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Ground rules

What are the main features of arbitration proceedings?

The most important feature of arbitration is its consensual nature and the consequent flexibility, informality and confidentiality. Both the competencies of arbitrators to settle the dispute and requirements as to their qualifications, the manner of their appointment and the rules of arbitration procedure are rooted primarily in a contract between the parties. This allows the parties to shape the procedure for resolving disputes which arise between them almost at will and entrust the adjudication to arbitrators who enjoy their trust, have particular expertise in the given field of law or business, and are experienced not only in the application of the rules but also in the management of disputes, i.e. in conducting proceedings so that the harm the dispute may cause to the parties’ interests is minimised.

Moreover, the parties can authorise the arbitrators to apply general principles of law and equity instead of strictly applying the law governing the given legal relationship. However, even if the arbitrators settle the dispute on the basis of the applicable law of the given country, they should always take into consideration the economic substance of the relationship between the parties as well as the established custom. As a result, arbitration has become a popular method of resolving commercial disputes, in particular those arising in projects that require many years of consistent cooperation and in the context of international trade agreements.

Where to look for regulations on arbitration?

The main source of Polish law governing arbitration is the Civil Procedure Code. Part V of the code, devoted to arbitration, was introduced in 2005 and is based on the Model Law developed by the United Nations Commission on International Trade Law (UNCITRAL).

The code regulates all the issues relating to arbitration in a comprehensive manner. The arbitration provisions of the code apply to both domestic and foreign arbitration, as no distinction is made between them. The code also provides for procedures relating to enforcement of domestic arbitration awards (rendered in Poland) as well as recognition and enforcement of foreign arbitration awards.

The basic principle here is the party’s autonomy. Part V of the code applies for the most part only in the absence of a relevant agreement between the parties. Provided that the principle of equality of the parties in arbitration proceedings is observed, the parties are free to agree on the composition of the arbitral tribunal, the method of appointing arbitrators and the rules for the arbitration proceedings.

What type of law is applied by an arbitral tribunal?

The tribunal decides the dispute in accordance with the law chosen by the parties to govern the substance of the legal relationship between them, or if the parties did not make a choice of law, according to the law as determined using conflict of laws principles. The tribunal may decide according to general rules of law and equity if expressly authorised by the parties. In all cases the tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.

What requirements should an arbitration clause satisfy?

Parties can submit to arbitration any dispute concerning property rights (i.e. including monetary claims), as well as disputes concerning rights of a non-property nature to the extent that the dispute could be the subject of a court settlement (except for spousal and child support). Generally, matters concerning civil status and capacity of individuals, family law and support are not arbitrable.

An arbitration agreement (or clause) has to be in writing. This requirement is met if the agreement or clause is contained in an exchange of correspondence or other recorded communications (this does not apply to labour law matters, however, in which the parties may agree to arbitration only after a dispute has arisen).

The Polish Civil Procedure Code contains a special provision concerning arbitration agreements (or clauses) which states that a power of attorney granted by a business entity relating to a given legal action includes authorisation to submit related disputes to arbitration.

Which arbitral tribunal to choose?

The parties may entrust the resolution of disputes arising between them to a permanent arbitral institution or to an arbitral tribunal appointed ad hoc for the purpose of hearing the particular case (the parties themselves define the method of selecting arbitrators).

Permanent arbitral institutions operate independently or in the form of organisational units attached to professional associations, chambers of commerce, etc. The institutions do not resolve disputes themselves but provide administrative support to arbitration proceedings, and often also offer formal supervision over the proceedings and the award. They develop their own arbitration rules and usually maintain lists of recommended arbitrators.

The most renowned are the International Court of Arbitration at the International Chamber of Commerce in Paris (ICC), the Vienna International Arbitral Centre at the Austrian Federal Economic Chamber (VIAC), the London Court of International Arbitration (LCIA) and the Arbitration Institute of the Stockholm Chamber of Commerce (SCC).

What happens if an agreement containing an arbitration clause turns out to be invalid?

If the parties submitted a dispute to arbitration in an arbitration clause included in a broader contract, the clause should be treated as a separate agreement. Termination of the underlying contract, death or incapacity of one of the parties, has no effect on the arbitration clause.