In Poland, arbitration is an increasingly popular method of dispute resolution. Based on the ICC statistics for 2019, Poland took the third place, after Turkey and Russia, in the number of parties to ICC arbitrations from Central and East Europe. Warsaw is also seen as one of the most competitive places of arbitration in Europe, due to high quality of legal and complementary services, affordable costs, and arbitration-friendly regulations.
According to the "Polish Arbitration Survey" (hereafter "Survey"), arbitration is the preferred method of dispute resolution for 57% lawyers at law firms, and nearly a half of the respondents from the business. The vast majority of both international and domestic arbitrations are handled locally, with the Court of Arbitration at the Polish Chamber of Commerce (the PCC Court of Arbitration) being one of the most important arbitral institutions in the region. According to the Survey, Polish arbitration users rank their preferences related to foreign arbitral institutions in the following order: ICC (83%), LCIA (32%), SCC (22%) and VIAC (20%).
The COVID-19 pandemic accelerated the ongoing shift towards digitalisation of the arbitration proceedings. Even though online arbitration has already been in practice (to varying extents), since March 2020 it has become much more common. Nowadays, the electronic only format is accepted in many proceedings, with no paper submissions whatsoever, and all stages of the proceedings, including an arbitral hearing, conducted via the Internet. Only arbitral awards retain requirements for paper and ink.
Independently, Poland is seen as a regional business hub and the EU gateway for eastern European (non-EU member states) and Asian countries. There is a growing number of foreign parties to arbitrations seated in Warsaw, coming from countries such as Ukraine (with more than a million of Ukrainians doing business, working or studying in Poland).
Local arbitration institutions are involved in international co-operation. The Warsaw Arbitration and Mediation Days have attracted participants from several countries in the region and worldwide. In December 2019, the Court of Arbitration at the Polish Chamber of Commerce signed a co-operation agreement with CIETAC.
According to the statistics of the PCC Court of Arbitration, the most important industries for arbitration practice in Poland are:
The Court of Arbitration at the Polish Chamber of Commerce (the PCC Court of Arbitration) is the most renowned arbitral institution in Poland.
It was established in 1950, but since then has undergone significant changes adjusting it to the realm of modern economy and international standards. The PCC Court of Arbitration registers a significant number of cases (most recently around 200 per year) of which up to a quarter may be counted as international (see 2 Governing Legislation regarding regulatory distinction of foreign and international arbitration). The Court also offers pre-arbitration mediation services.
The re-worked Arbitration Rules came into effect on 1 January 2015.
According to the Survey, the PCC Court of Arbitration is by far the most popular Polish arbitral institution (91% of respondents used its services). The Lewiatan Court of Arbitration was placed second (39%). With respect to foreign arbitral institutions – see 1.1 Prevalence of Arbitration.
The 2005 Arbitration Law introduced a new Part Five of the Polish Code of Civil Procedure (CCP) based on the UNCITRAL Model Law. The law was fine-tuned – after the first decade of its operation – in 2015.
The most important changes introduced in 2015 pertained to the concentration of post-arbitration proceedings at the level of appellate courts, and acceleration of arbitration-related state court proceedings. This reform came into force on 1 January 2016.
Application of the Law
The law applies both to domestic and international arbitration, hence does not contain a definition of “internationality” such as that found in Article 1(3) of the UNCITRAL Model Law.
The law is fully aligned to the standards of the UNCITRAL Model Law, and Poland belongs to the most arbitration-friendly jurisdictions. Certain former traditional limitations on the autonomy of the parties have been abolished. Court intervention in the arbitral proceedings was reduced to the minimum and the basis thereof is clearly defined.
It is expressly confirmed that a state court can only act in matters of arbitration if it is so authorised by a provision of law (Article 1159, Section 1 CCP).
Form of Arbitration Agreements
Requirements as to the form of the arbitration agreement have been liberalised, making it possible to validate an arbitration clause in the same manner as the substantive law contract in which it is contained. The jurisdiction of arbitral tribunals has been broadened to include the issuance of enforceable interim measures of protection. The premises applicable to enforcement and recognition of arbitral awards were unified and the procedures simplified.
One of few specific limitations under the Polish arbitration law relates to forbidding jurisdiction clauses which grant only one party the right of choice between arbitration and litigation before state courts.
The 2019 reform of the Arbitration Law (which entered into force as of 8 September 2019) pertained to arbitration of corporate disputes. The general arbitrability of corporate disputes (Article 1163 CCP) has been expressly extended to cases concerning the setting aside or determining invalidity of shareholders' resolutions, under reservation of certain basic requirements concerning the arbitration clause and the regulation of the resulting proceedings. Article 1169 CCP is now supplemented with a new paragraph 2 providing the solution to the so-called "Dutco problem".
Multiple parties are required to act together with respect to the appointment of arbitrator, unless the arbitral agreement provides otherwise. This rule was introduced as part of the reform related to corporate disputes, nevertheless it shall be important for all multi-party arbitrations.
Format and Content of Arbitration Agreements
According to Article 1162, Section 1 CCP, the arbitration agreement must be in writing. However, Article 1162, Section 2 CCP indicates that this requirement is fulfilled if the arbitration agreement is contained in an exchange of communications (electronic or other) which provide a record of the agreement. The arbitration agreement "by reference" (to a document containing an arbitration clause, making it part of the contract) is also permittable. Finally, under Article 1163 CCP the arbitration agreement may be incorporated in the articles of association of a company and in such case, it binds the shareholders. This also applies to other entities, such as co-operatives or associations.
As regards the content of the arbitration agreement, the arbitration agreement must specify the matter of the dispute or the legal relationship from which a dispute arose or could arise in the future, ie, the scope of the dispute.
In the case of labour disputes, an arbitration agreement may be concluded only after the dispute has already arisen (Article 1164 CCP).
