POLAND: An Introduction to Dispute Resolution

Dispute resolution in Poland has been, and for the foreseeable future will continue to be, affected by economic conditions, legislative changes and the political landscape.

The Polish economy has been impacted by rising energy prices, surging inflation, and disruptions of supply chains caused by the war in Ukraine. Consequently, the number of disputes concerning force majeure as well as price adjustment and renegotiation clauses remains relatively high.

A Strict and Formal Legal Framework for Commercial Disputes

The legal framework for commercial disputes in Poland underwent a significant amendment in 2019. The major reform of the Civil Procedure Code introduced special rules governing disputes between commercial parties relating to their business activities. The rules are formalistic and leave the parties little flexibility on procedural issues. A key feature of this framework is strict rules on preclusion of belated allegations and evidence. In principle, parties should raise all allegations and evidence in the statement of claim or answer to the statement of claim, unless the party can prove that the allegation or evidence could not have been presented to the court earlier or the necessity to do so arose later. If that is the case, allegations must be raised and evidence presented within two weeks from the date when it became possible or necessary. There are also other procedural limitations, for example, counterclaims are inadmissible.

This strict, formalistic legal framework for commercial disputes was introduced with the aim of increasing the efficiency of commercial litigation. However, court proceedings still remain lengthy, and this constitutes one of the major problems faced by commercial parties trying to pursue their claims in Poland. Numerous amendments to the Civil Procedure Code have so far been unable to solve this problem. Indeed, the constantly changing civil procedure regulations generate further legal uncertainty.

Another risk relates to doubts as to the legitimacy of judicial appointments made by the National Council of the Judiciary impanelled in 2018, and consequently the long-term certainty of judgments rendered by newly appointed judges of the Supreme Court of Poland and the lower courts.

The Movement from State Court Proceedings to Arbitration

These concerns and risks in resolving commercial disputes before the Polish courts may be mitigated by submitting commercial disputes to arbitration. Polish arbitration practice is very well developed, in particular when it comes to domestic arbitration. But Polish providers of dispute resolution services – arbitral institutions, arbitrators and law firms – are also well equipped to answer the needs of foreign investors doing business with ties to Poland. Arbitration offers an opportunity to avoid lengthy and formalistic court proceedings and minimise uncertainties arising from the frequently changing legal framework and unstable judicial system.

One of the recent amendments to the Civil Procedure Code should serve the purpose of encouraging commercial parties to move their existing disputes from the state courts to arbitration. In March 2023, the Polish parliament introduced into the Polish legal system a new procedural mechanism: conversion of state court proceedings to arbitration. Under this new regulation, parties to a court proceeding will have the right to submit their dispute to arbitration at any time until the final decision on the merits is rendered by the state court, provided that they conclude an arbitration agreement. In such a case, the state court will discontinue the pending proceedings, unless discontinuance would be contrary to law or public policy, or aimed at circumventing the law, or the arbitration agreement concluded by the parties is invalid or ineffective. Following the discontinuance, 75% of the court fee will automatically be refunded to the claimant, which is supposed to be a further encouragement for claimants to switch the dispute resolution method. A major advantage of this new mechanism is the rule that the limitation period will start to run anew from the date when the discontinuance order becomes final; thus there will be no risk that after discontinuance of court proceedings the claims pursued in arbitration would be declared time-barred.

This conversion mechanism is a step in the right direction, as it clearly signals that lawmakers in Poland treat arbitration as a serious and efficient solution to the problems of the judicial system, at least for some categories of cases. However, it remains to be seen whether parties, especially respondents, will be willing to use this mechanism in practice. It may require certain adjustments to gain more practical relevance. The current regulation raises some doubts as to its efficiency, for example, the proceedings will have to be commenced anew before the arbitral tribunal with all the submissions and exhibits already filed before the state court to be refiled. There are also some clear risks for the interests of the parties, for example, where a claimant was granted interim measures by the state court, these will no longer be in force once the court proceedings are discontinued. Thus, the claimant would have to co-ordinate the conclusion of the arbitration agreement and the subsequent request for discontinuance of the court proceedings with a request to an emergency arbitrator (if possible, under the chosen arbitration rules) – but it might be difficult to obtain new interim measures in time.

Broadening of the Catalogue of Disputes That May Be Submitted to Arbitration

It should be noted in this context that the reform of Polish arbitration law that came into force in September 2019 broadened the catalogue of disputes that may be submitted to arbitration. Currently, parties may submit to arbitration all disputes over economic rights (unless a particular category of dispute is expressly declared non-arbitrable by law, eg, family-law disputes concerning maintenance claims) and disputes over non-economic rights that could be subject to a court settlement. Furthermore, the amended Civil Procedure Code expressly provides for the arbitrability of internal corporate disputes regarding validity of corporate resolutions. The Court of Arbitration at the Polish Chamber of Commerce issued supplementary arbitration rules for such disputes that came into force on 1 January 2022. According to the amendment to the CPC that will come into force on 22 May 2023, it will also be possible to include an arbitration agreement in the statute of a family foundation. Thus, the legal and institutional framework for arbitration in Poland is evolving in a positive direction, and this trend is expected to continue.