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), to which there have been no legislative amendments. These rules are based on the UNCITRAL Model Law.
A.2 Institutions, rules and infrastructure
The two main local arbitration institutions in Poland are: the Court of Arbitration at the Polish Chamber of Commerce (PCC) and the Court of Arbitration at the Polish Confederation Lewiatan (“Lewiatan“). In 2024, both PCC and Lewiatan amended their arbitration rules.
On 10 October 2024, The Arbitration Council adopted the New Rules of the Arbitration Court at the PCC. They entered into force on 1 January 2025. The New Rules aimed at bringing the rules at the PCC in line with international arbitration standards. Changes to the previous rules include:
- Warsaw will no longer be the default seat of arbitration, and the Polish language will no longer be the default language of arbitration. Absent the parties’ agreement, the arbitral tribunal will decide on the seat and the language of arbitration.
- The presiding arbitrator and the sole arbitrator no longer need to be chosen from the Lewiatan’s list of recommended arbitrators. This list now serves only as a guide for parties.
- Moreover, a request for arbitration is now the only way to commence proceedings. Previously, the parties could also commence proceedings by filing a full statement of claim but this solution proved ineffective and inconvenient both for the parties and tribunals.
- The tribunal has the authority to order that all communications be conducted in electronic form irrespective of a party’s opposition to such approach.
- There is now a new procedure regarding an “emergency arbitrator.” Before the arbitral tribunal is constituted, an emergency arbitrator may issue an order on an interim measure to secure a claim or to preserve evidence.
- As a rule, the arbitral tribunal is required to set a date for a case management conference within 14 days from the date on which the file was transmitted to it. If the tribunal does not manage to set the date, it has to issue a procedural order no. 1 within 21 days.
- A party may apply for early determination of each of the claims made by the parties, or early determination of a defense or an issue in dispute, if its claim, defense or position on the issue in dispute is manifestly meritorious, or a claim, defense or position of the other party on the issue in dispute is manifestly without merit.
- The tribunal should render the award within six months from the date the file was transmitted, and no later than two months from the last day of the hearing or the date of the last written submission by a party.
- A new definition of interim award, which allows the tribunal to decide any substantive issue in it.
As of 1 January 2025, new Rules of the Court of Arbitration at the Lewiatan have come into force. Among the numerous changes, the key ones concern the following:
- Allowing the commencement of proceedings through a Request for Arbitration
- Conducting the proceeding in electronic form, unless the tribunal decides otherwise
- Extending the deadline for a third party to intervene in the proceedings until the end of the evidentiary proceedings
- Easing requirements for consolidating proceedings between the same parties
- Introducing IBA Rules on the Taking of Evidence in International Arbitration as a part of the new rules
- Granting new powers to the arbitral tribunal. When deciding on the costs of arbitration, the arbitral tribunal will be able to take into account so-called third-party funding for the arbitration proceedings, as well as a success fee
- Increase of the value of the dispute for an application of expedited proceedings rules, from PLN 50,000 to PLN 200,000
- Improvement of procedures for the appointment of a substitute arbitrator
B. CASES
B.1 Objective inability to bear the costs of arbitration proceedings may entail the unenforceability of the arbitration provision[1]
The case concerned the unenforceability of the arbitration clause in the case of inability to bear the costs of the arbitration proceedings by one of the parties. The plaintiff filed a suit in the Regional Court in Warsaw against the defendant, seeking payment. The dispute was based on an investment agreement and a shareholders’ agreement containing an arbitration clause. In the statement of defense, the defendant invoked the arbitration clause challenging the jurisdiction of the state court.
The Regional Court in Warsaw found that in the circumstances of this case, both prerequisites for the rejection of a lawsuit listed in article 1165 section 1 of the CPC were met, i.e., the dispute between the parties was covered by the arbitration clause, and the defendant invoked the arbitration agreement before entering into a dispute on the merits. According to the court, the arbitration clause was also not unenforceable within the meaning of Article 1165 Section 2 of the CPC, nor had it expired within the meaning of Article 1168 Section 2 of the CPC. The court also firmly rejected the possibility of declaring an arbitration clause unenforceable due to a party’s insolvency and stated that a party is always responsible for its ability to pay the arbitration fees required by the applicable rules and regulations.
The plaintiff unsuccessfully appealed the judgment of the Regional Court in Warsaw. The Court of Appeals in Warsaw did not share the plaintiff’s position that the lack of funds to conduct arbitration proceedings could be a reason causing the arbitration clause to become invalid as specified in article 1168 section 2 of the Code of Civil Procedure. In the court’s opinion, it was also impossible to consider the arbitration clause unenforceable for that reason.
The plaintiff appealed the decision of the Court of Appeals to the Supreme Court. The Supreme Court concluded that an objective inability to bear the costs necessary for the initiation and conduct of arbitration proceedings, may entail the unenforceability of the arbitration clause.
The Supreme Court stated that opting out of the state court system is an expression of the autonomy of the individual’s will. However, this autonomy, due to the importance of the right to a court in a democratic state under the rule of law, is not unlimited. In concluding an arbitration clause, the parties exclude the resolution of a case by a court, but they do not relinquish judicial protection in general. They merely choose to select another, more convenient forum that can provide them with protection equivalent to that obtainable in state courts. In addition, the parties do not fully derogate from the guarantees stipulated in the constitution, given that an arbitral award is subject to state court review.