Violations and Loss of Force
If the arbitration agreement violates the principle of equality of the parties, it shall be deemed ineffective. This would be the case if the arbitration agreement allows only one of the parties to bring a claim before an arbitral tribunal or a court (Article 1161, Section 2 CCP), gives one party more rights in the process of composition of the tribunal (Article 1169, Section 3 CCP) or gives one party more rights relating to presenting evidence before an arbitral tribunal (Article 1183 CCP).
The arbitration agreement will lose its force:
The arbitrability of disputes has been regulated in the manner consistent with modern trends, including personal rights disputes. Pursuant to Article 1157 CCP, the parties may subject to arbitration disputes about monetary or non-monetary rights that may be subject to a court settlement, except for alimony disputes. The disputes that cannot be settled in court, and that are therefore non-arbitrable, include, among others, cases involving family and guardianship law and disputes concerning the abuse of consumer rights.
In general, the Polish state courts are arbitration friendly and enforce arbitration agreements. For example, in the caselaw, no anti-arbitration injunctions are held admissible (Court of Appeals in Krakow judgment dated 22 November 2016, I ACz 1997/16) and recently, the need to interpret an arbitration agreement in favorem iurisdictionis arbitrii, particularly in international and cross-border settings, has been emphasised (Supreme Court, judgment of 1 December 2017, I CSK 170/17).
If one of the parties brings a claim before a state court despite the existence of an arbitration agreement and the other party raises an objection to this effect at the latest when submitting its first statement on the merits, the court will reject the claim, provided that the arbitration agreement is enforceable (Article 1165 CCP).The arbitration agreement does not prohibit the parties from obtaining an interim measure before a state court (Article 1166 CCP). According to Article 1165, Section 3 CCP by participating in court proceedings, the parties do not waive their right to arbitrate.
Unenforceable Agreements or Refusal to Enforce
The arbitration agreement will be deemed unenforceable if it refers to arbitration disputes that are not arbitrable, it does not fulfil the requirements as to form, or violates the principle of equality of the parties.
Independently, the courts will refuse enforcement of arbitration agreements on the same grounds as those that apply to common contracts, such as, among others, the lack of capacity for juridical acts, exclusion of conscious or free decision-making, etc.
The rule of separability is explicitly enshrined in Article 1180, Section 1 CCP. If the contract in which the arbitration agreement is contained is invalid, it does not invalidate the arbitration clause itself.
The parties' autonomy to select arbitrators is broadly defined. If there is no party agreement specifying the qualifications of an arbitrator, any natural person of any citizenship with full capacity to perform legal acts, with the exception of an active judge, may serve as an arbitrator (Article 1170 CCP).
The parties are free to determine a method for selecting arbitrators, as long as it does not give one of the parties more rights in the process of the constitution of the tribunal. If the number of arbitrators is not determined, the tribunal should be composed of three arbitrators (Article 1169 Section 2 CCP).
If the parties do not come to an agreement on the method of appointment of arbitrators, Article 1171 CCP provides for a procedure of appointment of the tribunal, according to which each party appoints an arbitrator (or an equal number of arbitrators) who then appoint the presiding arbitrator or, if the dispute is to be resolved by a sole arbitrator, they together appoint the sole arbitrator. If one of the parties fails to act in accordance with the procedure, the other party may request that the state court make the relevant appointment. The relevant court is the one that would have had jurisdiction if there was no arbitration agreement (Article 1158 CCP).
Polish arbitration institutions maintain lists of recommended arbitrators which are often used by parties.
Article 1169, Section 2 CCP provides the basic default appointment rule applicable to multiparty arbitration. It states that multiple participants – whether on a claiming or responding side – are to appoint their arbitrator jointly.
Under the arbitration rules, such as the PCC Arbitration Rules, it is the Arbitral Council of the Court of Arbitration, and not the state court, that makes the appointment if a party fails to name an arbitrator or the arbitrators fail to agree on a presiding arbitrator.
Polish state courts do not intervene in the selection of arbitrators except for their default role as a substitute appointing authority, see 4.2 Default Procedures.
An arbitrator may be challenged only in the event that circumstances raising justifiable doubts as to their impartiality or independence become apparent or, if they do not have the qualifications prescribed by the agreement of the parties. The party which appointed the arbitrator may demand that they be challenged only upon grounds which became known to it after the appointment (Article 1174, Section 2 CCP).
In accordance with Article 1176, Section 2 CCP, if the parties have agreed on the challenge procedure and within one month from the date on which the requesting party applied to challenge an arbitrator, the arbitrator is not recused, the requesting party may within two weeks apply to a state court to recuse the arbitrator.
If the parties have not agreed on the challenge procedure, the requesting party shall, within two weeks from the day on which it learned about the appointment of the arbitrator or from the day on which it learned about circumstances substantiating the challenge proposal, give written notification to the arbitral tribunal and the other party of the circumstances justifying the challenge (Article 1176, Section 3 CCP). If, subsequently, the arbitrator does not withdraw or is not recused within two weeks, the requesting party may within the following two weeks apply to the state court to recuse the arbitrator (Article 1176, Section 4 CCP).
A person appointed as an arbitrator should immediately disclose to the parties any circumstances that could raise doubts as to their impartiality or independence (Article 1174, Section 1 CCP).
There are no specific rules conflicts of interest for arbitrators provided in the Polish arbitration law. See 13.2 Ethical Codes for further comments on ethical rules, including the IBA Guidelines on Conflicts of Interest in International Arbitration and the codes of conduct of the local arbitral institution.
The limits of using arbitration are related to the premise of arbitrability only (see 3.2 Arbitrability).
The principle of competence-competence applies. The arbitral tribunal may rule on its own jurisdiction, including the existence, validity and effectiveness of the arbitration agreement.
