A new act on private international law (conflict of laws) rules came into force in Poland in May 2011. The new law (the “PIL Act”) replaced the previous Polish law of 1965, which had been enacted at a time when Poland’s economic and social ties with other countries were rather limited and had long been considered to be an outdated piece of legislation. The new act significantly remodels the established system of conflict of laws rules, as well as introducing new regulations concerning areas of law which had until now been left unregulated from the PIL perspective. One area covered by the new law relates to the conflict of laws status of an arbitration agreement (umowa o arbitraż), whereby the parties submit a (potential or existing) dispute to resolution in arbitration proceedings.
The conflict of law rules relating to arbitration agreements are set out in Chapter 8 (Articles 39 – 40) of the PIL Act.
“Chapter 8 – Arbitration agreement
Article 39. 1. The arbitration agreement shall be governed by the law selected by the parties.
2. If no such law is selected, the arbitration agreement shall be governed by the law of the state in which the agreed place of arbitration is located, in accordance with the agreement of the parties. In the absence of such an agreement as to the place of arbitration, the arbitration agreement shall be governed by the proper law governing the legal relationship, which the dispute pertains to. However, it is sufficient for the arbitration agreement to be effective under the law of the state in which the arbitration proceedings are under way or in which the arbitration tribunal has issued its award.
Article 40 The form of the arbitration agreement shall be governed by the law of the state of the place of arbitration. However it is sufficient for the form of the arbitration agreement to be in conformity with the law of the state which governs the arbitration agreement.”
The PIL Act now expressly allows the parties to an arbitration agreement to select the law which is to govern it. Until now the issue of whether an agreement of this type can be subject to a separate legal system has been the subject of much speculation and had been considered controversial, both in Poland and in numerous other countries. Note for instance, under German law arbitration agreements are regarded as falling under the lex fori of the court with jurisdiction over the recognition or enforcement of the arbitration award issued on the basis of the relevant agreement. A similar solution was sometimes adopted in Poland, following the German example.
Secondly, the PIL Act expressly indicates which legal system is to apply in the absence of a choice of law, pointing to the law of the agreed place of arbitration (lex loci arbitri) or (if no such place has been agreed) to the law governing the legal relationship which is the object of the dispute (which is in turn selected based on the relevant connecting factor). At the same time it is sufficient that the agreement meet the requirements of the law of the state in which the arbitration proceedings are taking place (whether or not this is the agreed place of arbitration) or in which the award had been issued (depending on the stage in the proceeding). The form of arbitration agreement is always governed by lex loci arbitri, except where it meets the (more liberal) requirements of the lex contractu selected for the arbitration agreement.
However, the introduction of the new provisions may lead to a possible conflict with the Polish insolvency rules (Article 142 of the Insolvency and Restructuring Act of 2003 (the “IR Act”)). Pursuant to the above regulations an arbitration clause or an arbitration agreement expires automatically as of the date of the announcement of the insolvency of a party thereto, and any ongoing arbitration proceedings are likewise automatically terminated. The introduction of Article 39 of the PIL Act may allow the parties to circumvent the application of Article 142 of the IR Act if the parties select to submit the arbitration agreement to a legal system other than Polish. While a Polish court with jurisdiction over the insolvency proceedings might believe that the above Article 142 is subject to mandatory application, irrespective of the choice of law, the relevant arbitral tribunal would most likely not consider itself bound by this and would refuse to terminate the ongoing proceedings. The actual effect of the new Article 39 on the practice of Polish courts (including in particular insolvency court) remains to be seen.