Facts Decision Comment

The Supreme Court recently ruled that a violation of the burden of proof rules did not constitute grounds to set aside an arbitral award.

Facts

A dispute arose between the seller and buyers of shares in a limited company in relation to the payment of the purchase price and the transfer of shares. As a result, the buyers rescinded the sale and purchase agreement. The seller commenced arbitration proceedings against the buyers, seeking to declare the rescission null, void and abusive. The buyers filed a counterclaim, seeking a refund for the part of the purchase price already paid and penalties provided for in the sale and purchase agreement.

The arbitral tribunal dismissed the claim and partially accepted the counterclaim. The seller sought to set aside the arbitral award, among other things, on grounds of a violation of public policy and the principle of equality. When the Athens Court of Appeal dismissed the motion,(1) the seller appealed before the Supreme Court.

Decision

The Supreme Court also dismissed the appeal and held(2) that a violation of the Civil Code's provision prohibiting abuse of rights(3) did not amount to a violation of public policy in its international dimension, which is required in order to set aside an arbitral award.

The court then held that a violation of the rules distributing the burden of proof between the parties(4) – although this is special grounds to appeal against a state court judgment(5) – cannot serve as grounds to set aside an arbitral award either directly, as there is no such ground, or indirectly by invoking a violation of the principle of equality of the parties,(6) which is grounds to set aside an arbitral award.(7)

The court first invoked Article 897 of the Code of Civil Procedure, which contains the grounds to set aside a domestic arbitral award, pointing out that no specific grounds refer to violations of the distribution of burden of proof between the parties. Second, the court dealt with the possibility of indirectly substantiating the grounds to set aside an award set out in Article 897 of the Code of Civil Procedure – in particular, the provision that referring to violations of the principle of equality of the parties. The court dismissed the proposition that the violation of the burden of proof rules amounted to a violation of the principle of equality of the parties, as this would in effect lead to the creation of grounds to set aside an award indirectly. This would run contrary to the nature and spirit of Article 897 of the Code of Civil Procedure, which contains only a limited number of grounds to set aside an award.

Comment

With respect to the public policy argument, the court simply confirmed its recent case law,(8) which settled a long-standing dispute as to whether the concept of public policy as grounds to set aside domestic arbitral awards should be understood in the international or domestic context (for further details please see "Concept of public policy in domestic arbitration reconsidered").

In relation to the burden of proof, this ruling is consistent with the court's previous stance when deciding whether violations of the res judicata effect could form grounds to set aside an arbitral award.(9) It is also in line with the legislature's clear intention to limit state court control in arbitration in order to enhance its effectiveness and finality. Finally, it should be regarded as yet another affirmation of state courts' attitude towards favouring arbitration, as seen in a long line of judgments over recent decades.

For further information on this topic please contact Antonios Tsavdaridis at Rokas Law Firm by telephone (+30 210 361 6816) or email (a.tsavdaridis@rokas.com). The Rokas Law Firm website can be accessed at www.rokas.com.

Endnotes

(1) Athens Court of Appeal 383/2014.

(2) Supreme Court judgment 366/2016 (Civil Division A1).

(3) Article 281 of the Civil Code.

(4) Stipulated in Article 338 of the Code of Civil Procedure.

(5) Under Article 559.19 of the Code of Civil Procedure.

(6) Stipulated in Article 886(2) of the Code of Civil Procedure.

(7) Under Article 897.5 of the Code of Civil Procedure.

(8) See Supreme Court judgment 14/2015 (in full plenary).

(9) See Supreme Court judgment 40/2010 (Civil Division A1).

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