The arbitral tribunal's decision that it has jurisdiction may be questioned before a state court. This may happen in the application to set aside an award (or to recognise and enforce the award) or in an appeal to the state court against the tribunal's decision assuming its jurisdiction, filed within two weeks from the day the decision was served. Pending the appeal, the tribunal is free to proceed (Article 1180, Section 3 CCP).
The state court will also examine the tribunal's jurisdiction if during the court proceedings a plea that a dispute is subject to an arbitration agreement is raised timely by the respondent, as per Article 1165 CCP. The court can proceed with the matter if it concludes that an arbitration agreement is invalid, ineffective, unenforceable or has lost its effect, as well as when an arbitral tribunal has already decided that it is not competent to hear the case.
The Polish state courts tend to show a general reluctance to intervene in such cases. In addition, they do not review negative rulings on jurisdiction by arbitral tribunals at all, ie, do not control the arbitral tribunal's decision declining jurisdiction over the case.
The parties have the right to raise jurisdictional objections no later than in the statement of defence or within the time limit established by the parties unless before the end of this time limit the party did not know, or exercising due diligence could not have learned of the grounds for such an objection, or such ground arose only after the end of the time limit (Article 1180, Section 2 CCP).
Polish state courts conduct the deferential review of admissibility and jurisdiction based on the examining the arguments and evidence presented by the parties. The arbitral institutions or tribunals do not take part in such review.
Polish courts enforce effective arbitration agreements. If a party initiates court proceedings despite the binding and effective arbitration agreement, and a respondent raises a timely objection, the state court is statutorily obliged to refer parties to arbitration and to discontinue its own proceedings (Article 1165, Section 1 CCP).
An arbitration agreement binds non-signatories in the case of a legal succession. For example, it applies to an assignee who acquires a receivable covered by an arbitration agreement or a party who acquires an enterprise. In caselaw, it is also accepted that an arbitration agreement binds beneficiaries of contracts created for the benefit of a third party.
An arbitration agreement contained in the articles of association of a company, a co-operative or an association, is effective in relation to its shareholders or members.
The Polish Supreme Court has not yet ruled on whether such doctrines as the group of companies, or piercing the corporate veil, may apply to arbitration agreements under Polish law.
Unless otherwise agreed by the parties, the arbitral tribunal may decide to order such interim measures it considers necessary in respect of the subject-matter of the dispute. The Tribunal is permitted to award preliminary or interim relief at the request of a party which prima facie evidenced its claim. The tribunal may require such party to provide appropriate security in order for the measure to be effective (Article 1181 CCP).
Interim measures are granted in the form of the tribunal's decision, rather than in the form of an award. The decision of the arbitral tribunal is enforceable after the court issues an enforcement clause.
The court is entitled to grant an interim relief in support of arbitration proceedings if the applicant's case is prima facie proved and it is likely that in the absence of relief, the enforcement of the award or the achievement of the purpose of the proceedings will be prevented or significantly impeded (Articles 730 and 1166 CCP).
Such measures may be ordered both before the constitution of the arbitration tribunal and in parallel to the ongoing arbitration proceedings.
The state courts in Poland can grant interim relief in aid of foreign-seated arbitrations and there are no special provisions in the Polish arbitration law pertaining to emergency arbitrators.
There is no explicit regulation in Polish statutory law as to whether the state court or arbitral tribunal may order the securing of the costs of the arbitral proceedings. However, based on anectodical data, arbitral tribunals rarely issue such orders based on their inherent powers related to interim measures. State courts may use the similar competence in relation to post-arbitration proceedings, for example the action to set aside an arbitral award, based on Article 1119 CCP.
Statutory laws governing the procedure of arbitration are enshrined in Articles 1183-1193 CCP. The vast majority of these provisions are not mandatory. The parties are free to agree on a tailor-made procedure or arbitration rules provided by an arbitration institution.
Unless the parties have agreed otherwise, the arbitral tribunal may conduct the proceedings in the manner it deems appropriate, however, it must adhere to the mandatory rule that the parties shall be treated equally. Each party has the right to be heard and to present its arguments and evidence for their support (Article 1183 CCP). Also, the tribunal cannot apply coercive measures to obtain evidence (Article 1191, Section 1 CCP).
Further, if the parties have not agreed that the proceedings will be conducted without a hearing, the arbitral tribunal is obliged to hear the case at a hearing if requested by one of the parties. The parties shall be notified of the planned hearings and meetings of the tribunal held for the purpose of taking evidence in due time (Article 1189 CCP).
According to the default procedural scheme in the Polish arbitration law, to initiate arbitration proceedings, a claimant files a request for arbitration (Article 1186 CCP). Subsequently, the parties file a statement of claim and a statement of defence before a hearing (Article 1189 CCP). However, these are not mandatory provisions, and arbitration rules may alter the scheme, for example, by allowing to commence the proceedings by filing a statement of claim.
If the parties have not agreed that the proceedings will be conducted without a hearing, the arbitral tribunal is obliged to hear the case at a hearing if requested by one of the parties.
Unless the parties have agreed otherwise, an arbitral tribunal may conduct the proceedings in the manner it deems appropriate (Article 1184 CCP). There is no specific catalogue or description of arbitrators' powers in the Polish arbitration law.
The Polish arbitration law does not regulate explicitly arbitrators' duties either, except for general duties relating to the disclosure of doubts as to impartiality and independence. However, a state court may dismiss an arbitrator upon a motion of one of the parties if they fail to perform their duties within the prescribed deadline or is in undue delay without a valid reason (Article 1177, Section 2 CCP). This provision is very rarely used, and seen as an extraordinary solution to prevent obstruction of justice.
There are two main legal professions in Poland: attorneys (advocated) and legal counsels. Both are organised in bars, which have detailed codes of conduct. The rules contained therein are the same for all kinds of proceedings, including arbitration. However, legal representatives in arbitration in Poland do not have belong to any of them. In particular, they can have qualifications other than domestic ones (being foreign lawyers or even not lawyers at all).
