Polish Supreme Court judgment
dated 27 April 1988
Case No. I CR 81/88
Summary by arbitraz.laszczuk.pl:
In 1984, the Polish foreign trade company that handled matters for diplomatic posts entered into an agreement with an English company under which it would adapt a house for use as the visa office for the British Embassy. The agreement provided that the fee, estimated at USD 29,000, would be based on man-hours worked, at a rate per hour in US dollars. It also included an arbitration clause calling for arbitration before the Arbitration Board at the Polish Chamber of Foreign Trade.
The same day, the Polish foreign trade company entered into an agreement with the Polish subsidiary of the English company, in Tarnów, subcontracting performance of the work to the Polish subsidiary. This agreement also provided that the fee, estimated at USD 29,000, would be based on man-hours worked, but at a rate per hour in Polish zloty. The Tarnów company also undertook at its own expense to train its staff in the British norms to be followed when conducting the work.
In 1986, the Polish foreign trade company brought a claim in arbitration against the English company for over USD 72,000 allegedly due under the contract. In 1987, the arbitration panel rendered an award for over USD 36,000, finding that the final invoice had been inflated to include hours spent training the subcontractor’s staff.
The English company filed a petition with the Warsaw Province Court to set aside the award, alleging that the panel had acted beyond the scope of the arbitration clause and had denied the respondent a defence by refusing to consider the existence of the subcontract for the work, and in effect had awarded the claimant an undue profit. The province court denied the petition, finding that although the arbitration panel had acted beyond the scope of the arbitration clause, the petitioner had failed to raise this allegation in the arbitration proceeding. The court found that the petitioner had not been denied a defence, as it had been represented by an advocate, and the existence of the subcontract was irrelevant because it involved a different entity.
The petitioner sought review from the Polish Supreme Court, alleging violation of substantive law and erroneous findings. The Supreme Court denied the review, on the basis that violation of substantive law is not grounds to set aside an award. The court also held that the award did not violate public policy.
Excerpt from the text of the court’s ruling:
In the context of Civil Procedure Code Art. 712(4), violation of the principles of social coexistence is equated with conditions disqualifying an arbitration award to a degree depriving it of value as the basis for resolution of the dispute (violation of the rule of law, unintelligibility or inconsistency), and thus highly exceptional.