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( Source of the document: ICC Digital Library )
Partner, Greenberg Traurig Grzesiak sp.k., Warsaw.
The Warsaw Regional Court, in a decision of 10 October 2016 (ref. XXIII Gz 881/16), resolved a long-standing controversy over whether parties to an arbitration agreement may have recourse to court-assisted settlment proceedings in the local state court. Although rarely producing a settlement, such proceedings have been overused by parties, as they have the effect of restarting the limitation period for bringing claims. The Warsaw Regional Court decided that court-assisted settlement proceedings amounted to the submission of a dispute to a state court, and that a state court before which an arbitration clause is invoked must decline jurisdiction and refer the parties to arbitration.
Arbitration agreement; State courts; Jurisdiction
Polish law regulating arbitration proceedings is based on the 1985 UNCITRAL Model Law on International Commercial Arbitration and found in Part Five of the Polish Civil Procedure Code (CPC). Both domestic and international arbitration are regulated by the same set of provisions. Article 1165(1) CPC is modelled on Article 8(1) of the UNCITRAL Model Law and provides that if a claim is filed in a state court and the respondent or another party to the proceedings invokes an arbitration clause in due time, the state court should decline jurisdiction over the matter and reject the statement of claim.
The CPC allows for non-mandatory, court-assisted settlement proceedings in which parties may settle their dispute at a court hearing. The requesting party submits a general description of its claim and requests the court to summon the opposing party to settle the dispute. The requesting party does not need to prove its claim but simply to describe it in sufficient detail. There is a single hearing, during which the court asks the parties if they wish to settle their dispute. The summoned party is entitled to refuse to settle and is not obliged to give reasons for its refusal. If achieved, the settlement is recorded by the court and may be enforced. Although often used (as they are simple and cheap), court-assisted settlement proceedings rarely lead to a settlement. The claimant is free to subsequently file its claim in court. Even if no settlement is reached, court-assisted settlement proceedings have the effect of restarting the limitation period for bringing claims. This is one of their principal attractions and explains their overuse, including by parties to contracts containing arbitration clauses.
Whether parties bound by an arbitration agreement may use the court-assisted settlement procedure is a subject of controversy, with commentators and the courts taking opposite views.
State courts (e.g. the Warsaw Court of Appeal in a decision of 8 January 2013, ref. I ACa 960/12 and the Szczecin Regional Court in a decision of 13 June 2013, ref. VIII Gz 139/13) and arbitral tribunals (e.g. arbitral tribunal acting under the Arbitration Rules of the National Chamber of Commerce in Warsaw, decision of 11 June 2007, case SA 56/06) have issued decisions indicating that an arbitration clause does not preclude a request for court-assisted settlement proceedings. The main argument supporting this stance is that during such proceedings state courts do not make any substantive findings and do not decide on the merits of a case. The state court simply assists the parties in reaching a settlement. If they are unsuccessful, the claimant will need to pursue its claim before the arbitral tribunal. It has been argued that Article 1165(1) CPC is worded in such a way that the jurisdiction of the state court may be challenged only where the claimant has filed a statement of claim, which is not the case with court-assisted settlement proceedings, as they do not meet the strict requirements of a statement of claim and do not lead to a decision on merits. Therefore, a party summoned to participate in court-assisted settlement proceedings cannot invoke the existence of an arbitration clause as a defence to escape those proceedings.
On the other hand, commentators have argued that the existence of an arbitration clause should be allowed as a defence against any state court proceedings in which the parties may settle their differences (see D. Bryndal & M. Robenek, ‘Zapis na sąd polubowny przeszkodą do skutecznego zawezwania strony do próby ugodowej przed sądem powszechnym’, e-Przegląd Arbitrażowy nr 3-4 (10-11) 2012, referring to a number of commentaries). It has also been argued that the principle of limited state court intervention in arbitration proceedings applies equally to all ancillary procedures, including court-assisted settlement proceedings.
The issue came before the Polish Supreme Court in the form of a question from a lower court, which sought guidance from the Supreme Court on how the matter should be resolved. In a decision of 18 June 2015 (ref. III CZP 30/15), the Supreme Court refused to respond to the question on procedural grounds, but did acknowledge that there are conflicting views on the matter.
More recently, the same issue was examined by the Warsaw District Court. The claimant filed a request for court-assisted settlement proceedings, apparently for the sole purpose of interrupting the limitation period and setting it running anew. The party summoned to participate in the proceedings invoked in its defence the existence of an arbitration clause and challenged the jurisdiction of the state court. It contended that all causes of action identified in the request were subject to the exclusive jurisdiction of the arbitration tribunal, and therefore the matter could not be submitted to court-assisted settlement proceedings in a state court. The Warsaw District Court, in its decision of 11 May 2016 (ref. VIII GCo 261/16), rejected the request for the court-assisted settlement proceedings on the basis of Article 1165(1) CPC, and did not enquire whether the parties were ready to settle a dispute. The District Court stated that an arbitration clause can be invoked as a defence in court-assisted settlement proceedings, and that the filing of a request for court-assisted settlement proceedings constitutes submission of a dispute to a state court.
The party requesting the court-assisted settlement proceedings filed an appeal, arguing that Article 1165(1) CPC applies only to situations in which the claimant files a statement of claim, but not to requests for court-assisted settlement proceedings. The party thus proposed a narrow interpretation of that article. The Warsaw Regional Court, in a decision of 10 October, 2016 (ref. XXIII Gz 881/16) dismissed the appeal, preferring a broad interpretation of that provision. Its decision is not subject to any further appeal.
The ability of a party summoned to participate in court-assisted settlement proceedings to invoke an arbitration clause in its defence has significant practical consequences. Parties to arbitration clauses may not use this procedure to interrupt a statute of limitations, so must file their claims before the arbitral tribunal to avoid the risk of the claims being time-barred.