A. LEGISLATION AND RULES
A.1 Legislation
International arbitration in Poland continues to be governed by the rules embodied in the Polish Civil Procedure Code (CPC). These rules are based on the UNCITRAL Model Law.[1] In September 2022, the Polish parliament began work on revision of the CPC in the form of the Draft Act.
With regard to the arbitration rules, the Draft Act introduces the possibility for the parties to submit a dispute already pending before a court to arbitration until the court renders its final judgment. Therefore, the parties will also be able to conclude a compromissory arbitration clause after the dispute has been brought before the court, including in many cases, in appellate proceedings.
If the parties decide to conclude such an arbitration clause, the court will be obliged to discontinue the court proceedings at the parties’ unanimous request. In that case, the time bar for claims covered by the compromissory arbitration clause will run anew from the date on which the decision to discontinue the court proceedings becomes final.
However, the court will refuse to discontinue the proceedings if the content of the arbitration agreement or the circumstances of the case indicate that the discontinuance (1) would be contrary to the provisions of law or principles of social co-existence, or (2) it would aim to circumvent the law, or (3) the arbitration clause is invalid or ineffective. Additionally, the Draft Act provides for the rejection of a statement of claim or an application which relates to a dispute already discontinued on the aforementioned basis.
The proposed change provides an incentive to choose arbitration as an alternative to court proceedings. It has the potential to increase the number of compromissory clauses concluded in Poland, which is currently relatively low. However, in practice, after a court dispute is initiated, the parties are often unlikely to reach any amicable agreements, including those relating to the dispute resolution method. Furthermore, the Draft Act obliges the court to refund three-fourths of the court fee paid for a statement of claim instituting proceedings in the first instance if the case is discontinued as a result of conclusion of an arbitration clause. However, if the parties conclude the arbitration agreement in the second instance proceedings, the court fee for the appeal is not subject to refund. This may deter parties from removing the case to arbitration in those cases where the court dispute is well advanced. Whether the Draft Act will in fact further increase the use of arbitration in Poland will be verified by practice.
Please note that the legislative process of the Draft Act has not ended yet and the Draft Act may change. It is currently being revised by the parliament after the Senate’s amendments. Once the process is finalized, the changes will come into force after three months from the promulgation of the Act.
A.2 Institutions, rules and infrastructure
One of the two main local arbitration institutions in Poland is the Court of Arbitration at the Polish Chamber of Commerce (PCC). In 2022, the PCC introduced a minor but significant amendment to its Arbitration Rules (“PCC Rules“).
As of April 2022, the PCC introduced an obligation to attach a confirmation of payment of the registration fee (which as a general rule is PLN 2,000) to the statement of claim, under pain of return of the statement of claim to the claimant. Consequently, in the event of lack of confirmation of payment attached to the statement of claim, the statement of claim is returned automatically. Moreover, pursuant to article 26(3) of the PCC Rules, the returned statement of claim does not have any legal effect.
The provisions of the PCC Rules regarding a statement of claim apply mutatis mutandis to a request for arbitration. Therefore, submitting a request for arbitration without the necessary confirmation of payment will also result in the return of this request.
The change may have a significant effect on disputes in which the date of initiation of proceedings is crucial. This would include disputes in which, depending on the date of the initiation of the proceedings, the claims may be, for example, time-barred or a party’s interim injunction may be at stake. An interim injunction may be at stake in jurisdictions (such as Poland) where parties have the right to obtain an interim injunction securing their claims prior to the initiation of arbitration proceedings. However, this is conditional upon the arbitration commencing within a specified period. In such case, failure to adhere to this deadline results in an automatic termination of the interim injunction.
As a consequence, although this amendment of the PCC Rules is of a technical nature, it may have practical consequences for parties initiating proceedings under these rules.
B. CASES
B.1 A pathological arbitration clause cannot be interpreted as providing for ad hoc arbitration, provisions of a standard form contract cannot supersede the parties’ intent and merger clauses apply to arbitration agreements[2]
The case concerned a dispute between Polish and Norwegian companies pertaining to the refurbishment of a vessel. The claimant in the proceedings sought payment for the performance of repair works. The contract between the parties was concluded on a form standard to the maritime market — the Repaircon BIMCO contract. However, the parties diverged from the wording of this form when agreeing on the dispute resolution provision.
The standard Repaircon BIMCO contract is in the form of a table, in which the parties fill out specific cells in accordance with the instructions provided. As for dispute resolution clauses, the standard Repaircon BIMCO contract provides the parties with several different options. All of these options, however, ultimately provide for arbitration proceedings (either in the form of ad hoc or institutional arbitration). To include one of these options in the contract, the parties have to explicitly indicate their choice. However, in case of a lack of choice by the parties, or a wrong wording of the clause, the instruction to the contract provides that parties are deemed to have agreed to arbitration under English law.
