polish

case law

id : 20572

id: 20572

Warsaw Court of Appeal judgment

dated 13 September 2017

Case No. VI ACa 840/16

Summary by arbitraz.laszczuk.pl:

…, a limited liability company, based in G., and …, a joint-stock company, based in W. entered into a contract of 30 March 2004. The object of the contract was to regulate rules regarding, among other things, conclusion and confirmation of financial market transactions according to an attached list. According to § 14 of the framework agreement, which constituted a part of the contract, disputes which could arise in connection with the performance of the framework agreement should be adjudicated by the Court of Arbitration at … Bank …. .

The limited liability company filed a lawsuit of 16 December 2011 against the joint-stock company. The Court of Arbitration delivered an award of 24 January 2013 in which, among other things, it ordered the respondent to pay to the claimant approx. PLN 1,880,000.00 with statutory interest as from 14 February 2012 until the date of payment. In the reasoning of the award the Court of Arbitration indicated that after an analysis of the framework contact and phone conversations between the parties, classification of relevant transactions as being concluded separately, and thus being standard transactions, was not well-founded. Additionally, the parties did not comply with the previously accepted form of such transactions with regard to the disputed transaction. Therefore the disputed transaction had not been concluded. The above resulted in the fact that the disputed amount collected by the respondent for the transaction constituted an undue benefit.

The joint-stock company filed a petition to set aside the arbitration award. The Regional Court in Warsaw found the petition meritless on 17 March 2016. The Regional Court pointed out that the task of a state court hearing a petition to set aside an arbitration award is limited solely to examination whether a statutory ground for setting aside of such an award indicated in the case exists (cf. the Polish Supreme Court judgment dated 28 November 2013, Case No. IV CSK 187/13). A state court before which a petition to set aside an arbitration award has been brought, does not operate as a II-instance court entitled to review the case on the merits with application of the provisions of substantive law, but makes an assessment of the arbitration award only from the perspective of violations indicated in the relevant provision, and in this case – in Art. 1206 § 1 points 2 and 4 and Art. 1206 § 2 of the Polish Civil Procedure Code (the “PCPC”). A state court’s ruling is limited in this case to the following options: setting aside an arbitration award in full, in part or rejecting the petition (cf. the Court of Appeal in Poznań judgment dated 16 November 2005, Case No. I Aca 912/15 and the Polish Supreme Court judgment dated 13 December 1967, Case No. I CR 445/67). The phrase “fundamental principles of the legal order” used in Art. 1206 § 2 point 2 of the PCPC refers to such a violation of provisions of substantive law that will result in violation of the principles of the rule of law, and the award infringes the overriding legal principles in force in the Republic of Poland and conflicts with the legal order, i.e. it violates the principles of the political and socioeconomic system (see, the Polish Supreme Court judgments dated 11 May 2007, Case No. I CSK 82/07 and dated 7 January 2009, Case No. II CSK 397/08). A petition to set aside an arbitration award may not be granted only because the award is found to have legal or factual defects (see, the Polish Supreme Court judgment dated 27 May 1998, Case No. I CKN 709/97).

However, the respondent filed an appeal to the Court of Appeal in Warsaw alleging that the ruling of the Regional Court had violated Art. 1206 § 1 point 2 of the PCPC and Art. 1206 § 2 point 2 of the PCPC.

The Court of Appeal in Warsaw found the petition meritless. It stated that the I-instance court made correct factual findings in the case. The Court of Appeal also found that the arbitration award did not infringe the fundamental principles of the legal order of the Republic of Poland and that the petitioner’s right to defense was not infringed in the course of the proceedings before the arbitral tribunal.

It is worth noting that in this judgment the Warsaw Court of Appeal made a reference to the following rulings of the Polish Supreme Court: dated 13 December 1967, Case No. I CR 445/67, 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 13 February 2014, Case No. V CSK 45/13, dated 29 October 2015, Case No. I CSK 922/14.