The parties are free to decide on the rules of evidence. Unless the parties have agreed otherwise, the arbitral tribunal may conduct the evidentiary proceedings in the manner it deems appropriate. However, the parties must be treated equally; each party has the right to be heard and to present its arguments and evidence for their support (Article 1183 CCP).
In procedural orders, arbitral tribunals often refer to IBA Rules on the Taking of Evidence in International Arbitration, most frequently, as a source of guidance.
The Polish arbitration law does not regulate the rules of evidence in detailed manner. An arbitral tribunal may conduct all evidence it deems necessary and in the manner it deems appropriate. The same general rules apply to both international and domestic arbitration. However, in the international settings, frequently, the rules of evidence are regulated in sometimes very detailed procedural orders.
An arbitral tribunal cannot apply coercive measures to obtain evidence (Article 1191, Section 1 CCP). However, it may request assistance from a state court in the taking of evidence or in the performance of other judicial acts that the tribunal is not empowered to perform.
Witnesses are not obliged to give testimony before an arbitral tribunal. Also, the tribunal has no power to examine witnesses under oath. However, pursuant to Article 1192 CCP, the tribunal may request the assistance of a state court in obtaining witness testimony (also under oath).
A court may, among other things, apply disciplinary measures, eg to bring a witness to court under constraint. Arbitrators and the parties are entitled to participate and ask questions in evidentiary proceedings before a state court.
The state court may also request parties, or a third party, to produce documents under procedural rules applicable in state court proceedings. According to the CCP, a party to the proceedings may not, in principle, be subject to means of compulsion in production of evidence. However, a tribunal may draw adverse inferences if a party refuses to present certain evidence. Accordingly, in principle, a Polish court will not use means of compulsion against a party to the arbitral proceedings when assisting the tribunal.
The Polish arbitration law does not provide for any rules concerning the confidentiality of arbitration proceedings or their constituent parts. The parties are free to agree on confidentiality by way of an explicit agreement, or by a reference to the arbitration rules. Also, the tribunal may order the confidentiality of the proceedings within its authority to determine the arbitral procedure. Unless this is the case, information produced in arbitral proceedings generally can be disclosed in subsequent proceedings.
The PCC Arbitration Rules prescribe confidentiality duty in relation to the arbitrators and the Court of Arbitration and its staff and the members of its authorities with respect to "all information concerning the proceeding" (Section 8).
With respect to formal requirements, an arbitral award must be made in writing and signed by the issuing arbitrators (Article 1197 CCP). If the award is issued by a tribunal composed of three or more arbitrators, the signatures of the majority of arbitrators, accompanied by an explanation why the other signatures have not been provided, are sufficient. The award should contain reference to the arbitration agreement, identify the parties and the arbitrators, specify the date and place the award was granted and provide an explanation of the grounds on which the tribunal based its decision.
Arbitrators are allowed to issue dissenting opinions. An arbitrator who voted against the majority may indicate, next to their signature under the award, that they were of a dissenting opinion (Article 1195, Section 2 CCP). An explanation of the dissenting opinion should be prepared within two weeks from the date of preparation of the reasons for the award and attached to the case files (Article 1195, Section 3 CCP).
The award has to contain a decision on all of the claims raised in the arbitration proceedings (Article 1202 CCP). Awards by consent are also permittable. Article 1196 CCP allows explicitly for settlements recorded in the form of an award. Such award must adhere to the same formal requirements, as referred to above.
An arbitral tribunal may award any type of legally admissible relief under the relevant governing law. Under Polish law, for example, punitive and exemplary damages generally cannot be awarded. Such award would likely be set aside or denied enforcement as being contrary to the basic principles of the Polish legal order (public policy).
The arbitrators may award interest and compound interest, subject to the governing law. Under Polish law, for example, compound interest may be awarded from the date of commencement of arbitration.
Although the Polish arbitration law is silent on costs of arbitration, in the absence of an agreement between the parties, the principle "the loser pays the costs" will prevail, as it is a general rule which applies also in Polish litigation. However, the application of the "pay your own way" rule, ie, that each party should bear its own costs irrespective of the outcome of the proceedings, is also accepted if the parties agreed so.
An arbitral award issued in Poland may be challenged only in the setting aside proceedings and not by way of a common appeal. Grounds for challenge are limited to those set forth in Article 1206 CCP, and hence a state court may set aside an arbitral award provided that:
Based on the general principle of parties' autonomy in shaping the rules of arbitration procedure, the parties can also agree on appellate arbitration proceedings. However, this option is very rarely seen in practice, and anecdotical examples generally criticised as inefficient.
The grounds for the setting aside of an award are not subject to parties’ agreement. The parties may not waive their right to challenge an award or modify the grounds for its setting aside.
In turn, with respect to only rarely seen in practice, appellate arbitration proceedings (referred to in 11.1 Grounds for Appeal), parties are free to regulate them in any manner they deem appropriate.
Polish state courts examine an arbitral award only within the confines of the setting aside grounds listed in Article 1206 CCP (referred to in 11.1 Grounds for Appeal), and based solely on the arguments and evidence presented by the parties. The arbitral institutions or tribunals do not take part in such review. The review standard in proceedings for the setting aside of an award can be qualified the deferential standard; ie, the state court does not examine the case de novo (see eg, Supreme Court's judgment of 24 May 2018, V CSK 6/18).
Poland is a party to the New York Convention. It has made reservations restricting the application of the Convention to commercial cases and to awards made in the territory of another contracting state. Poland has also signed the 1961 Geneva Convention.