In the case, which was ultimately heard by the Polish Supreme Court, rather than properly choosing one of the provided options, the parties decided to include their own wording in the relevant section of the contract. In the offer sent by the claimant to the respondent prior to the conclusion of the contract, the claimant indicated that all disputes under the contract should be subject to “arbitration in Polish civil court in Szczecin, in accordance with Polish law.” However, the contract itself contained only the following wording in the relevant section: “polish law, Szczecin civil court, POLAND.“ Arbitration was not mentioned. The contract also included a merger clause.
In response to the claimant’s statement of claim filed in the court in Szczecin, the respondent asserted a jurisdictional objection based on the above wording of the dispute resolution provision, claiming that this was an arbitration agreement. On this basis, the respondent requested the court to reject the claims for lack of jurisdiction. The respondent claimed that the parties had in fact chosen to submit their disputes to arbitration, as the wording added by the parties was an indication of the place of arbitration and law applicable to the dispute, rather than a forum selection clause. In the respondent’s view, the parties’ intention was for arbitration to be the proper forum to resolve their disputes.
The court of first instance did not agree with this argument and dismissed the jurisdictional objection. The court noted that an arbitration agreement, like any other agreement, can be concluded only if both parties consent to it. In this court’s view, it was clear that the parties did not wish to have their case heard in arbitration, as the wording of their clause provided for “Szczecin civil court.” By indicating the civil court, they chose to refer the dispute to court proceedings rather than arbitration. The witness evidence submitted in this respect, also did not confirm the alleged mutual consent to conclude an arbitration agreement. The court also found that by diverging from the typical wording of the BIMCO standard clause the parties clearly chose not to conclude an arbitration agreement.
This decision was appealed by the respondent. On appeal, the appellate court did not agree with the decision of the first instance court and found that there was a binding arbitration agreement between the parties, providing for ad hoc arbitration in Szczecin. The appellate court considered the structure of the standard Repaircon BIMCO contract and came to the conclusion that parties using this form as their contract cannot agree to any other dispute resolution method than arbitration. The only choice that the parties have is between the seat of arbitration and the law applicable to the contract. The court also decided that the original offer sent by the claimant, which provided that disputes should be heard in “arbitration in Polish civil court in Szczecin,“ was relevant to establishing the parties’ intent to conclude an arbitration agreement. In the court’s view, this intent was corroborated by the witness evidence, as the witness testified that they understood the dispute resolution clause to refer to arbitration. The court concluded that, depending on the context, “civil court” may mean either an arbitral tribunal or a court. In light of this, the court rejected the claims for lack of jurisdiction.
The claimant successfully appealed this decision to the Supreme Court, which remanded the case to the appellate court. There were main three reasons that lead to this decision.
Firstly, the Supreme Court confirmed that it is long established that, as with any other agreements, arbitration agreements are subject to interpretation. However, it is an essential part of an arbitration agreement to include the expression of intent to have the case heard in either intuitional or ad hoc arbitration. As such, a valid and effective arbitration clause must identify the parties, the dispute and the arbitration institution or ad hoc arbitration, even if lexically the clause itself is not perfect. As such, if it is impossible to identify the institution (or ad hoc arbitration) to which the parties have referred the dispute, the arbitration clause is ineffective. At the same time, a pathological arbitration clause providing for institutional arbitration cannot be interpreted as a valid agreement to an ad hoc arbitration.
Secondly, the Supreme Court considered that even if parties conclude their agreement on a standard form, which provides for arbitration as a default rule, the intent of the parties supersedes such default rule. This is because any default rule applicable in the absence of the parties’ choice is inapplicable if the parties explicitly changed it. As such, the Repaircon BIMCO standard form’s default provision for arbitration under English law cannot apply if the parties explicitly chose something else. And parties are free to change standard form contracts, in particular if the contract provides that the priority is given to the parties’ choice rather than the default rule.
Finally, the Supreme Court considered the effect of a merger clause on an arbitration clause included in a contract. The Supreme Court found that a merger clause providing that no statements or documents created before the conclusion of the contract cannot modify or affect the agreement cannot be omitted when interpreting an arbitration agreement. From this it stems that discussions and offers pertaining to an arbitration clause exchanged between the parties before the conclusion of the agreement are irrelevant to the interpretation of the arbitration clause if the contract contains a merger clause.
This is an important decision confirming the standard for interpretation of arbitration agreements in contracts concluded on a standard form. While it has been already established in previous Supreme Court decisions that in interpreting arbitration agreements the same principles apply as in any other contracts, this was not so clear in cases concerning arbitration clauses forming part of standard form contracts. Similarly, the application of merger clauses to arbitration agreements has not been explicitly confirmed before.
At the same time, this decision clarifies the extent to which a court or tribunal may seek to save a pathological arbitration agreement in order to compel the parties to arbitration. While this is not the first time that this has been discussed by the Supreme Court, the judgments of lower instance courts are not uniform. This decision may increase the more strict approach to rectifying badly written arbitration agreements.
