case law

id : 20407

id: 20407

Kraków Court of Appeal order

dated 7 August 2013

Case No. I ACz 1251/13

Summary by arbitraz.laszczuk.pl:

N.D., an American citizen residing in the US, commenced an arbitration case before the Court of Arbitration at the Polish Chamber of Commerce in Warsaw against a Polish limited-liability company seeking to strip it of its corporate rights as the general partner in a Polish limited partnership. The arbitration court ordered her to advance an arbitration fee of over PLN 189,000. Unable to pay the fee, N.D. applied to the Kraków Regional Court for relief from the arbitration fee as an indigent litigant.

The regional court dismissed the application, holding that because Polish arbitration law did not provide for relief from arbitration costs, and the regulations on relief from court costs cover only proceedings before the state courts, the application for relief from arbitration costs could not be pursued in the state courts.

On interlocutory appeal to the Kraków Court of Appeal, the American argued that the existence of an arbitration agreement was distinct from the issue of non-justiciability of the dispute, and the court’s refusal to consider her request infringed her constitutional and statutory right to legal protection.

The court of appeal stated first that a proceeding seeking relief from court costs is auxiliary to the main proceeding. Here, where the applicant had chosen to commence arbitration and did not intend to commence a proceeding in the Polish state court on the merits of the case, the state court was not required to consider her application for relief from arbitration costs. The Act on Court Costs in Civil Cases states that it applies only when proceedings on the merits of the case before the state court are filed or at least contemplated as of the date of filing of the application, and thus the hypothetical existence of jurisdiction over the merits of the dispute was irrelevant. Consequently, her application was moot and had to be dismissed.

The court also pointed out that not only was there a lack of any legal regulations enabling the state courts to grant relief from arbitration costs, but under the Act on Court Costs in Civil Cases the State Treasury temporarily bears the court costs in question. This would not be feasible to apply in the case of arbitration because the fees are payable to a private arbitration institution.

The court went on to provide guidance to the litigant. The fact that an arbitration proceeding was pending was not a formal bar to commencement of a proceeding on the merits of the case in the Polish state court, where the litigant could then request relief from court costs. Then, if the defendant raised the arbitration agreement as a defence, she could claim that the arbitration agreement had lapsed because resolution of the dispute in arbitration had been rendered impossible by the claimant’s objective inability to advance the arbitration fee.

The court of appeal denied the interlocutory appeal accordingly.

Excerpts from the text of the court’s ruling:

1. The absence in the Polish system of a legal regulation concerning relief from the costs of arbitration proceedings is a subject not lying within the jurisdiction (justiciability) of the state court. This excludes the permissibility of implementing through a judicial ruling the standards of procedural law reserved for judicial proceedings for the sake of a proceeding before an arbitration court. … The “law of indigents” within the meaning of the Act on Court Costs in Civil Cases is not of a substantive civil nature, but is a systemic regulation guaranteeing the fulfilment of Art. 45(1) of the Polish Constitution, ensuring the right of access to the courts, and Art. 177 of the Polish Constitution, which establishes the presumption of the jurisdiction of the state court. Following the rules of interpretation of the Act on Court Costs in Civil Cases, there are therefore no grounds for finding that an application for relief from the costs of an arbitration proceeding may be resolved through the courts.

2. The presumption of justiciability (Civil Procedure Code Art. 1 and 2) does not exclude commencement of a judicial proceeding despite the commencement of an arbitration proceeding. … It is not a barrier to consideration of a case by the state court that the case is also pending at the same time before an arbitration court.

3. An application for relief from the costs of an arbitration proceeding cannot be resolved through the courts (Civil Procedure Code Art. 199 §1(1)).

4. A finding of the lapse of legal force of an arbitration agreement may result from the inability of the arbitration court to consider the case in light of the objective inability (the proportion of the degree of wealth of the interested person and the foreseeability of such costs as of the date of the arbitration agreement in relation to the level of the fees, constituting an excessive barrier to the accessibility of the arbitration court) to cover the advance arbitration costs by an interested person who has commenced the proceeding before the arbitration court. The evaluation of the circumstances connected with the existence of the last of these grounds is reserved for the state court deciding a possible objection by the defendant under Civil Procedure Code Art. 1165 §1 in proceedings connected with the dispute formally covered by the wording of the arbitration agreement.

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