Excerpts from the text of the court’s ruling:

1. It should be noted that according to Art. 1207 § 1 and 2 of the PCPC, the provisions governing an appeal shall apply accordingly to a petition to set aside an arbitral award, with modifications resulting from title VII part V of the Polish Civil Procedure Code. Although it is a form of review, a petition is not, however, an appellate instrument, as unlike in appellate proceedings, the role of the state court is not to reconsider the case resolved by the arbitration award, applying the provisions of substantive and procedural law. In the proceedings before a state court initiated by a petition, the court does not examine whether the arbitration award is contrary to substantive law or is grounded in the facts cited in the award, or whether these facts were properly established. The state court considers the case only from the perspective of the grounds for setting aside the award and evaluates the soundness of the petition only in the light of the grounds set forth in Art. 1206 § 1 and 2 of the PCPC, considering at its own initiative only the grounds set forth in Art. 1206 § 2 of the PCPC. A violation of general provisions of civil procedure law or overriding principles of civil procedure may serve as grounds for setting aside an arbitration award only if it results in violation of fundamental principles of the legal order of the Republic of Poland or principles of social coexistence. A violation of overriding principles in force in the Republic of Poland may result – if it is to constitute grounds for setting aside an arbitration award – in an infringement of the substantive law … .

2. [B]y entering into an arbitration agreement, the parties consciously waived submission to the strictures in place for the proceedings before a state court, including some procedural guarantees in such proceedings. Unlike a state court, an arbitral tribunal considering cases does not need to strictly apply the provisions of substantive law, but may also base its ruling on the principles of equity or rule on the basis of general principles of law. Consequently, review by the state court of awards made by arbitral tribunals is limited to the instances strictly defined by the law … .

3. [E]xamination of a case with respect to the grounds for setting aside an award under Art. 1206 § 2 point 2 of the PCPC may not proceed beyond aggravated violations of law, and the parties cannot challenge an arbitration award when such an award was delivered after properly conducted proceedings, but does not satisfy their expectations. A petition is possible only when it has been demonstrated that an arbitration award violates the fundamental principles of the Polish legal order … .

4. The public policy clause on the ground of Art. 1206 § 2 point 2 is commonly identified with fundamental constitutional principles and overriding principles of specific areas of law, including civil, family and procedural law. An arbitration award may be set aside on the basis of a public policy clause if such an award is found to be contrary to a specific, absolutely binding norm which is included in the aforementioned principles. In the case-law of the Polish Supreme Court … it was for example indicated that the fundamental principles of the Polish legal order include, among other things: the principle of freedom of the will of the parties in civil law, the pacta sunt servanda principle and the principles setting limits of the freedom to form contracts and consequently the limits of the pacta sunt servanda principle, as well as the principle of freedom of business activity, the principle of contractual justice and the principle of compensatory nature of liability for damages … .

5. The principle of being bound by a state court when the court rules, expressed in Art. 321 § 1 of the PCPC, is not one of the fundamental principles of the Polish legal order within the meaning of Art. 1206 § 2 point 2 of the PCPC … . The principle of being bound by a state court when the court rules is not of an absolute character, because in the PCPC there are provisions which oblige a state court to rule on issues not covered with a prayer for relief.

6. Except for the fact that the principle expressed in Art. 321 § 1 of the PCPC is not of an absolute character, also … its limits were subject to amendments made by the legislator … . Therefore, the prohibition of ruling above a prayer cannot be deemed as one of the fundamental principles of the legal order of the Republic of Poland, because it is not an absolute, stable and permanent principle. First fulfilment of these criteria justifies inclusion among the principles of fundamental principles.

7. [The principle of adversariality], undoubtedly very essential in civil procedure, is not of an absolute character – it is limited, for example, in proceedings regarding juveniles and in proceedings in labour law matters. The model of civil suit based on the principle of adversariality was also subject to many amendments. This principle is not characterized by permanence and stability, which – as it was indicated above – is relevant for the fundamental principles of legal order … .

scroll up