Polish Supreme Court judgment
dated 14 June 2017
Case No. IV CSK 482/16
Summary by arbitraz.laszczuk.pl:
In October 1994 the individual farmer T.N. entered into a tenancy agreement with the Agricultural Property Agency for over 800 hectares of farmland, where he operated a farm and made certain improvements. The tenancy was for a 10-year term. It included a clause providing, “The parties agree to submit to an arbitration tribunal for resolution any disputes that may arise during the course of performance of the agreement.” In 2003 the tenant submitted a statement to the agency seeking to extend the tenancy by a further 10 years. As the agency did not respond by proposing new terms, he regarded the tenancy as extended by tacit agreement under the Civil Code and the law governing state-owned agricultural land.
On 20 November 2004 the agency filed suit against T.N. in state court seeking return of possession of the property, alleging that the tenancy was not extended and had expired in October 2004. T.N. asserted in his response the defence of the arbitration clause in the tenancy agreement, and on 25 November 2004 commenced arbitration before an ad hoc arbitral tribunal seeking to order the agency to consent to extension of the tenancy, or a declaration that the tenancy was extended by a further 10 years. The proceeding before the state court was stayed pending the resolution of the arbitral proceeding. In December 2004 the arbitral tribunal issued an award generally upholding the farmer’s claim. The agency challenged the award, which was upheld by the regional court in 2006, but ultimately, in 2009, the court of appeal set aside the arbitration award.
Meanwhile, the regional court took up the original case again, issuing a judgment for the agency in May 2007, which was overturned by the court of appeal in December 2007, among other reasons because the case should not have been taken up again while the proceedings to set aside the arbitration award were still pending.
Subsequently, T.N. also filed further lawsuits seeking similar relief. One claim was denied by the district court in 2008 (with the appeal denied in 2009 by the regional court). Another claim filed in 2011 was denied by the regional court in 2012. A further claim before the arbitration court was denied in 2012.
In January 2013, a joint-stock company was formed under the name O. SA, with T.N. appointed to the supervisory board. In March 2013, T.N. purported to transfer possession of the disputed land to the company.
In May 2013, in the original case, on remand, the regional court granted most of the relief sought by the agency, holding that the parties had not mutually agreed in the required form to extend the lease. With respect to the assertion that the proceeding in state court should have been stayed pending resolution of the new arbitration claim, the regional court pointed out that the prior award in the farmer’s favour had been set aside. While this did not in itself terminate the arbitration clause, it had already been determined that the tenancy agreement was no longer in force, in litigation before a range of venues (arbitration, regional court, court of appeal, Supreme Court), and the farmer’s attempt to relitigate the matter in a further arbitration should clearly be regarded as a tactic aimed at delaying the litigation, which had already been pending for 8 years.
The farmer filed an appeal, joined by O. SA as an intervenor, which was denied by the court of appeal in 2015. The court upheld the earlier finding by the court of appeal in December 2007 that the claim for delivery of possession of the land was not itself covered by the arbitration clause, which in the case of doubt should be construed in favour of the jurisdiction of the state courts.
The farmer and the company O. SA filed cassation appeals with the Supreme Court of Poland against the order of the court of appeal, alleging procedural violations, including the refusal to recognize the arbitration clause as a defence to the action by the agency. The Supreme Court agreed that the court of appeal had erroneously granted relief based on the tenancy agreement itself, which was subject to arbitration. Nonetheless, in making its own interpretation of the arbitration clause, the Supreme Court found that it covered only disputes arising “during the course of performance” of the agreement and therefore did not cover disputes arising after the termination of the tenancy agreement, specifically the claim for return of possession of the property. Consequently, granting the cassation appeal and vacating the judgment of the court of appeal solely so that the court of appeal could consider whether to dismiss the agency’s claim because the arbitral tribunal allegedly had jurisdiction of the matter would be “irrational.” The Supreme Court denied the cassation appeal accordingly.
Excerpt from the text of the court’s ruling:
The Supreme Court is authorized to interpret the content of the arbitration clause, as the scope of its application is subject to examination by the court on its own initiative because it may result in dismissal of the claim (Art. 1165 §1 of the Civil Procedure Code). In making such interpretation, it must be assumed that the principal route for pursuing claims is through the courts. The interpretation of the arbitration clause thus may not extend so far that the competence of the arbitral tribunal is accepted contrary to the express intention of the parties as set forth in the agreement.