case law

id : 20559

id: 20559

Kraków Court of Appeal judgment

dated 15 March 2018

Case No. I AGa 90/18

Summary by arbitraz.laszczuk.pl:

Two companies – D. U., based in W., and (…) (“the Fund”), based in B., concluded an agreement on the Fund’s investment into a special purpose vehicle, in the form with signatures certified by a notary public on 29 November 2007. In the provisions of this agreement, the parties decided that all disputes and claims arising between the parties in connection with the wording and performance of the agreement would be settled by an arbitral tribunal established in accordance with the provisions of the Polish Civil Procedure Code (the ‘PCPC’). As a result of performance of the agreement, a dispute arose between the parties. Consequently, D. U. sent a call for arbitration to the Fund on 30 December 2014. The claimant appointed an arbitrator on 30 January 2015 and requested that the case be heard at a hearing. The arbitrators considering the dispute were: M. J. – appointed by the respondent, K. Z. – appointed by the claimant, S. P. – as the Presiding Arbitrator appointed by M. J. and K. Z. on 23 March 2015.

D. U. filed a lawsuit in which it demanded over USD 373,500,000 or an equivalent thereof in the amount of PLN 1,370,000,000 and over PLN 545,000 as a cost of proceedings to secure claims.

The (ad hoc) Arbitral Tribunal delivered an award whereunder, among other things, it obliged the respondent to pay over PLN 37,000 to the claimant. However, arbitrator M. J. expressed a dissenting opinion. The Fund filed a petition to set aside the arbitration award.

The Court of Appeal found that the arbitration agreement was an element of the agreement between the parties. According to Art. 1206 § 1 point 3 of the PCPC exceedance of the scope of the arbitration agreement shall not be a basis for setting aside an arbitration award if the party who took part in the proceedings failed to assert a plea against hearing the claims exceeding the scope of the arbitration agreement. However, the party did not assert such a plea. The Court of Appeal stated that a gross violation of criteria concerning interpretation of agreements (contracts) results in infringement of the principle of freedom of the will of the parties which is one of the fundamental principles of civil law (cf. Polish Supreme Court judgment dated 30 September 2010, Case No. I CSK 342/10). The infringement of a public policy clause may constitute a basis for setting aside an arbitration award set out in Art. 1206 § 2 point 2 of the PCPC. The literal wording of the disputed arbitration award indicated clearly that the parties’ intention had been to refer all disputes and claims which could arise in connection with the performance of the arbitration agreement. In the opinion of the Court of Appeal, there is no basis for setting aside of an award related to Art. 1206 § 1 point 4 of the PCPC in connection with Art. 1183 of the PCPC.       

Excerpts from the text of the court’s ruling:

1. Relying on objective illegality of actions of the other party to an agreement and possible concurrent grounds of liability does not override the competence of an arbitral tribunal.

2. [A]n arbitration award may be assessed in the context of procedural public order. Subject to assessment is the compliance with the fundamental procedural principles of legal order of procedure that have led to the delivery of the arbitration award (…).

3. An allegation of infringement of Art. 1183 of the Polish Civil Procedure Code may be justified, if an arbitral tribunal conducts proceedings in omission of evidence offered by a party, but only if this evidence was necessary to resolve the case (…).

4. The control of elements comprising an arbitration award cannot be of the same scope as substantive control (of validity) of such an award.

5. When hearing a case, an arbitral tribunal may be guided by legal intuition, and it does not need to – unlike a state court – strictly apply the provisions of substantive law, but may base its ruling also on the principles of equity or good faith. According to the public policy clause expressed in Art. 1206 § 2 point 2 of the Polish Civil Procedure Code, an arbitration award shall be set aside when effects determined by the award are incompatible with a specific norm which is one of the fundamental principles of this public policy (…).

6. The arbitration award that protects one of the partners encumbered with the contractual risk of failure of the business venture does not infringe upon trading certainty and the principle of trading security, in the situation when the investor (the Fund) could limit its own economic risk resulting from engagement of funds by correct, consistent with the agreement, and, above all, loyal conduct.

7. Application of the public policy clause is not aimed at verification whether the assessed arbitration award id compliant with all applicable absolutely binding provisions of law, but whether effects of such an award are contrary to the fundamental principles of national legal order.

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