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Arbitration in Poland

Interest in arbitration is growing, due to its effectiveness, professionalism, confidentiality and speed—particularly important benefits for businesses. But the parties do not always take full advantage of the possibilities.

Arbitration has a very long history in Poland, stretching back to the Middle Ages. In 1335, arbitration was used at Visegrád to resolve a dispute between the King of Poland and the Order of Teutonic Knights concerning sovereignty over the regions of Pomerelia and Kujawy and a dispute between John of Bohemia and Casimir the Great over the Polish throne. The tribunal, made up of the Czech and Hungarian rulers, awarded Pomerelia and the Chełmno Land to the order, and Kujawy and the Dobrzyń Land to Poland. In the crown dispute, John of Bohemia demanded 20,000 threescore Prague Groschen, an offer which Casimir the Great accepted. Under the settlement thus entered, he became the undisputed ruler of Poland.

In the Second Polish Republic, arbitration flourished in the form of mercantile courts ruling on the basis of established commercial practice and principles of fair dealing. In the inter-war period, arbitration functioned not only in domestic matters, but perhaps most of all in foreign trade. Due to socio-economic changes, however, arbitration in Poland developed differently than in countries with a market economy. The international spread of arbitration resulted in conclusion of numerous treaties which effectively supported the resolution of cross-border arbitration disputes and guaranteed the enforceability of awards. Existing arbitration courts, for example in Paris, London and Stockholm, grew in stature, and new permanent arbitration courts were founded, such as the Vienna International Arbitral Centre.

The oldest permanent arbitration court in Poland is the Court of Arbitration at the Polish Chamber of Commerce, whose predecessor was the Board of Arbitrators established in 1950 at the Polish Chamber of Foreign Trade. Arbitration has grown particularly quickly in Poland since the country switched to a free-market democracy beginning in 1989. The growth in arbitration during this period was spurred by the rapid increase in entrepreneurship and the steadily growing number of domestic and international commercial transactions, accompanied by entry onto the Polish market by foreign companies accustomed to resolving disputes through arbitration, and, on the other hand, the paralysis of the Polish judicial system in the face of these changes, as the state courts did not have effective procedural tools at their disposal to efficiently resolve increasingly complex commercial disputes. For these reasons, new arbitration courts began to operate in Poland, such as the Court of Arbitration at the Polish Confederation of Private Employers Lewiatan, the Court of Conciliation at the Polish Bank Association, and arbitration courts at the regional chambers of commerce. There are now over 20 permanent arbitration courts operating in Poland.

Why the booming interest in arbitration? There are several reasons: First, the effectiveness, professionalism, confidentiality and speed in which cases are decided. Second, Poland’s economic growth over the past 20 years, and in consequence the number, size and complexity of commercial disputes, which the state courts have not always been in a position to handle. Third, the more and more supportive legal environment, with an improved appreciation on the part of the state courts for the nature and benefits of arbitration.

The popular understanding of arbitration often treats it as an alternative to the state courts, particularly the commercial courts. Based on this understanding, arbitration proceedings are often conducted following civil procedure rules, but this significantly reduces the efficiency of the process.

Arbitration procedure provides a breadth of options unavailable in proceedings before the state courts, but unfortunately the parties rarely take advantage of these options. First and foremost, procedural mechanisms can be much less formalised, and adapted to suit the specific relationship between the parties—typically contractual—resulting in fast, efficient resolution of disputes. When the parties agree on how to proceed, they are more likely to keep their emotions in check. This approach is fostered by the culture commonly shared among arbitrators. This helps avoid a scorched-earth mentality and gives the parties a better chance of cooperating again in the future. Proceedings are normally considered at a single instance, which makes them faster. The parties’ ability to choose the arbitrators allows them to entrust the dispute to persons with knowledge of the specific field, which makes it easier for the parties to communicate with the arbitrators and provides them reassurance that the substance of the decision will be of high quality. Arbitrators increasingly take a more pro-active approach, identifying the disputed issues together with the parties, which may then be reduced to a “mission statement” signed by the parties. From my own perspective as counsel to businesses in arbitration proceedings, this is a desirable approach, because cooperation expedites the decision and enables the parties to focus on proving only the facts that the parties and the arbitrators have identified as being crucial to resolution of the dispute. Agreement between the parties on the pleadings to be exchanged and the scheduling of hearings also cuts the time required to obtain a decision.

The arbitration courts are striving to improve their own rules. Unlike amendments to civil procedure, the evolution in the procedure before the arbitration courts is designed to meet the needs of commerce and accommodate the interests of the parties. Examples of such changes include the introduction of expedited consideration of cases, and rules for cases in which multiple parties appear on each side. This contrasts with changes in civil procedure, which seem to be designed primarily to suit the needs of the courts, while imposing a number of new obligations on the parties. While these changes do give judges tools for hearing cases more quickly and efficiently, the courts are not really taking advantage of them.

The international effectiveness of arbitration awards, thanks to near-universal accession to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, is also of colossal importance. Thus an award issued in Poland against a counterparty from almost any other country will be enforceable there under the same grounds as here. By the same token, an award issued in another country may also be enforced in Poland. Recognition and enforcement of domestic awards is provided by Part Five, Chapter 8 of the Civil Procedure Code.

For all of these reasons, arbitration is deserving of further promotion and greater popularity, both in Poland and abroad. In business-to-business disputes, it is a more efficient and more appropriate method of dispute resolution than judicial proceedings before the state courts.

The popularity of arbitration in Poland is now being promoted thanks to a new book published in English by the Court of Arbitration at the Polish Chamber of Commerce, entitled Arbitration in Poland. The book presents the structure and procedures for arbitration in Poland, and was designed for international businesspeople and foreign companies with operations or subsidiaries in Poland.

Monika Hartung, Dispute Resolution & Arbitration practice, Wardyński & Partners