Polish Civil Procedure Code is now clear on the arbitrability of corporate matters.
Polish civil procedure law has recently been subject to a wave of amendments. They were various in nature, purpose and magnitude. Some were just a confirmation of already established practice, and others could be classified as a reform of the core of the Polish civil court system. All of them, however, were promoted as aiming to ease bureaucracy and make legal measures more available to people and businesses. Most new laws, with varying degrees of success, were designed as an attempt to accelerate the proceedings and overcome the obstructive and dilatory behavior of the parties to court proceedings.
With that noble purpose in mind, the legislator has not overlooked the arbitration law. Finally, the controversy surrounding the arbitrability of corporate issues has been resolved.
The controversy was twofold. Up to this point there was a debate as to: (i) whether claims to repeal a resolution of shareholders or to declare such a resolution null and void could be resolved in arbitration, and (ii) who could bring such a claim in arbitration if an arbitral clause was inserted in the company’s articles of association.
Firstly, there was a debate on the definition of arbitrability adopted in the Polish Civil Code. Quite commonly, the general rule in the Polish Civil Procedure Code conditions arbitrability on whether or not the dispute in question could be subject to a court settlement (i.e. whether it concerns rights that the parties may freely dispose of). However, a specific provision of the Polish Civil Code suggested the arbitrability of corporate disputes if an arbitration clause was included in the company’s articles of association.
The question was whether this specific rule on corporate disputes overrode the general test of capability to be subject to a court settlement. The jurisprudence on the matter was not uniform, which further promoted the uncertainty and reluctance to insert arbitration clauses into companies’ articles of association. Finally, in the judgement of 7 May 2009 (III CZP 13/09) the Supreme Court ruled that the general test of capability to be subject to a court settlement applied to corporate disputes too, thus excluding – in principle – disputes over corporate resolutions from the jurisdiction of arbitral tribunals. This unfortunate conclusion of the Supreme Court is now no longer applicable, as the new Civil Procedure Code disassociated pecuniary claims from the test of capability to be subject to a court settlement and now the test only applies to non-material claims. As a result, all corporate resolutions can – in principle – be resolved in arbitration proceedings.
Secondly, the pre-amendment wording of the Polish arbitration law on corporate disputes limited the entities that could invoke such an arbitration clause to the company itself and its shareholders. Members of the company’s bodies (including management board members) were excluded from the provision. This solution, heavily criticized, could have led to pathological situations in which, e.g. a shareholder challenged a resolution before an arbitral tribunal and a management board member challenged the same resolution before a national court. The new wording now includes management board members and is finally in line with the rights each entity has under the Code of Commercial Companies.
To promote transparency and award the entities involved the same level of protection as if the matter were resolved before a national court, the legislator introduced some extra requirements for an arbitration clause to be valid. Namely, arbitral proceedings which challenge corporate resolutions are public and their initiation must be announced within a month in the same way that other notices of a company are announced. Within another month from the announcement, every shareholder may join one party to the proceedings. What is more, all claims in that respect are to be resolved jointly, in the same proceedings. The arbitral tribunal selected in the proceedings that were initiated first will have jurisdiction over the claims that are raised later.
It is definitely welcome news that the doubts as to the arbitrability of corporate matters are no longer an issue. Any such doubts were always a strong argument against inserting arbitration clauses into a company’s articles of association. Any prudent lawyer had to inform his/her clients of the existing controversies and such advice commonly led to all corporate disputes being left to the national court’s jurisdiction.
The new solution, according to which in case of the initiation of more than one set of proceedings regarding the same resolution, all claims will be resolved by the same arbitral tribunal, is an excellent tool that accelerates the whole process and makes all disputes transparent to all stakeholders. On the other hand, it constitutes a minor bypass of the basic rule of arbitration that, generally, allows the parties to select the tribunal. However, it appears that the advantages outbalance the potential imperfection of the new regulation and, all in all, it greatly promotes the arbitration of corporate matters and hopefully will be well received by arbitration users too.