As a consequence, drafters of arbitration agreements subject to Polish law should take into account these three considerations when drafting arbitration clauses:
- A pathological arbitration clause cannot be interpreted as providing for ad hoc arbitration just to save the parties’ intent to arbitrate if the parties never intended to be subjected to ad hoc arbitration
- Provisions of a standard form contract providing for arbitration as a default dispute resolution forum cannot supersede the parties’ intent to refer the case to civil courts, if it is clear that this was the parties’ intent
- When including a merger clause in an agreement, parties should take into account that it will apply to arbitration clauses unless the arbitration clause is specifically carved out of the merger clause’s scope
B.2 All disputes unless they are explicitly removed by law from civil courts are prima facie arbitrable[3]
The case concerned the enforcement of an arbitral award issued by the Court of Arbitration for Sport (CAS) concerning an athlete’s suspension due to a failed doping test. The court in this case ruled on the question of arbitrability of sports disputes, and also provided a clear rule as to how to approach the question of the arbitrability of disputes in general.
The dispute was a consequence of a failed doping test by a Polish athlete. Following the relevant investigation, a decision disqualifying the athlete was issued by the sports association. The decision included the information that the athlete had the right of appeal to the CAS. The athlete used this right and arbitration proceedings were initiated against their sports association. As a result of these proceedings, an award was issued, changing the penalty for the failed doping test to suspension rather than disqualification. The award was never challenged in setting aside proceedings by either of the parties.
The award was then referred to the Polish courts for recognition and enforcement by the athlete. In these proceedings, the sports association objected to the enforcement, claiming that there was no arbitration agreement between the parties. The case was heard by the appellate court in the first instance. The court decided that the objection was baseless. The court considered the action of the sports organization, including the inclusion of the information about the right to appeal to CAS in the disqualification decision, the lack of objection to the jurisdiction of CAS in the arbitration proceedings, and not challenging the award in the setting aside proceedings. All these facts led the court to the conclusion that an arbitration agreement was formed between the parties. As a result, the appellate court issued a decision recognizing and enforcing the arbitral award.
The sports association filed a cassation appeal with the Supreme Court. In the appeal, it claimed that the appellate court erred in concluding that the arbitration agreement was formed, and in addition argued that sport disputes are not arbitrable, as the dispute between the parties was not a civil law dispute.
The Supreme Court did not agree with any of the arguments.
As for the existence of an arbitration agreement, the Supreme Court fully agreed with the appellate court, and confirmed that a party waives the right to raise objections as to the existence of an arbitration agreement if it does not challenge the jurisdiction of the tribunal in course of the arbitration proceedings.
The Supreme Court also dismissed the arguments pertaining to the arbitrability of sports disciplinary proceedings, finding that the definition of civil law disputes is broad. In its reasoning, the Supreme Court stated that, as a general rule, a dispute that may be heard by a common courts or the Supreme Court is a civil law dispute, and hence, is arbitrable. Under the constitutionally guaranteed right to court the default rule is that common courts have jurisdiction to hear a dispute if there is no other forum indicated by law. There are of course certain exceptions, however, this principle is key in establishing prima facie whether a dispute may be subject to arbitration.
In case of sports disciplinary disputes, there is no ground to assume that the common courts could not hear this case, as there was no other forum designated by law for this type of dispute. The court noted that it could also be argued that sports associations’ decisions, such as a disqualification decision, are of a civil nature, as the relationship between an athlete and a sports association is voluntary, based on equality of the parties and voluntary participation.
While this decision is most significant for sports arbitration in Poland, as it explicitly confirms the arbitrability of sports disputes, its application may be broader. The approach taken by the Supreme Court in considering what types of disputes may be arbitrable may be applied in complex cases, in which there are doubts whether it is a civil law dispute. The established rule is an opt-out approach, which excludes disputes from being civil law (and, thus, arbitrable) only if the law states so. This decision confirms that the right to refer disputes to arbitration in Poland is broad, and the Supreme Court maintains its pro-arbitration approach.
However, it should be noted that article 1157 of the CPC excludes arbitrability of certain types of disputes. The Supreme Court’s ruling, while broad, does not change these particular exclusions.
The decision also confirms the well-established rule that waiving jurisdictional objections in the course of arbitration proceedings prevents a party from raising them in post-arbitration proceedings for recognition and enforcement of the award. This unchanging approach of the Supreme Court to the issue of waiver ensures a higher certainty for parties seeking enforcement of their awards in Poland as to the outcome of the proceedings.
[1] The UNCITRAL Model Law before the 2006 amendments.
[2] Decision of the Supreme Court of 27 October 2022, case file no. II CSKP 470/22.
[3] Decision of the Supreme Court of 3 March 2022, case file no. II CSKP 28/22.
