Gdańsk Court of Appeal judgment

dated 23 July 2021

Case No. I ACa 322/21

Summary by arbitraz.laszczuk.pl:

Enterprise … and Municipality (Gmina) … concluded a contract for performance of a specific work. A dispute arose between the parties. The Enterprise filed a lawsuit with the Permanent Arbitration Court at the G. Regional Chamber of Legal Advisers (the “Arbitral Tribunal”), which found that the lawsuit was unfounded. Consequently, the claimant filed a petition to set aside the arbitration award in full because, according to the Enterprise, Art. 1206 § 2 point 2 of the Polish Civil Procedure Code (the “PCPC”), among other things, had been violated.

The Court of Appeal in Gdańsk found the petition meritless. It stated that no grounds indicated in Art. 1206 § 2 of the PCPC had been present in the case. The Court of Appeal also stressed that a state court hearing a petition to set aside an arbitration award does not examine the case on the merits between the parties. The prohibition of a review of the merits of an award is related to the essence of the application of the public policy clause. By application thereof, the point is not to determine whether the award is consistent with all relevant mandatorily applicable legal regulations, but only to determine whether the award has effected a result contrary to the fundamental constitutional principles of the national legal order or to fundamental principles of specific areas of substantive or procedural law. The Court of Appeal indicated that the Arbitral Tribunal had conducted a proper analysis of evidentiary material in a comprehensive way and made a correct legal assessment of the factual findings in the case.

It is worth noting that in the case the Court of Appeal in Gdańsk made a reference to, among other things, the following judgments of the Polish Supreme Court: dated 7 October 2016, Case No. I CSK 592/15 and dated 28 February 2019, Case No. V CSK 63/18.

Excerpts from the text of the court ruling:

1. A petition to set aside an arbitration award is a legal remedy combining features of an extraordinary remedy at law, especially a petition for the revival of the proceedings, and an action for the formation of law or legal relationship in which the claimant (petitioner) demands a state court to render a judgment on setting aside of an existing legal relationship established by an arbitration award. A state court’s judgment granting the petition is of a quashing nature, as in such a situation the state court can only set aside the arbitration award, and only insofar as demanded by the petitioner.

2. [G]rounds for setting aside an arbitration award are provided for in Art. 1206 of the PCPC. It clearly follows from Art. 1206 of the PCPC that the list of the grounds for a petition to set aside an arbitration award contained therein is of an exhaustive character. Cognition of a state court in such a case is limited to examination whether the ground asserted in the petition, which may be one of the circumstances specified in Art. 1206 § 1 of the PCPC, exists. In addition, in the proceedings, a state court shall ex officio take into account the prerequisites set forth in Art. 1206 § 2 of the PCPC, irrespective of whether they were indicated in the petition or not.

3. The public policy clause covers both the procedural and the substantive fundamental principles of the legal order. Procedural public policy may be a ground for assessing an arbitration award in two aspects. First, the procedure which led to rendering of the arbitration award is assessed for its compliance with the fundamental principles of the legal order, second, the effects of the arbitration award are assessed from the perspective of their consistency with the procedural public policy, i.e. whether they are reconcilable with the system of procedural law. On the other hand, a violation by an arbitral tribunal of the substantive law applicable to the resolution of the legal relationship from which the dispute referred to arbitration arose, legitimates setting aside of the award only if it is connected with a violation of the fundamental principles of the legal order.

4. According to Art. 233 § 1 of the PCPC “The court shall assess the reliability and validity of evidence at its discretion, following extensive deliberations of the available material”. The boundaries of free assessment of evidence are determined by three factors: logical, statutory and ideological. The logical factor means that a court (an arbitral tribunal as well) is obliged to draw logically correct conclusions from the evidentiary material gathered in the case.

5. A reasoning of an arbitration award does not need to meet the same requirements as a reasoning of a state court ruling…, and an arbitral tribunal is not obliged to indicate in the reasoning of an arbitration award a precise interpretation of the relevant substantive provisions, in this case provisions regarding a contract for performance of a specific work, withdrawal from a contract, a contractual penalty.