Easier way to switch from litigation to arbitration in Poland
While we were all enjoying the summer, new legislation amending the civil procedure came into force in Poland. Among many procedural details, one should not overlook a significant change – it is now easier to convert a dispute from litigation to arbitration.
New special regulations
Until now, parties had a general right to conclude an arbitration agreement after a dispute had already been commenced before a common court. However, in such cases, the claimant usually had to withdraw the lawsuit and then the proceedings were discontinued based on general rules.
New provisions explicitly allow parties to submit a dispute pending before a common court to an arbitral tribunal until the case is finally resolved. To this end, the parties must (1) conclude an arbitration agreement and then (2) file a consensual request for discontinuation of the proceedings before the common court.
Importantly, additional incentives have been implemented:
- The statute of limitation for claims subject to the arbitration agreement restarts from the date on which the common court's decision to discontinue the proceedings on the above basis becomes final;
- 75% of the court fee paid for the lawsuit is returned to the claimant if the proceedings are discontinued on the above basis at the first instance stage.
Can the common court decline the conversion?
When considering the parties' request for discontinuation of the proceedings, the common court is required to examine the arbitration agreement concluded between them. The court will dismiss the request if, based on the contents of the agreement and the circumstances of the case, it appears that discontinuing the proceedings would be contrary to the law, the principles of social coexistence, or would be aimed at circumventing the law. The court will also refuse to discontinue the proceedings if the arbitration clause is invalid or ineffective.
When might the conversion be useful?
In some specific cases, converting to arbitration may prove to be a mutually preferred solution despite the parties' opposing interests, which may allow them to agree on arbitration during the pending litigation. This may occur, in particular, if a settlement agreement is not an option, but:
- the parties want to resolve the dispute quickly for business reasons (e.g., in post-transactional disputes to eliminate the uncertainty of the legal status);
- the parties intend to resolve the dispute in a confidential manner, e.g., for reputational reasons;
- specialised knowledge is necessary to resolve the dispute (in arbitration, the parties have more say in the selection of expert witnesses and arbitrators, who also may be specialists in a particular industry).
author: Hanna Kosińska