Polish Supreme Court judgment

dated 28 November 2013

Case No. IV CSK 187/13

Summary by arbitraz.laszczuk.pl:

In an arbitration before the Polish Chamber of Commerce brought by German company L.P. GmbH & Co. KG against the municipal water and sewer company in the town of B. (MWiK w B. sp. z o.o.), the panel decided to admit evidence from the respondent in the form of oral testimony by two members of its management board. They were scheduled to testify on 13 October 2010, but did not appear. Respondent’s counsel claimed that there was an informal discussion with the panel the day before in which it was determined that there would be difficulties taking the testimony of the board members on 13 October, and it could be rescheduled, and consequently she instructed the board members that they should not appear on the 13th. However, when the management board members failed to appear on the 13th, the panel proceeded to close the hearing, and the respondent did not object.

An award was issued in June 2011 in favour of the claimant for over EUR 400,000. In the justification for the award, it was expressly stated that the testimony of the respondent’s management board members was not taken solely because of their failure to appear at the scheduled hearing on 13 October 2011.

The respondent filed a petition with the regional court to set aside the award on the grounds that it had been denied a defence because of the failure to take the testimony of its management board members. The regional court found from the record of the arbitration proceeding that the panel did not participate in an informal discussion on 12 October 2010 on postponing the board members’ testimony scheduled for the next day, and that no other date was considered for hearing their testimony. After the panel closed the hearing on 13 October, the respondent failed to request rescheduling of the board members’ testimony, and the only request to reschedule their testimony was made by the claimant’s counsel in June 2011, after the award was already issued (but before the parties were notified of the award).

The regional court denied the petition to set aside the award in July 2012, and the court of appeal, relying on the factual findings by the regional court, denied the respondent’s appeal in December 2012. In the meantime, in October 2011, the regional court granted enforcement of the award in a legally final order.

On cassation appeal, the respondent alleged inter alia that the court of appeal had violated appellate procedure by failing to consider all of the evidence, particularly by ignoring a letter from the respondent’s counsel from June 2011, in response to the letter from the claimant’s counsel, in which the respondent allegedly upheld its motion to take the testimony of the board members, and the correspondence together suggested that the parties both still expected the board members to testify, which would undermine the regional court’s finding that there was no informal understanding on 12 October 2010 that the board members would not testify the following day.

Based on this finding of violation of appellate procedure, the Supreme Court granted the cassation appeal, set aside the judgment of the court of appeal accordingly and remanded the case to the court of appeal for reconsideration.

Excerpts from the text of the court’s ruling:

1. Because an arbitration award may be set aside only for grounds set forth in the law which are generally considered at the court’s own motion, while, with the exception of the invalidity of the proceedings before the court of second instance, a cassation appeal is considered within the bounds of the grounds stated for the cassation appeal, a cassation appeal in a proceeding seeking to set aside an arbitration award may — apart from the instance of invalidity of the proceedings before the court of second instance — be granted only if one of the grounds asserted in the cassation appeal is upheld containing an allegation which justifies or may justify a finding of grounds for setting aside the arbitration award asserted in the petition to set aside the award or considered at the court’s own motion.

2. The separate listing of the circumstances [in Civil Procedure Code Art. 1206 § 1 (2), (4) and (5)] as grounds for setting aside an arbitration award leads to the conclusion that they are excluded from the scope of application of the public policy clause.

3. For the arbitration court to conduct the proceeding ignoring the proffer of evidence, when the party has not given up introduction of the evidence and the evidence was necessary for resolution of the case, will constitute a violation of [the second sentence of Civil Procedure Code Art. 1183], setting forth one of the fundamental principles of arbitration procedure.