The enforcement procedure is aligned to the commonly applied standards: a party must file a motion to a state court and append it with the original or a certified copy of the award and the arbitration agreement, along with translations into Polish, if these documents were drafted in a foreign language. Since 2016, the decision of the state court is not subject to appeal, however, an extraordinary recourse (a cassation) to the Supreme Court may be permittable (Articles 1212 to 1217 CCP). If the New York Convention does not apply, under the CCP, the court can refuse recognition or enforcement of an arbitral award (both domestic and international) issued in Poland (Articles 1214 to 1215 CCP) only if the dispute is not arbitrable or it would be contradictory to the fundamental principles of public policy.
The foreign states’ immunity is regarded as a matter of public international law. In Poland a foreign state’s immunity from execution is recognised as a possible defence against enforcement. Polish state courts would allow enforcement if immunity were waived by the state. Immunity pertains only to property designated for exercise of public authority. In turn, enforcement against the Polish state, or state entities, is limited to the bank accounts of the relevant entity (organ) to which the claim pertained.
Poland may be fairly described as an arbitration-friendly jurisdiction. Matters pertaining to recognition and enforcement of arbitration awards are conducted by state courts in a professional and unbiased manner. In particular, the state courts do not overuse the premise of public policy, and most often interpret it very narrowly. The Supreme Court emphasises that this procedure is incidental, and that its function is to ensure fast and effective enforcement of an arbitral award (Supreme Court judgement of 20 May 2011, IV CZ 18/11).
According to the statistics published by the Ministry of Justice, only 6% of arbitral awards issued in Poland have been set aside. The problems with recognition and enforcement of arbitration awards are not more frequent.
re are no regulations applicable to class-action or group arbitration, except for the general provisions of the arbitration rules permitting multi-party arbitration. For example, the PCC Arbitration Rules allow for consolidation of arbitrations (see 13.4 Consolidation) and joinder of additional party (Section 10 of the Rules).
The Polish arbitration law imposes general duties on arbitrators relating to the disclosure of doubts as to impartiality and independence. Polish arbitral institutions require arbitrators to adhere to the institutional codes of ethics (eg, the Code of Ethics at the PCC Court of Arbitration). In addition, in the challenge decisions, the PCC Court of Arbitration often refers to the universal standards enshrined in the IBA Guidelines on Conflicts of Interest in International Arbitration.
There are no rules or restrictions applicable specifically to third-party funders.
There are no rules pertaining to consolidation in the Polish arbitration law. However, consolidation is permissable under the arbitration rules. According to Section 9 of the PCC Arbitration Rules, two or more proceedings being conducted between the same parties under the Rules may, upon application of a party, be consolidated into one proceeding if the composition of the Arbitral Tribunal in each of the proceedings is the same and:
Proceedings in which the parties are not identical may also be consolidated if the composition of the Arbitral Tribunal in each of the proceedings is the same, the conditions set forth above are met, and the parties to all of the proceedings consent.
The Arbitral Tribunal shall issue an order in each of the proceedings undergoing consolidation indicating the proceedings that are consolidated.
In issuing the order on consolidation of proceedings, the Arbitral Tribunal shall take into account all material circumstances and be guided by the interests of the parties, including in particular the need to assure that the proceeding is conducted efficiently.
An arbitration agreement or an arbitral award bind non-signatories in the case of a legal succession, or an arbitration agreement contained in the articles of association of a company, a co-operative or an association (see 5.7 Third Parties).
One could say that Poland is a good test environment for the development of arbitration. The country is characterised by a strong, steadily growing economy, and even the crisis of 2008 did not halt the economic growth of the country. Poland, in the last decades, has been one of the quickest growing economies in Europe. At the same time, the judicial system (at least in the last few years) faces constant political pressure to change. Mainly unfair criticism of politicians impacts both the effectiveness of the courts and their perception. If we add to this arbitration friendly legislation, we could expect the rapid growth of arbitration. It still has to come though. Even the current arbitration picture nevertheless presents a solid, sizable and maturate market.
The Polish law was conformed already with the UNCITRAL Model Law in 2005. However, the regulation was timid. The most criticised were long post-arbitration procedures and uneven policy of the courts in setting aside arbitral awards. The arbitration community was focused on lobbying activities to shorten the post-arbitration procedure. This was achieved in 2015 by a new regulation which provides that an application to set aside an arbitral award and to enforce an arbitral award are to be filed directly to the appellate court. Consequently, the appellate court judgment is final and provides only limited recourse, ie, a cassation to the Supreme Court remains an option.
These amendments to the law shortened the post-arbitration procedure significantly. By the same token, elevating the setting aside procedure to the appellate court stabilised the jurisprudence and eliminated some of the most surprising awards of the lower courts. This paper presents three representative issues for the development of the Polish arbitration law and practice in the last year. It comprises a review of some selected court judgments, the Polish aftermath of the investment treaty arbitration following the Achmea judgement and finally amendments to law regarding the arbitrability of corporate disputes.
Recent Court Cases
Judgment of the Appellate Court in Warsaw of 26 November 2019, I ACa 457/18
The Appellate Court considered an appeal from the judgment of the Regional Court in Warsaw of 26 January 2018, I C 736/13, which dismissed the application of the State Treasury – the Ministry of Infrastructure, to set aside the arbitral award rendered by the ad hoc arbitral tribunal rendered under the UNCITRAL Arbitration Rules on 20 March 2013, corrected on 30 April 2013.
The State Treasury and Austostrada Wielkopolska S.A. concluded in 1997 a project finance agreement for the construction and exploitation of a turnpike, containing an arbitration clause. After Poland became an EU Member State in 2004, the country adjusted its regulations regarding the payments of trucks for using the national roads and introduced a compensation mechanism for damage to turnpike operators resulting from the deprivation of their right to collect fees from truck drivers. Consequently, in 2005, the parties concluded a so-called Annex No 6 which set forth the rules for the payment of compensation to Autostostrada Wielkopolska S.A. In 2008, the State Treasury submitted a declaration of evasion of the effects of its declaration of will expressed in Annex no 6 based on an error as to the truthfulness of the data for the calculation of the amount of due compensation. The amount of compensation for the purposes of Annex No 6 was calculated based on outdated data, ie, the traffic forecasts from 1999, while the analysis from 2004 was available.
