Warsaw Court of Appeal judgment
dated 30 May 2017
Case No. VI ACa 180/16
Summary by arbitraz.laszczuk.pl:
Two parties – a joint-stock company (the “Bank”) and M. L. entered into a framework agreement on the rules of cooperation in the field of financial market transactions on 29 March 2007. The agreement replaced the previous framework agreement of 8 March 2006.
On 13 August 2008, a representative of M. L. contacted an accountant of the Bank and made him an offer – a transaction protecting against the risk of currency rate fluctuations. In the course of the conversation, the representative and the accountant agreed on conclusion of transactions. After that, M. L. sent transaction confirmation forms to the Bank. On 18 August 2018 M. L. signed the documents. Together with the transaction confirmation forms, M. L. sent a framework agreement dated 8 August 2008, which was supposed to replace the framework agreement of 29 March 2007. The agreement was signed by the Bank and delivered to M. L. on 5 September 2008. On 6 July 2009 the Bank, relying on an error, issued a written statement on avoidance of the legal effects of the declaration of will which had been made at the moment of signing of the transaction confirmations. The Bank stated that the error concerned a misbelief that the transaction had been effectively concluded on 13 August 2008. The statement was delivered to M. L. on 13 July 2009.
The Court of Arbitration at … ordered the Bank in W. to pay to M. L. approx. EUR 1,700,000 with statutory interest and dismissed the remainder of the claim.
On 9 August 2013 the Bank filed a petition to set aside the arbitration award. It alleged, among other things, that the fundamental principles of the legal order of the Republic of Poland had been infringed and that the Bank had been deprived of the possibility to protect its rights in the arbitration proceedings.
The regional court found the petition to set aside the arbitration award meritless. In the assessment of the regional court, the arbitration award had not been contrary to the fundamental principles of the legal order of the Republic of Poland. It also stated that it was a well-established view in the doctrine and case-law that the fundamental principles of the Polish legal order consisted of the rules arising out of the Constitution of the Republic of Poland (the “Constitution”) and the fundamental principles of different branches of law. Only absolutely binding legal norms (ius cogens) to which primary importance is ascribed could justify recourse to the public policy clause. It also stressed that a petition to set aside an arbitration award was not an appellate measure but an extraordinary means of judicial oversight by the state court over the activity of the arbitration court. The state court generally does not examine the rulings of an arbitral tribunal, and, in particular, it does not review whether it is founded on the facts presented in the reasoning of the award, or whether the appropriate provisions of substantive law were applied. The state court may set aside an arbitration award only in exceptional instances, indicated in constrictively interpreted provisions of the code. Consequently, in the event of doubts, the award should be upheld rather than set aside.
The Bank filed an appeal to the Warsaw Court of Appeal. It invoked, among other things, infringements of: Art. 1206 § 2 point 2 of the Polish Civil Procedure Code (the “PCPC”) in connection with Art. 45 (1) of the Constitution, Art. 2 of the Constitution in connection with Art. 1183 of the PCPC, Art. 1206 § 1 point 2 of the PCPC.
The Court of Appeal in Warsaw delivered a judgment in which it stated that the appeal was meritless as factual findings were founded and legal assessment made on those findings was not defective. Consequently, the Court of Appeal in Warsaw fully shared them and adopted them as its own.
It is worth noting that in this judgment the Warsaw Court of Appeal made a reference to, among other things, the following rulings: dated 21 December 2004, Case No. I CK 405/04, dated 11 August 2005, Case No. V CK 86/05, dated 8 December 2006, Case No. V CSK 321/06, dated 13 December 2006, Case No, II CSK 289/06, dated 11 May 2007, Case No. I CSK 82/07, dated 9 July 2008, Case No. V CZ 42/08, dated 3 September 2009, Case No. I CSK 53/09, dated 11 March 2011, Case No. II CSK 385/10, dated 9 March 2012, Case No. I CSK 312/11, dated 15 March 2012, Case No. I CSK 286/11, dated 13 February 2014, Case No. V CSK 45/13, dated 15 May 2014, Case No. II CSK 557/13.
Excerpts from the text of the court’s ruling:
1. [T]here is a great deal of autonomy in arbitration procedure, which is entirely consistent with the intentions of the lawmaker, distinctly limiting the review capabilities of a state court. The basic goal of this law is the rapidity of the procedure for resolving civil-law disputes, and not creation of an additional phase of pre-litigation proceedings. Parties deciding to submit a dispute to arbitration must take these conditions into account, which also include scant external review of arbitration awards.
2. [P]arties limit their constitutional right to court on their own by entering into an arbitration agreement … .
3. [A]n arbitration award may be set aside only on the grounds listed in Art. 1206 of the Polish Civil Procedure Code.
4. The arbitration tribunal’s violation of the substantive law governing the case, which is generally connected with Art. 1194 § 1 of the Polish Civil Procedure Code, is subject to review by the state court considering a petition to set aside an arbitration award only in terms of application of the public policy clause – ex officio or on the basis of a petition. Mere misinterpretation of the substantive law or misapplication thereof by the arbitral tribunal does not justify upholding of the petition. Infringement of the substantive law shall constitute a basis for setting aside of an arbitration award only insofar as its effects are contrary to the fundamental principles of the legal order. … interpretation of this term shall be restrictive and, as it is argued in the case law …, an assessment made ad casum whether an award violates the fundamental principles of the legal order should be made with caution.
5. Procedural public order may be a ground for assessing of an arbitration award in two aspects. First, the procedure which led to issuance of the arbitration award is assessed for its compliance with fundamental principles of the legal order. Second, the effects of the arbitration award are assessed from the perspective of their consistency with procedural public order, i.e. whether they are reconcilable with the system of procedural law, for example, whether they do not violate the principle of res iudicata or the rights of third parties.
6. In the case law, the fundamental principles of the legal order in terms of substantive law include, among other things: the principle of civil liability for the injury caused …, the principle of the restitutive nature of liability for damages …, the pacta sunt servanda principle …, the principle of business freedom and freedom of contract, the principle of contractual fairness …, the principle of protection of property rights …, the principle of the autonomy of the will of the parties and the equality of entities … .
7. Depriving a party of the possibility to defend its rights, within the meaning of Art. 1206 § 1 point 2 of the Polish Civil Procedure Code shall be equated with the party being objectively prevented from taking such actions which in fact change its procedural position … . A party is deprived of the possibility to take actions only when it was completely deprived of the possibility to defend its rights, i.e. when it was in a situation which prevented, and not only impeded or restricted, the pursuit of the claims before the tribunal … . The assessment whether a party was deprived of the possibility to defend its rights should be made in the light of specific circumstances of the case and the analysis whether a party was deprived of the possibility to take actions should start from consideration, whether procedural provisions were infringed and then it should be determined whether the infringement affected the party’s ability to take actions in the proceedings; finally, it should be assessed if despite these circumstances the party could defend its rights in the legal proceedings. When all these prerequisites are fulfilled cumulatively, it should be assumed that the party was deprived of the possibility to take actions … .
8. The public policy clause, like any general clause, is not precisely defined, which leaves a great deal of discretion to the court adjudicating a given case, but nonetheless on the basis of this clause, the review of constitutive elements of an arbitration award may not take on the dimensions proper to a review of the merits (correctness) of an award. The prohibition of a review of the merits (correctness) of an award is tied to the essence of application of the public policy clause. In applying the clause, the point is not to determine whether an award is consistent with all relevant mandatorily applicable regulations of law, but only to determine whether the award has had an effect contrary to the fundamental principles of the domestic legal order … .