Arbitration in Poland is often presented as an alternative for “slow and expensive” state courts. What makes the arbitration attractive is said to be: faster proceedings, lower costs and the fact that the case is heard by experts from a given field.
In practice, however, it is not that easy and the decision to submit a dispute to an arbitration court in Poland must be carefully considered. Apart from the advantages described above, there may also be pitfalls that can greatly complicate the situation of the party.
Many parties often use standard contracts containing an arbitration clause, not fully aware of the legal consequences of such a clause.
Meanwhile, an arbitration clause which is, for instance, too general, has been copied from another contract or is contained in some model contracts (like charterparties, shipbuilding contracts, carriage contracts etc.) may be a source of serious problems already at the initial stage of the dispute.
The most common situation here happens when the party discovers that its relatively small claim needs to be pursued – for instance – before the arbitration court in London, Shanghai or Paris which is of course highly costs- and time-consuming. Also recognition and enforcement of the foreign arbitral award in Poland can be problematic but this is a completely different story.
But parties seeking justice in Polish courts or before Polish arbitration panels can find themselves in the difficult situation as well.
First of all, if a case is brought before a Polish state court, but the parties first have agreed for an arbitration clause the state court may reject the claim for formal reasons (lack of its jurisdiction).
Of course, such decision is open to challenge, the case does not create the state of res iudicata, but at this stage the party already risks loss of its court fee, and that it will have to pay the opponent the costs of the trial for the case before the state court.
As a result, the party becomes involved in an arbitration case that it did not plan. Other serious risk is possible limitation (time bar) of the claim if all this legal mess lasts too long.
It may also happen that a party wishes to refer the matter to arbitration, but does not first check whether the arbitration clause meets the formal conditions for its validity (under Polish law the arbitration clause requires written form, also understood here as an exchange of e-mails, faxes, etc.) or whether the signatory was authorized to enter into such a clause (a written power of attorney is obligatory).
Deficiencies in this respect may lead either to the arbitration court considering itself incompetent to hear the case, or - in the longer perspective - to the setting aside of the arbitration award. Loss of time and money is also guaranteed here.
Additional problem is often the enigmatic wording of the arbitration clause. The Polish Code of Civil Procedure requires only that the arbitration clause indicate only the subject of the dispute or the legal relationship from which the dispute has arisen or may arise. Other additional provisions are not mandatory.
Thus, if there is an arbitration clause with such a minimum content, the matter will be heard by ad hoc arbitration panel (i.e. appointed solely for that particular case). In other words, the burden of organizing the entire arbitration will be on the party initiating the arbitration having at the same time very little control over the actions of such court.
While the composition of the arbitration panel should not be a problem (it is clearly regulated in the Polish Civil Procedure Code - each party appoints its arbitrator, and the arbitrators selected by the parties appoint a super-arbitrator - the chairman of the panel), the procedure used by an ad hoc arbitration panel and the costs of the proceedings are completely beyond control of any party.
The ad hoc arbitration panel is not bound by the provisions of civil procedure or the provisions on court fees. Unlike permanent arbitration courts ad hoc arbitration panel usually does not have the rules of procedure before such a court or the table of costs, which can be consulted in advance. Additionally, as an arbitrator can be appointed anyone (except judges of state courts).
In addition, arbitration proceedings under Polish law are by default one-instance (two-instance arbitration requires an express agreement between the parties). Of course, a party dissatisfied with the award may file a petition to the state court to set aside the arbitration award.
However, this petition may be based only on a closed list of charges - mainly formal and concerning the validity and effectiveness of the conclusion of an arbitration clause or the appointment of arbitrators.
So, the state court will not have the power to consider, for example, a breach of substantive law or incorrect findings of fact made by an arbitration court, which may happen in the same way as in any other court proceeding.
Bearing in mind the above, every party considering using the arbitration should ask itself whether it wants the case to be heard by an arbitration court.
If so, arbitration clauses used in the contract should be made in such a way that such proceedings would be carried out in a predictable manner and consistent with criteria that the party considers important.
Recommended solution is to: (1) submit a possible dispute to some permanent arbitration court that has established rules of procedure and rules of costs (permanent arbitration courts have their model arbitration clauses) or (2)to draw the ad hoc arbitration clauses in such a way that such key elements as the place of proceedings , language, costs, and rules of procedure before the court are clearly established (it is enough to refer to the existing and practical rules - e.g. ICC rules).