Polish Supreme Court ruling
dated 8 February 1935
Case No. C III 778/34
Summary by arbitraz.laszczuk.pl:
In 1933, the director general of the Polish Coal Convention, a cartel of coal producers, obtained an arbitration award against the Henckel von Donnersmarck-Beuthen Estates Ltd in Tarnowskie Góry, in which it was found that the estate had violated the provisions of the convention by making unlicensed sales of coal. The convention contained an arbitration clause.
The estate brought an action in the regional court to set aside the award in part (the monetary award—not the finding that it had violated the convention), which was granted on the grounds that the director general was not a party to the convention and thus had no standing to assert claims under the convention.
The Katowice Appellate Court denied the appeal by the director general, holding that while lack of standing was not grounds to set aside the award, the fact that the director general was not a party to the convention meant that there was no arbitration clause in force between the parties. The appellate court also found that the estate had been denied an opportunity to present its case, because after the hearing was closed the arbitration court accepted a further pleading by the director general and forwarded it to the estate’s attorney, but apparently did not give the estate at least 7 days to respond, although it was not certain whether this had an effect on the award. The appellate court also held that the regional court did not err by setting aside the award only in part, because it was limited to the relief sought in the petition to set aside the award.
On cassation appeal to the Supreme Court of Poland, the director general argued that an award could not be set aside only in part. The court disagreed. The director general also argued that the appellate court erroneously found that there was no arbitration clause in force. On this point, the Supreme Court pointed out that the arbitration court had found in favour of the director general on the substantive legal issue of his standing to assert claims on behalf of the cartel even though he was not a party to the convention, and the court had no jurisdiction to review that issue. Nonetheless, the court held that the assignment of rights to the director general to assert claims under the convention on behalf of the cartel also made the arbitration clause in the convention binding between the director general and the parties to the convention. The appellate court had thus erroneously found that there was no arbitration clause in force between the parties. The Supreme Court also held that the appellate court had improperly found that the estate had been denied the right to present its case, because the court failed to determine whether the alleged deprivation had an effect on the award. For these reasons, the Supreme Court granted the cassation appeal, vacated the judgment of the appellate court, and remanded the case for reconsideration.
Excerpts from the text of the court’s ruling:
1. The violations referred to in Civil Procedure Code Art. 503 may occur with respect to only a portion of the claims considered by the arbitration court, and in such case they will also justify only partial setting aside, because in order to exert such effect the defects mentioned in Art. 503 must affect the issuance of the ruling. Thus, as partial setting aside is generally permissible, it must be left to the discretion of the party whether it wishes to exercise the right arising under Art. 503 in full or in part. Exclusion of a certain portion of the ruling in the petition may not be undertaken solely in such a manner that partial setting aside of the arbitration award cannot be dictated by considerations of litigation defence.
2. Because in the dispute before the arbitration court, the defendant [i.e. the claimant in the arbitration case] could have standing only under the principle of an assignment for collection, Civil Code § 404 is applicable. Because under this provision the debtor may assert the arbitration clause also against the new creditor, the clause must be binding also on the new creditor.
3. Depriving a party of the ability to defend its rights is not absolute grounds for setting aside an arbitration award, but such violation will result in setting aside the award only if it affected the issuance of the award.