The arbitral award
In the arbitral award, the arbitral tribunal held that Annex No 6 was valid and the declaration of the State Treasury from 2008 was ineffective.
The regional court
In the course of the setting aside proceedings, on 25 August 2017, the European Commission issued a decision (EU) 2018/556 on state aid SA.35356 (2013/C) (ex 2013/NN, ex 2012/N) in which found that the overcompensation for the period from 1 September 2005 to 30 June 2011 amounting to PLN 894 956 888.88 granted by Poland to Autostrada Wielkopolska S.A. based on Annex No 6 constituted unlawful state aid, was incompatible with the internal market and should be recovered. The European Commission also participated in the setting-aside proceedings.
The regional court refused to set aside the arbitral award.
The appellate court
The Appellate Court granted the appeal and set aside the arbitral award. The Appellate Court found that the arbitral award did not comply with the public policy requirements as it did not take into consideration the EU regulations on state aid and the functioning of the EU internal market which constitute a part of the Polish legal system. The arbitral award was deemed to threaten the consistent application of the EU state aid rules, ie, the existence of two contradictory rulings – the arbitral award and the decision of the European Commission. In a situation where a national court considers an application to set aside an arbitral award based on the violation of the public policy clause, that court must also set aside such an award if it violates the EU principles of the same kind.
The Appellate Court held that the arbitral tribunal completely ignored the EU state aid regulations. At the time when the arbitral tribunal rendered its award, the state aid granted to Autostrada Wielkopolska S.A. was not notified to and confirmed by the European Commission, and thus it was illegal. The arbitral tribunal had no competence to conclude to the contrary. On top of that, since the arbitral tribunal ignored the EU law, it also did not consider the invalidity of Annex No 6 under EU state aid rules and Polish regulations.
Judgement of the Appellate Court in Warsaw of 18 November 2019, VII AGa 804/19
The Appellate Court was considering an application to set aside an arbitral award. In the course of the arbitration, the applicant acting as the respondent invoked the right of set-off against the claims brought by the claimant. The arbitral tribunal, however, found lack of its jurisdiction to consider the respondent's right of set-off and the arbitral tribunal issued an award in which it granted the claimant's claims. The Appellate Court did not agree and held that:
"The offsetting institution meets, inter alia, the function of payment, and thus making it tends to terminate the obligation and creates a state as if the debtor has fulfilled its obligation. Effective offsetting as a means of terminating the obligation relationship is considered equivalent to the effects of payment. (...) The right of set-off is a defense, and the content of the arbitration clause does not refer to such defenses at all. Additionally, since as a result of raising the set-off defense, there is an examination of the existence of the claim covered by the arbitration clause, the above means that the existence of the claim is being determined, and thus the arbitral tribunal operates fully within the limits of its powers determined by the arbitration clause."
The Appellate Court set aside the arbitral award as it did not comply with the public policy requirements as the arbitral tribunal refused to consider the respondent's right of set-off, failing to comprehensively consider the case, which compromises the security and safety of trading.
Order of the Supreme Court of 5 April 2019, I CSK 130/18
The Supreme Court was considering the legal implications of a situation in which the buyer of a rented premises disposed of during the lease period, entered the lease relationship in place of the seller of the rented premises. It held that in the case of the lease agreement, the legal succession on the part of the lessor is subject to specific legal regulations (Article 678 of the Civil Code) and the legal successor of the rented property does not enter into all legal relations that may have arisen in connection with the lease agreement between the original landlord and the tenant. The Supreme Court held that, in particular, the legal successor of the rented property is not bound by the arbitration clause set forth in the lease agreement concluded between the original landlord and the tenant.
Order of the Supreme Court of 4 April 2019, III CSK 81/17
The Supreme Court was considering the cassation for the dismissal of an application for a declaration of recognition and enforceability of two arbitral awards rendered by the arbitration tribunals of the Federation of Cocoa Commerce. The applicant (the claimant) concluded with the participant (the respondent) five sale agreements for cocoa powder. The sale agreements were concluded after the placing of telephone or electronic orders. Following the order, the seller sent the buyer an e-mail with a confirmation of the concluded agreement and by post the agreement itself, after which the parties proceeded to perform the agreement. Each of these agreements included a reference to the FCC Contract Rules (CP2) that contain an arbitration clause under the FCC Arbitration Rules.
The Supreme Court found that the manner in which the parties concluded the arbitration clause was not sufficient to meet the requirement of the written form under Article II of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York, 10 June 1958 (the "New York Convention"). Article II(2) of the New York Conventions reads: "The term "agreement in writing" shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams." Thus, the Supreme Court concluded that it was necessary to consider whether the parties had concluded an arbitration clause by exchanging documents containing their statements on submission of the dispute to an arbitral tribunal.
The Supreme Court held that:
"(...) the development of means of distance communication inclines to accept the position that the idea behind Art. II(2) sentence 2 of the New York Convention is also implemented in the event of declarations of will made by means of new technological methods, including by exchange of electronic letters or faxes. In each of these cases, however, two requirements must be met. Firstly, as far as the agreement is concerned, it is undoubtedly necessary for each of the parties to express their will to submit the dispute to an arbitral tribunal, which means that they accept the exclusion of the case from the jurisdiction of a state court. Secondly, it is not sufficient to accept the idea of submitting a dispute to arbitration on both sides, but it is necessary to make declarations of will in a manner that satisfies the requirements of written form within the meaning of Art. II(2) sentence 2 of the New York Convention."
