Polish Supreme Court ruling
dated 16 February 1934
Case No. C III 143/33
Summary by arbitraz.laszczuk.pl:
In 1923, Berta S. and Stanisław M. entered in a partnership agreement to operate a steam mill for six years. In January 1927 they dissolved the partnership, drew up an accounting before an advocate, and entered into an agreement approving the accounting. After entering this settlement, a dispute arose between the parties when Berta S. found out that Stanisław M. had collected receivables of the partnership of some zł 14,000 but had failed to turn over the proceeds to the partnership. Through an exchange of letters between their attorneys, the parties agreed to arbitrate disputes arising after the accounting.
In May 1927, Berta S. filed a claim in arbitration against Stanisław M. for some zł 33,000, including the zł 14,000 allegedly held out by Stanisław M. as well as an additional zł 19,000 in partnership contributions allegedly made by Berta S. but not reflected in the January accounting. Stanisław M. objected to consideration of the claim for the partnership contribution. Then, at a hearing in July 1927, Stanisław M. claimed before the arbitration court that “the case was rigged by the court.” In response, all of the arbitrators, including the one appointed by Stanisław M., resigned. Subsequently, in October 1927, at the request of Berta S., the arbitrators reconvened, ruled that their earlier resignation, individually and as a group, was unjustified, and took up consideration of the case again. In January 1928, the arbitrators handed down an award in favour of Berta S. for about zł 8,000. Then, in July 1928, upon request of the claimant, the arbitrators issued an amended award in her favour for some zł 21,000, stating that they were “correcting an obvious error in calculation.”
Berta S. applied to the Poznań Regional Court for enforcement of the award against Stanisław M. The defendant objected that the arbitration court did not have jurisdiction. The regional court granted enforcement of the award.
The Poznań Appellate Court granted the defendant’s appeal and denied the plaintiff’s claim. The court held that the arbitration court had jurisdiction to hear only the claim for zł 14,000 in partnership receivables held out by Stanisław M. but did not have jurisdiction to hear the claim for the partnership contribution, which was covered by the January 1927 accounting and settlement and thus was not covered by the arbitration clause. Because the award was issued for a single, indivisible amount, enforcement of the award
had to be denied in its entirety.
On cassation appeal by the plaintiff, the Supreme Court of Poland agreed with the appellate court that the arbitration agreement covered only the claim for zł 14,000 in partnership receivables and not the claim for the partnership contribution. The Supreme Court found that the appellate court had properly refused to enforce the entire award, including the amount of some zł 14,000 for the partnership receivables, as the state court could not divide the award into enforceable and unenforceable parts without impermissibly entering into the merits of the dispute. The court found that the arbitrators were not authorized to correct the award because the correction involved not an obvious computational or typographical error but a logical error (based on the assumption that the receivables allegedly withheld by the defendant had been reflected in the January 1927 accounting). The court further found that when the entire panel of arbitrators resigned in response to the defendant’s claim of partiality, the arbitration agreement expired accordingly, and the defendant was not required (as the appellate court erroneously held) to apply to the court for a declaration that the arbitration agreement had expired. For these reasons, the Supreme Court denied the cassation appeal.
Excerpts from the text of the court’s ruling:
1. The state court could only either find the arbitration award enforceable in its entirety or refuse to find the award enforceable also in its entirety, as it is not the place of the state court in considering a case seeking recognition of an arbitration award as enforceable to review which of the reasons behind the award are justified or unjustified, or which item in an accounting was proved or acknowledged by a party, or to enter at all into consideration of the merits of the dispute.
2. The arbitration court may apply § 319 of the [former German] Civil Procedure Code, i.e. correct obvious errors of calculation, typographical errors or the like. It may not, however, amend its material content after service of the award on the parties, unless both parties consent to such amendment.
3. Resignation of appointment is a declaration by arbitrators that they refuse to perform their duties, that they renounce the agreement with the parties obliging them to resolve the dispute.
4. In light of the declaration by the arbitrators in the presence of the parties that they resign their appointments, and thus renounce the agreement to perform the duty of arbitrators, pursuant to § 1033 of the [former German] Civil Procedure Code the arbitration agreement ceased to be in force, and expired.
5. In light of expiration of the arbitration agreement, the arbitrators who resigned their appointments had no legal basis to take up their rights and obligations again upon the unilateral request of the plaintiff without the consent of the defendant, as they did.