbitration award and denied the petition to set aside the award.
Excerpts from the text of the court’s ruling:
1. The issue of the scope of an arbitration clause involves interpretation of the declarations of will of the parties expressed in the document, where the main role is played by rules of linguistic meaning.
2. When considering a petition to set aside an arbitration award, the state court will examine the case only with respect to the grounds listed in Civil Procedure Code Art. 712 §§ 1 and 2. The ruling by the state court is limited in this case either to setting aside the arbitration award in whole or part, or denying the petition. ... The task of the court in a proceeding initiated by a petition to set aside an arbitration award is not to determine the merits of the matter that was previously resolved by the arbitration court, applying provisions of substantive and procedural law, but only to assess the justification for the petition under the grounds set forth in Civil Procedure Code Art. 712 §§ 1 and 2. The court with which a petition to set aside an arbitration award has been filed does not act as a court of second instance, authorized to review the merits of the case applying provisions of substantive law, but reviews the challenged award only from the perspective of the violations indicated in Civil Procedure Code Art. 712 §§ 1 and 2.
3. [Civil Procedure Code Art. 712 §1(2)] refers to the necessity to comply with the principle of the equality of the parties before the arbitration court, to hear them out, and the possibility for a party to address the evidence and allegations presented by the opposing party. As stated by the Supreme Court, only if the arbitration court did not hear the party at all or did not allow it to submit its allegations can it be said that the party was deprived of the opportunity to defend its rights.
4. Pursuant to the rule set forth in Civil Procedure Code Art. 705, in a proceeding before an arbitration court the parties have the right to establish the rules of procedure themselves. Their determination of the procedure may occur in the arbitration agreement or in an additional agreement, but no later than the time the proceeding is commenced. Lack of agreement by the parties means that the right to select the arbitration procedure passes to the arbitrators, as if they were assuming the rights of the parties.
5. A ruling by an arbitration court may not be challenged because of erroneous decision of the case in legal or factual terms. Violation of the law may be grounds for setting aside an arbitration award only if the content of the ruling violates the rule of law or principles of social coexistence. Assessment of whether the ruling violates the rule of law or principles of social coexistence is formulated narrowly, and such conclusion may be reached only if the arbitration award would result in a material violation of such principles.