Warsaw Court of Appeal judgment
dated 20 February 2017
Case No. VI ACa 871/16
Summary by arbitraz.laszczuk.pl:
(…), a limited liability company, based in W. entered into a contract for construction of a housing estate with infrastructure with (…), a limited liability company, based in W. (…), as the contractor, undertook to implement the investment task specified in the contract. (…), as the investor, undertook, among other things, to pay the renumeration specified in the contract. The parties concluded an arbitration agreement in the contract under which all disputes arising out of or in connection with the concluded contract were to be settled by the Court of Arbitration at the Polish Chamber of Commerce in Warsaw (the ‘Arbitration Court’).
(…) filed a suit to the Arbitration Court on 24 June 2015 and demanded over PLN 1,390,000. The Arbitration Court issued an award of 25 March 2016 and, among other things, ordered the respondent to pay to the claimant over PLN 450,000 with statutory interest.
One of the companies filed a petition to set aside the arbitration award to the Court of Appeal in Warsaw and alleged that the arbitration award was contrary to the public policy clause, i.e. the fundamental principles of the legal order of the Republic of Poland (Art. 1206 § 2 (2) of the Polish Civil Procedure Code) (the ‘PCPC’).
The Court of Appeal in Warsaw considered that an arbitration agreement is a special control measure in which a state court may control arbitration awards. However, it is not a form of appeal control – an arbitration award is not subject to appeal to a state court. According to Art. 1205 § 1 of the PCPC, an arbitration award may be set aside by the court solely in special proceedings initiated by filing of a petition to set aside the award. The Court of Appeal owned that in the scope of the settlement of interest, the Arbitration Court had failed to meet the requirements set out in Art. 1197 § 2 of the PCPC and that should be deemed a violation of the fundamental rules of procedure resulting from the statute (Art. 1206 § 1 (4) of the PCPC). However, the indicated ground could not be taken into account by a state court ex officio. What is more, according to the Court of Appeal, the aforementioned breach cannot be deemed in this case a violation of the fundamental principles of the legal order of the Republic of Poland.
The Court of Appeal dismissed the petition accordingly.
What is noteworthy is that in its judgment the Court of Appeal in Warsaw made a reference to, among other things, the followings rulings of the Polish Supreme Court: dated 15 February 1964, Case No. I CR 123/63, dated 31 March 2006, Case No. IV CSK 93/05, dated 13 February 2014, Case No. V CSK 45/13 and further case law cited therein, dated 7 October 2016, Case No. I CSK 592/15 and further case law cited therein.
Excerpts from the text of the court ruling:
1. A state court takes into account the grounds for setting aside an arbitration award set out in Art. 1206 § 1 of the Polish Civil Procedure Code (…) only upon a request of a party. Therefore, a state court is, in this regard, bound by the grounds cited in the petition.
2. [I]n proceedings initiated by a petition to set aside an arbitration award, a state court does not examine the accuracy of the assessment of evidence made by the arbitral tribunal, the correctness of factual findings, the accuracy of interpretation and application of the substantive law. The legitimacy of a specific method of resolving the disputed legal relationship by an arbitral tribunal is neither the subject to assessment by a state court. The essence of a petition to set aside an arbitration award is to provide a review mechanism respecting, on the one hand, the separateness and autonomy of arbitration, and, on the other hand, preventing the functioning in the legal system of rulings rendered by non-state courts in breach of the rule of law. Proceedings initiated by a petition to set aside an arbitration award do not, therefore, result in reconsideration of the merits of the dispute between the parties, but is only to verify the petitioner’s allegations concerning the existence of the grounds raised in the petition and set out in Art. 1206 § 1 of the PCPC, and provide an assessment as to whether any of the grounds provided for in Art. 1206 § 2 of the PCPC exist (…).
3. [T]he notion of the public policy clause within the meaning of Art. 1206 § 2 (2) of the PCPC is commonly identified with the fundamental constitutional principles and the prime principles of particular fields of law, including civil, family and procedural law. An arbitration award may be set aside on the basis of the public policy clause, if such an award is contrary to a specific, mandatory legal norm included in the aforementioned principles. In the case law of the Polish Supreme Court (…) it has been indicated, for example, that the fundamental principles of the Polish legal order include, among others, the principle of freedom of will in civil law, the pacta sund servanda principle and the principles setting limits of the freedom to form contracts and consequently the limits of the pacta sund servanda principle, as wells as the principle of freedom of business activity, the principle of contractual justice and the principle of compensatory nature of liability for damages (…).
4. [P]ursuant to Art. 1197 § 2 of the PCPC, an arbitration award shall contain the reasons for the award. However (…) it should be assumed that the requirement set out in Art. 1197 § 2 of the PCPC is not equivalent to the obligation of an arbitral tribunal to draw up a reasoning containing all elements provided for in Art. 328 § 2 of the PCPC. As the Polish Supreme Court indicates, to recognize that the requirements set out in Art. 1197 § 2 of the PCPC have been fulfilled, it is sufficient to be able infer from the reasons drawn up by the arbitral tribunal what premises were applied by the arbitral tribunal when the tribunal ruled on the parties’ demands (…)
5. No award with respect to capitalised interest may also justify (…) the allegation that the arbitration award violated Art. 481 § 1 of the Polish Civil Code. However, taking into account particularly the dispositive nature of this legal norm, it cannot be classified as one of the prime principles of civil law. Therefore, such a violation cannot be deemed a ground for setting aside an arbitration award on the basis of Art. 1206 § 2 (2) of the PCPC.