The Supreme Court noted that both the New York Convention and the UNCITRAL Model Law, do not contain an enumerative list of cases of unenforceability of an arbitration clause. In the Supreme Court’s view it is beyond dispute that the availability of judicial protection in a particular case can be affected by the costs required to initiate and conduct legal proceedings. It applies not only to the state judiciary, but also to arbitration. This is because in arbitration the initiation and conduct of proceedings involve financial outlays as well. The dismissal of a lawsuit by a state court in the event of an actual inability to initiate and conduct arbitration proceedings, the basis of which is the poverty of the plaintiff, would be tantamount to depriving the plaintiff of judicial legal protection in general.
At the same time, the Supreme Court stated that the declaration of unenforceability of the arbitration clause should be limited to cases in which the elimination of this obstacle is impossible in the arbitration proceedings with the use of statutory solutions that allow the arbitration institution to temporarily bear the costs of arbitration or otherwise alleviate the burden of their payment, if such are available, or with the participation of the opposing party, who, seeking to maintain the effects of the clause and the determination of the case by the arbitration court, may pay the costs necessary to initiate and conduct the arbitration proceedings. Moreover, the inability to bear the costs of the arbitration proceedings should be objectively existing at the time of the ruling. Finally, it must be noted that declaring the arbitration clause unenforceable is not equivalent to the permanent loss of its force, so the arbitration clause may be applied in the future if the inability to bear the costs of the arbitration proceedings ceases.
As the plaintiff in the commented case could not bear the costs of arbitration, the Supreme Court declared the arbitration clause inoperable. As a result, the Supreme Court annulled the decision of the Court of Appeals in Warsaw of 27 April 2020 and compelled the state courts to resolve the case despite the existence of the arbitration clause.
This is an important decision demonstrating a new approach of the Polish judiciary to the issue of the enforceability of an arbitration clause. While it remains to be seen how impactful this decision will be in the judicial practice, it must be noted that the Supreme Court already expressed a similar view as to the possibility of declaring an arbitration agreement inoperable in the decision of 20 March 2024,[2] however, it declined to do so as it found that the plaintiff had failed to prove that it had not been able to bear the costs of the arbitration.
The approach presented by the Supreme Court may potentially create new grounds for challenging the arbitration agreements by the parties wishing to evade arbitration. Nonetheless, even the Supreme Court appears to reserve this new approach only for exceptional situations. Hence, it is unlikely that it will significantly disrupt the enforceability of arbitration agreements in Poland.
B.2 An application for recognition of an arbitral award can be granted even if the applicant fails to submit the arbitration agreement, provided that the existence of a foreign arbitration clause is not disputed[3]
This case concerned the formal requirements for an application for a declaration of enforceability of an arbitral award issued abroad. Article 1213 section 1 of the CPC requires a party to submit an original of an arbitration clause or a copy certified by a notary along with an application. Polish courts tend to be quite formalistic and tend to reject applications that fail to conform to all formal requirements.
In this case, a German company applied for a recognition and enforcement of the ICC awards but did not attach to the application the original or a certified copy of the arbitration clause. The company only attached a simple copy of the arbitral clause.
Despite the Court of Appeals’ request to the company to provide an original or a certified copy of the arbitration clause, the company failed to do so. As each party only signed its copy of the arbitration clauses and the parties exchanged only the scanned copies, the company did not possess a written original nor could it obtain its certified copy. The company could only provide (and provided) the printout of the scan of the arbitration clause. Despite this explanation, the Court of Appeals dismissed the application, since the applicant did not submit the original arbitration clause or its certified copy.
The applicant appealed the Court of Appeals’ decision and the Supreme Court reversed it. The Supreme Court emphasized that the provisions of the New York Convention prevail over the regulations of the CPC, but the CPC applies in the remaining scope. The New York Convention and article 1213 section 1 of the CPC require a party to submit the original or a certified copy of an arbitration clause to allow a court to assess whether the parties conclude the arbitration clause in the required form. When assessing whether a party’s application met this formal requirement, a court should account for the possible forms of the arbitration clauses. If the parties concluded the arbitration clause through the exchange of emails, providing a printout of these emails should suffice to meet the formal requirements for the application. However, as the Court of Appeals did not definitely establish in what form the parties concluded the arbitration clause, the Supreme Court reversed the decision and returned the case to the Court of Appeals for reconsideration.
The Supreme Court also stressed that if, in foreign arbitral proceedings, a party did not challenge a tribunal’s jurisdiction and undertook a defense on the merits, in the recognition and enforcement proceedings before a court, such party cannot claim that an arbitration clause did not exist or was void. A court should recognize or enforce an arbitral award if an appropriate arbitration clause exists, even if an applicant did not submit a document confirming its conclusion. If the existence of the arbitral clause is undisputed, the requirement to provide its original or a certified copy becomes moot.
The Supreme Court’s decision, effectively limiting the formal requirements to recognize or enforce a foreign arbitral award in Poland, confirms the pro-arbitration approach of the Supreme Court. If the Polish courts follow this decision, applicants’ failure to submit an arbitration agreement will not prevent the courts from recognizing or enforcing arbitral awards, provided the existence of the arbitration clause is undisputed.
[1] Decision of the Supreme Court of 19 January 2024, case file no. II CSKP 897/22.
[2] Decision of the Supreme Court of 20 March 2024, case file no. II CSKP 1187/22.
[3] Decision of the Supreme Court of 12 April 2024, case file no. II CSKP 1099/22.
