id: 20099

Polish Supreme Court judgment

dated 14 November 1960

Case No. 2 CR 1044/59

Summary by arbitraz.laszczuk.pl:

In 1951, Wacław D. entered into an agreement with a state knitting cooperative under which he permitted the cooperative to use knitting machinery and equipment for three years without charge. The agreement included an arbitration clause.

In 1958, Wacław D. filed an arbitration claim against the cooperative seeking damages for unjust enrichment based on the cooperative’s use of the same machinery and equipment without charge for the same three-year period. The arbitration court issued an award of damages for unjust enrichment, reasoning that it was common knowledge that “at the time the agreement was concluded the tax policy then in force did not provide conditions for operating private enterprises, and owners of private enterprises who wished to protect their machinery and equipment from forced sale provided them to cooperatives for their use free of charge—a practice that was commonly followed at that time. Under such conditions, the arbitration court thus found it proper, notwithstanding the enclosed agreement, to award the plaintiff the benefits obtained by the cooperative.”

The province court denied the cooperative’s petition to set aside the award as contrary to public policy. The cooperative sought review by the Polish Supreme Court. The court set aside the award, reasoning that since the validity of the agreement under which the machinery and equipment were provided to the cooperative for its use free of charge was not disputed, any benefit obtained by the cooperative from its use of the equipment under the agreement could not be found to be unjust enrichment under the theory that if not for the tax policy of the People Republic of Poland the claimant would have operated the enterprise himself and earned a profit accordingly. According to the court, “the tax and economic policy of People’s Poland with respect to capitalist-type enterprises, consisting of restricting or eliminating capitalist ownership, was and is consistent with the principles of our system.”

Excerpt from the text of the court’s ruling:

Erroneous interpretation or improper application of substantive law does not in and of itself constitute sufficient grounds for a petition to set aside an arbitration award, defined by Civil Procedure Code Art. 510 §1(4) as violation of the rule of law or principles of social coexistence in the People’s State. Violation of substantive law may constitute sufficient grounds to set aside an arbitration award if it would result in a determination that clearly violates the overriding principles of the legal system in the People’s State or violates principles of social coexistence. Such principles must also be respected in arbitration.