The Supreme Court concluded that those prerequisites are not met in a situation of an oral or any other but written agreement by the parties submitting the case to the arbitration. Also, those prerequisites are not met if one of the parties sends by e-mail or post confirmation of the conclusion of an agreement including a reference to the general conditions of the contract containing the arbitration clause and the other party does not and confirms its intention to enter into a contract in any other manner but by commencing its performance, as in this case. To meet the requirement of the written form, the other party would have to make a declaration of will to submit the case to arbitration, eg, via e-mail or by post as well. Further, liberalisation of the requirement of the written form set forth in Art. II of the New York Convention would deprive it of its meaning.
Historically, Poland has concluded bilateral investment treaties (BITs) with almost all EU Member States, with Ireland and Malta being the only exceptions.
Terminating intra-EU BITs
On 22 August 2007, Italy notified Poland of its decision to terminate the Italy-Poland BIT due to pressure from the European Commission, which for years deemed the intra-EU BITs incompatible with the EU law. The termination of the Italy-Poland BIT became effective on 9 January 2013; however, the protection guaranteed thereunder was available to investments made prior to its termination until 9 January 2018, due to the operation of the sunset clause. For years, Poland had formally agreed with the stance of the European Commission on the incompatibility of the intra-EU BITs with the EU law, but with no follow up actions on the part of the Polish state.
Since 2017, Poland has been actively engaged in the process of terminating its intra-EU BITs. The country accelerated its actions after the judgment of the Court of 6 March 2018 in the case of Slowakische Republik v Achmea BV, case No C 284/16 (the "Achmea judgement"). Until 2019, Poland prepared and implemented legislative acts regarding its decision to terminate all its intra-EU BITs, including the UK-Poland BIT, except for the Poland-Slovakia BIT that still remains untouched and in force.
Five EU Member States agreed to terminate the BITs concluded with Poland by mutual agreement, ie, Czechia, Denmark, Estonia, Latvia and Romania. The agreements to terminate these BITs have already been signed by Poland and respectively by Czechia, Denmark, Estonia, Latvia and Romania. The contracting states agreed also to terminate the sunset clauses set forth in those BITs. Consequently, investments made when these intra-EU BITs were in force no longer benefit from the protection of international investment law.
In respect of the remaining intra-EU BITs, with the exception of the Poland-Slovakia BIT, as the other EU Member States did not agree for their termination by mutual agreement, Poland sent declarations to other contracting states (including the United Kingdom), expressing its decision to unilaterally terminate the treaties. Their respective sunset clauses, however, remain intact, prolonging the protection of investments made prior to the termination of those treaties for a number of years (from five to 20 years).
Following also the Achmea judgement, on 15 January 2019, Poland, along with other EU Member States, signed a declaration on the legal consequences of the Achmea judgement and on investment protection. The declaration was signed by the EU Member States in three versions, as the EU Member States do not have a unanimous position on the compatibility of the Energy Charter Treaty with the EU law when it is used within the intra-EU relations. In the declaration, Poland and other EU Member States undertook to negotiate and to conclude an agreement, terminating all the intra-EU BITs in force at once.
BITs in 2020
On 5 May 2020, Poland and 22 other EU Member States signed an agreement for the termination of BITs between the Member States of the European Union. The agreement was not signed by Austria, Finland, Ireland and Sweden. It has not entered into force yet. It will enter into force 30 days after the Secretary-General of the Council of the European Union receives the second instrument of ratification, approval or acceptance. The agreement will terminate all the intra-EU BITs that are still in force, along with their sunset clauses, as well as the sunset clauses operating on the basis of the already terminated intra-EU BITs. Additionally, based on the agreement, the EU Member States agreed that arbitration clauses set forth in the intra-EU BITs may not serve as a legal basis for arbitration proceedings initiated by investors after 6 March 2018.
Once the agreement of 5 May 2020 enters into force, firstly, the BITs concluded by Poland with Belgium and Luxembourg, Bulgaria, Hungary, Lithuania, Slovakia and Slovenia will be terminated along with their respective sunset clauses. Secondly, the sunset clauses set forth in the already terminated BITs concluded by Poland with Croatia, Cyprus, France, Germany, Greece, the Netherlands, Portugal and Spain will also be terminated.
Finally, Poland still remains a Contracting State to 35 BITs with other states (outside of the European Union) and to the Energy Charter Treaty. It should be highlighted, however, that Poland agrees with the European Commission, which was confirmed in the aforementioned declaration of 15 January 2019, that the application of the Energy Charter Treaty in intra-EU disputes is incompatible with the EU law. At the moment, though, the scope of operation of the Energy Charter Treaty remains unchanged.
The arbitrability of corporate disputes has, in recent years, been one of the main topics of debate in the Polish arbitration community. The matter has been a fixed point of all arbitration conferences as the wording of the Polish Code of Civil Procedure did not provide an unequivocal answer. However, in June 2019, when a wave of amendments to the Polish Civil Procedure was surprisingly voted through by the Parliament, the changes also impacted arbitration. Thanks to the Amendment of 31 July 2019, corporate disputes are now arbitrable ("2019 Amendment"). The lawmakers' action, however, is just the beginning. Some vital ingredients are still missing for the system of corporate arbitration to work.
Broad and narrow meaning of corporate disputes
The term "corporate disputes" encompasses two meanings – broad and narrow. Taking a broad view, corporate disputes are those disputes arising from any corporate relationship between: shareholders, shareholders and a company, the company and its bodies, individual members of corporate bodies, a corporation and persons acting to the detriment of the company. The broad definition encompasses all disputes based on corporate relations.
The narrow meaning, though, pertains to disputes based on resolutions of corporate bodies, ie, disputes arising as a consequence of a challenge of shareholders' resolutions by their shareholders, management board, supervisory board or their individual members.
