id: 20274

Warsaw Appellate Court judgment

dated 14 June 2012

Case No. I ACa 1241/11

Summary by arbitraz.laszczuk.pl:

In 2006, a limited-liability company entered into a contract with a registered partnership under which the partnership was to conduct construction work for the company. The contractual deadline was the end of 2006, but the work was not completed until September 2007. In December 2007, the partnership commenced an arbitration proceeding before the Court of Arbitration at the Polish Chamber of Commerce, seeking payment of about PLN 1.36 million outstanding for the construction work. The respondent asserted a setoff in the amount sought by the claimant as part of a contractual penalty of PLN 1.6 million for late performance and defects in the work, and asserted a counterclaim for PLN 350,000. In 2009 the arbitration court issued an award denying monetary relief to either party but granting costs to the respondent.

The claimant filed a petition with the Warsaw Regional Court to set aside the award, on the grounds inter alia that the award was based on an altered document, specifically the minutes of a construction coordination conference concerning changes in the design documentation, affecting the nature and timing of the work. The regional court held that it had no authority to determine whether the document in question was altered, because an allegation that the award was based on an altered document requires that the alteration of the document first be established in a criminal proceeding, which had not been commenced in this case. The petition was denied accordingly.

The claimant appealed to the Warsaw Appellate Court. The appellate court held that an allegation that the award was based on an altered document does not require a ruling in a criminal proceeding, but the objection to the document must be raised before the arbitration court. In this case, the court found that the objection should have been made by moving to correct the record of the arbitration proceeding at which the allegedly altered document was admitted into evidence. Under the rules of the arbitration court, the party was required to do so by the next hearing at the latest, which the claimant failed to do and thus waived its right to do so. The court denied the appeal accordingly.

Excerpts from the text of the court’s ruling:

1. The regional made an erroneous interpretation of Civil Procedure Code Art. 1206 §1(5) by incorrectly assuming that demonstration of the statutory ground for setting aside an arbitration award in the form of issuance of the award on the basis of a forged or altered document requires proof of this fact through a legally final conviction for commission of a criminal offence. The ground for setting aside an arbitration award consisting of the fact that the arbitration award was obtained through a criminal offence or that the basis for issuance of the award was a forged or altered document is the same as the basis for reopening a civil proceeding set forth in Civil Procedure Code Art. 403 §1(1). However, Art. 1206 §1(5) does not expressly require that the criminal act underlying obtaining of the arbitration award be established by a legally final criminal judgment, which means that such fact may be the subject of independent findings by the regional court.

2. There is great autonomy in arbitration procedure, entirely consistent with the legislative intent, significantly limiting the opportunities for review by the state court. The basic purpose of this legal regulation is to expedite the procedure for resolution of civil disputes, and not to create an additional phase of pre-judicial procedure. When the parties decide to submit a dispute to an arbitration court, they therefore must take into account such conditions, also including the minimal external review of its awards.

3. For the state court to conduct a proceeding concerning alteration of documents, which the petitioner did not attempt to demonstrate in the arbitration proceeding, would essentially involve the state court replacing the juridical activity of the arbitration court, which is not provided for by the civil procedure regulations.

4. Because the petitioner did not seek to correct or supplement the record [before the arbitration court], failure to exercise this special measure means that it lost the right to assert irregularities in preparation of such document. Pursuant to §13 of the Rules [of the Court of Arbitration at the Polish Chamber of Commerce in force from 1 January 2007], if the provisions of the Rules or the procedure agreed by the parties is not followed, a party who knew of such violation but failed to assert an objection promptly or within another time determined by the parties is deemed to waive the opportunity to raise such allegation in the proceeding before the arbitration court.

5. The limits of the discretion of the arbitration court in conducting the evidentiary procedure are established by the requirements of thorough examination of the circumstances essential to resolve the matter and equal treatment of the parties to the proceeding. Depriving a party of the opportunity to defend its rights should be interpreted narrowly. The arbitration court’s rejection of evidence offered by a party because it finds the evidence unnecessary does not constitute depriving the party of an opportunity of a defence.