case law

id : 20196

id: 20196

Polish Supreme Court order

dated 2 April 2003

Case No. I CK 287/02

Summary by arbitraz.laszczuk.pl:

I.P. sp. z o.o. filed a claim with the Warsaw District Court for an order for payment against Marek K. pursuant to an in blanco promissory note the defendant had issued for the purpose of guaranteeing repayment of a loan from the plaintiff to the defendant. The promissory note had not been endorsed to another holder, but was completed by the plaintiff as the original holder. In 1996, the district court upheld the claim and issued the order for payment.

After the defendant asserted defences to the order for payment, including the defence of the arbitration clause in the underlying loan agreement as well as the defence that the loan had been repaid and thus the underlying obligation had been extinguished, in 2001 the Warsaw Regional Court vacated the order for payment, finding that the underlying dispute under the loan agreement was covered by an arbitration clause, providing for arbitration of “any and all disputes that may arise out of this agreement.” The appellate court denied the plaintiff’s interlocutory appeal.

On cassation appeal, the plaintiff alleged that the appellate court had improperly found that conclusion of an arbitration clause in the underlying loan agreement precluded the plaintiff from pursuing claims before the state court under the promissory note issued to guarantee the loan obligation.

The Supreme Court disagreed and denied the cassation appeal. The court held that even though a promissory note obligation is separable from the underlying contractual obligation, the argument is not relevant when the parties to the promissory note dispute are the same as the parties to the underlying obligation and the note has been not endorsed to a new holder. Between the parties to the underlying agreement, the arbitration clause should be construed to extend to disputes connected with the promissory note issued under the agreement.

Excerpts from the text of the court’s ruling:

1. It is correctly accepted in the literature that even if there are doubts as to the scope of matters covered by an arbitration clause, under the principle of interpretation in favour of the contract (favor contractus), which is enshrined in many modern legal systems (e.g. Polish Civil Code Art. 58 §3, Napoleonic Code Art. 1157, Italian Civil Code Art. 1367), it would be resolved in favour of extending the clause to disputes under a promissory note issued to secure performance of the underlying agreement.

2. Application of regulations concerning a proceeding for order for payment (Civil Procedure Code Art. 4841–497) is not excluded in a proceeding before an arbitration court.

3. The only rules of the Civil Procedure Code which the parties may not exclude or modify in the procedure before the arbitration court are the mandatorily applicable provisions of Book Three of the Civil Procedure Code, concerning the arbitration court.

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