Paweł Mazur

Alternative jurisdiction clauses under Polish law

Is there any justification for Polish civil procedure rules limiting the parties’ freedom to choose the forum?

Freedom of contract is generally regarded as one of the foundations of civil law. It is not an absolute freedom, however, but is subject to limitations dictated by a desire to protect one of the parties to the contract—generally the party regarded as weaker. An example of such legislative attempts is found in Art. 1105 §3 and 1161 §2 of the Polish Civil Procedure Code.

Under Art. 1105 §3, the jurisdiction of the Polish courts may not be excluded by a contract under which only one of the parties is entitled to pursue a claim before a foreign court. Art. 1161 §2 provides that an arbitration clause infringing the principle of the equality of the parties, and more specifically a clause authorising only one of the parties to pursue a claim before the arbitration court indicated in the clause or before the state court, is ineffective.

In agreements between parties from different countries, the parties often make a choice of applicable law as well as a choice of the forum for resolution of disputes arising under the agreement (i.e. submitting disputes to a Polish or foreign state court or arbitration court).

In practice, particularly among international financial institutions, there is often a reservation that the final selection of the competent court may be made by the financing party after the dispute has already arisen. This approach is accepted in most legal systems, and is pragmatically dictated by the need to protect the interests of the lender releasing funds to the borrower or the leasing company delivering the leasing asset to the customer.

It is a truism to point out that in most contracts between professional, commercial parties, some of the provisions are one-sided, but the imbalance is dictated by the differing positions and interests of the parties. Under the principle of the autonomy of the parties, such provisions are entirely permissible so long as they do not constitute an abuse of law.

From the point of view of a leasing company, it is generally critical to have a right to recover the leasing asset in any jurisdiction (often while retaining an option to resort to arbitration), while at the same time limiting the risk of being sued before a state court in Poland (or even a more exotic country).

However, in the Polish legal system, the effectiveness of a choice-of-forum clause (excluding the jurisdiction of the Polish state courts) or an arbitration clause is conditioned on awarding the right to make such an election to both parties to the agreement. This is a major hindrance to selection of Polish law as the substantive law governing the contract, which the parties are entitled to do under the EU’s Rome I Regulation (593/2008).

However, submitting an agreement to the law of a foreign country which fully recognises the effectiveness of unilateral choice-of-forum clauses does not entirely eliminate the risk arising under the Polish civil procedure regulations cited above. This is because there is a risk that a foreign judgment or arbitration award issued as a consequence of such contractual provisions could be challenged on the basis of the public policy clause in a proceeding for recognition or enforcement in Poland. This situation does not encourage legal certainty, as the Polish rules differ unfavourably from those adopted in other EU member states.

Paweł Mazur, Dispute Resolution & Arbitration Practice, Wardyński & Partners