Challenges to the arbitrability of corporate disputes
The Polish law provides for a legal action if a resolution of a shareholders' meeting breaches the law or is adopted to the detriment of a shareholder. These actions were traditionally furnished to the national courts and those types of disputes, according to the majority of academics and jurisprudence, were not arbitrable, even though the Polish Code of Civil Procedure contained provisions that indicated the potential arbitrability of some types of corporate disputes if an arbitration clause was introduced in the statutes or articles of association.
The main challenge of the arbitrability of corporate disputes pertains to the fact that shareholders' relations are by their nature multilateral. The most important consequences of this relate to the impact of an award on non-participation in the arbitration proceedings of shareholders. An award setting aside a shareholders' resolution affects all the shareholders, not only those who participated in the proceedings. Under the so-called extended effectiveness of a judgment rule, a judgment issued in a corporate dispute setting aside a shareholders' resolution initiated by one shareholder is binding on all shareholders of a given company, even if they did not participate in the proceedings. Naturally, this rule was envisaged in the context of the state courts and their procedural rules which include a number of guarantees and protections not only for the parties to the proceedings but also for third parties and even the general public. This is different in the case of arbitration that conceptually is a private dispute resolution method which serves to resolve disputes between those who are a party thereto.
Considering all uncertainties and risks connected, there was just one way to introduce corporate arbitration into the legal practice – through changing the law and by way of the 2019 Amendment. The change had to start from the amendment of the notion of "arbitrability" (ie, the ability of a dispute to be resolved through arbitration). In Poland, before the 2019 Amendment, the legal definition of "arbitrability" was fuelling doubts as to whether both property and non-property disputes needed to pass a capability test of being resolved by a court-approved settlement to be qualified as arbitrable. In the context of corporate disputes, doubts arose as to both whether corporate disputes are always property disputes and whether they can be resolved by a court-approved settlement.
Consequently, lawyers refrained from inserting arbitration clauses into the articles of association and statutes of the companies so as not to expose their clients to risk of a costly arbitration procedure which will not hold in the set aside procedures before the national courts. As a result, there were very few corporate disputes in arbitration. The 2019 Amendment made it clear that the test of a court-approved settlements is needed only for non-property disputes. Since the majority of scholars maintain that all corporate disputes are property disputes, the door for arbitrability of corporate disputes has been opened.
The 2019 Amendment goes further and introduces some procedural rules which should be included in an arbitration agreement to safeguard some principal rights of all shareholders. An action of one shareholder to invalidate a corporate resolution does not prevent others from doing the same.
Minimising multiple challenges to proceedings
To minimise the risk of the multiplication of proceedings challenging the same corporate resolution, the 2019 Amendment stipulates that an arbitration clause included in the statutes or articles of association is effective only if it provides for the obligation of a company to publicly announce the start of the arbitration within one month from the date of its commencement. The announcement may also be published by a claimant. Each shareholder may join the proceedings with the claimant or respondent within a month from the date of the announcement.
A clear goal of the 2019 Amendment is to guarantee an effective alert to all shareholders that a dispute emerged and that the dispute may affect their rights. It is also a chance for other shareholders to participate in arbitration. The first constituted arbitral tribunal remains competent to rule on all the disputes over a specific shareholders' resolution.
This "the first, the better" rule may, however, cause some questionable results, because a shareholder who joins the proceedings or initiates subsequent arbitration may have no influence on the appointment of the arbitrators. Thus, such a party is deprived of one of the single most important decisions during an arbitration – the appointment of the arbitrator. It may cause some unexpected results if reviewed by a national court in the set aside procedure. One may argue that any party to arbitration should have an equal opportunity to appoint an arbitrator. The Dutco Case of 1992 before the French Court of Cassation (Cour de Cassation) may serve as guidance in that regard.
Changes beyond the 2019 Amendment
The 2019 Amendment is, however, just the beginning. The still missing part is being prepared by the Polish arbitral institutions. Corporate disputes may become an additional part of arbitration practice and a source of new cases for the arbitral institutions. This opportunity, however, comes with a lot of challenges. The Polish arbitral institutions need to prepare for ruling on corporate disputes through both logistical preparation for a larger number of participants in corporate disputes, but also by amending their arbitration rules to address some peculiarities of corporate disputes.
A sincere and thoughtful reflection is needed to establish whether any particular arbitral institution is capable of creating such safeguards in their arbitration rules which would protect users from any guerilla practices of parties wishing to misuse arbitration of corporate disputes to gain an illicit advantage. This is not enough. The introduction of co-operate disputes by arbitration institutions, especially by amending their rules will be treated as a bond for the potential users that this procedure is in compliance with the law and will not be overthrown by the national courts in a set aside procedure. The users will simply accept these amendments as the promise of their legal effectiveness. Any slip up in that regard might be costly not only for the future of corporate disputes in arbitration, but more generally for the perception of the arbitration in the country.
The biggest Polish arbitration court – the Arbitration Court at the Polish Chamber of Commerce in Warsaw - has initiated a discussion by publishing the draft of the model arbitration clause to be included in the articles of association and statutes of companies, the draft supplement to its rules on corporate arbitration and detailed commentary. It is supposed to kick off a discussion in the arbitration community on the arrangements needed for corporate disputes to be effectively resolved by arbitration. The first goal is to set up a procedure which will be acceptable to the majority of the arbitration community.
The above considerations only touch upon some trends in the arbitration law and practice in Poland. They illustrate that Poland is in the mainstream of the arbitration developments in Europe, for instance following German and Austrian examples of opening the market for corporate disputes or advocating along with the European Commission for eliminating the intra-EU investor-state arbitration. Undoubtedly, even if arbitration in Poland has a solid base in both the legislation and jurisprudence, it is still in the process of tuning in with the vibrant Polish economy and gaining even greater recognition among business users. Some measures taken in recent years will surely help in this regard.