In July 2019, amendments to the Civil Procedure Code (“CPC”) were adopted that concerned, inter alia, changes in arbitration and allowed corporate disputes to be resolved by arbitration to a greater extent. In June 2020, the Court of Arbitration at the Polish Chamber of Commerce in Warsaw (“CAPCC“) published a draft of additional regulations in dispute resolution, which is discussed below. The work on the Draft is still in progress.
Broader Arbitrability of Corporate Disputes Allowed by the 2019 Amendment to the CPC
Amendment to the CPC entered into force on September 8, 2019. The amended wording of the CPC determined, first of all, that all patrimonial disputes are arbitrable and their arbitrability does not depend on whether a certain dispute may be settled in court (whether parties may freely dispose of their claims). This amendment resolved previous discussions in jurisprudence, which took a strict approach, and in scholarly writing. Secondly, the binding force of the arbitration clause in the company’s articles of association (or statute) was extended to the company’s governing bodies (management and supervisory boards) and their members. Thirdly, a convocation procedure has been established in disputes over corporate resolutions, which allows all interested shareholders to join the proceedings. Fourth, taking into account the issue of concurrently initiated proceedings, it was decided that the arbitration court appointed in the first case will hear all cases initiated later and pertaining to the same corporate resolution.
Work on Additional CAPCC Rules
In connection with the amendment to the CPC, CAPCC began work on adopting new specific rules in corporate disputes, called the Draft additional rules of CAPCC in disputes over corporate resolutions (the “Draft“) in the form of an annex to the CAPCC Arbitration Rules. The key practical solutions will be presented below.
Firstly, the Draft concerns only a narrower category of matters than permitted by the CPC. The provisions of the CPC allow arbitration of “disputes arising from a company’s relationship”. However, the Draft only disputes about the repeal or annulment of a corporate body’s resolutions. This means that the CAPCC cognition will be narrow.
Secondly, the Draft provides for extensive powers to appoint an arbitrator. The appointment of arbitrators is one of the first steps in the proceedings and a dispute in this respect may significantly delay rendering the arbitral award. The Draft allows not only the parties to the proceedings to have an impact on the selection of the arbitrator, but also third parties. This may result in a conflict where multiple shareholders with different procedural statuses (party/non-party to the dispute) are involved in the selection of arbitrators.
Thirdly, the Draft provides for the obligation to hold an organizational meeting and specifies the scope of such a meeting in detail, including the participation of the parties in designing organizational provisions and planning the schedule to resolve the matter. It is the key to a quick resolution of the case, and currently, there is no such obligation in the CAPCC Arbitration Rules.
The Drawbacks of Resolving Corporate Disputes in Arbitration
Despite the abovementioned changes in the CPC and the CAPCC Draft, it is highly probable that this will not translate into the popularity of taking corporate disputes to arbitration for the following reasons.
First, interim measures are of great importance in corporate disputes. The parties cannot effectively exclude the competence of the state court to grant an interim measure. Therefore, even if a case is brought before an arbitration court, the state court will still be competent to grant an interim measure at the same time. This creates a risk of conflicting judgments. In addition, an arbitral court cannot grant an interim measure previous to filing the statement of claim, unlike a state court.
Secondly, it should be foreseen that during the arbitration proceedings the parties will raise the objection that the dispute is unfit for arbitration, i.e. that the dispute concerns non-pecuniary rights. It will also pose a risk at the post-arbitration stage. An arbitration award may be set aside by a state court. It is not known what will be the attitude of state courts recognizing challenges to the jurisdiction and how the procedure before the arbitral court will be assessed from the perspective of grounds for setting aside.
Thirdly, in cases before a state court, the conditions for challenging corporate resolutions are stricter, i.e. there are conditions of attendance at the meeting, voting against a resolution and requesting the recording of the objection in the minutes. In the case of arbitration, under the abovementioned convocation procedure, any shareholder, even if they do not meet the above conditions, may join the proceedings. Thus, arbitration allows for the challenging of resolutions in wider circumstances than before a state court.
The Polish arbitration law allowed broader arbitrability of corporate disputes. CAPCC commenced work on arbitration rules on corporate resolutions. However, due to the model of narrow cognition adopted in the Draft, the potential large number of participants in the proceedings and the fact that it is the state court that has the last word in the proceedings (in the case of interim measures or setting aside an arbitration award), we should expect no quick influx of corporate disputes to arbitration. According to the information from CAPCC, comments to the Draft were collected by the end of July 2020 and the commission on the Draft held a few further meetings. Therefore, the Draft is still a work in progress.
Wojciech Rzepiński, attorney-at-law, associate at RKKW