Polish Supreme Court ruling
dated 12 November 1955
Case No. 1 CR 378/55
Summary by arbitraz.laszczuk.pl:
In 1947, Edward W. entered into a contract with a socialized publishing cooperative, Cz., to translate a 3-volume work in Russian entitled The History of Diplomacy. The contract included an arbitration clause and provided that the fee for the translation should be based on the Copyright Law of 1926. Edward W. delivered the translation but the cooperative ultimately decided not to publish the work. The translator pursued his fee in arbitration. In 1954, the arbitration court issued an award for Edward W. in which it based the fee on the rates provided in a 1951 government decree, which resulted in a higher fee than would have been due under the Copyright Law of 1926.
The publishing cooperative applied to the Warsaw Province Court to set aside the award on the grounds that in relying on the 1951 government decree instead of the 1926 Copyright Law, the arbitration court exceeded the bounds of the arbitration clause, and that issuing an award for a fee based on the 1951 government decree rather than the 1926 Copyright Law subjected the cooperative to a substantial and unjustified loss and therefore the award should be set aside as violating public policy.
The province court set aside the award on the grounds that it violated public policy, holding that “this type of decision infringes on the financial plan of a socialized entity without justified legal grounds and significantly diminishes social assets without any equivalent consideration, and thus the arbitration award cannot stand.”
Edward W. sought review by the Polish Supreme Court. The court reasoned that the arbitration court was not required to apply the correct substantive law so long as the award did not violate the rule of law, understood to mean “the interests of the People’s State.” In the court’s opinion, application of the more recent fee schedule adopted by the communist government could not be regarded as violating the interests of the People’s State, but actually furthered such interests by providing authors (including translators) with progressively greater rewards for their work, which was one of the policies of the socialist system. The court amended the judgment of the province court accordingly to deny the petition to set aside the award.
Excerpts from the text of the court’s ruling:
1. A proceeding upon a petition to set aside an arbitration award is not an appeal against the award. In the proceeding upon a petition to set aside an arbitration [award], the state court does not judge the case anew, nor does it conduct full review of the award, but its task is only to determine whether the grounds to set aside the award alleged in the petition exist.
2. An arbitration court rules within its discretion, but the bounds of such discretion are set by Civil Procedure Code Art. 510 §1.
3. An arbitration clause is also a type of disposition by the parties, an effect of which is the possibility of the arbitration court to resolve the dispute in a manner that violates substantive law but is nonetheless binding on the party.
4. As the challenged arbitration award does not in its substance violate the rule of law, even if it violated substantive law, the Supreme Court has no basis for ruling on whether the award is consistent or inconsistent with substantive law.