Commercial arbitration offers good value

Faster, better, simpler – these are the big points in favour of commercial arbitration courts. Soon now, arbitration will also be less expensive than classic litigation. Maybe this will bring the business community around to this form of dispute resolution ? 

14 February brought the launch of OAC, Poland’s first online commercial arbitration court. Another one, Ultima Ratio, is set for launch in April. They promise to reduce – even to a dozen days or so (in real terms, to a minimum of three weeks) – what is already a competitive (vis a vis the notoriously slow general courts) timeframe for dispute resolution. All in all, Poland already has approximately 50 commercial arbitration tribunals, usually affiliated with sectoral organisations. The two largest ones are the Arbitration Court of the National Chamber of Commerce, in operation since 1950, and the Arbitration Court of the Lewiatan Confederation of Private Employers. The former issued 131 awards in 2018 and embarked on 158 new cases with an aggregate dispute value in the hundreds of millions PLN. The latter commences several dozen new cases every year.

This isn’t much, if one considers that the Polish general courts hear almost 2 million commercial cases every year. To date, expansion of ADR in Poland was probably stunted by the attendant costs; once more than one arbitrator became involved, these tended to be higher than in the state courts, and companies party to a dispute generally like to have at least three arbitrators. At least half of potential commercial arbitration litigants are also impeded by insufficient knowledge about arbitration and its advantages.

Yet the civil process reforms now being considered by Polish parliament are set to increase the cost of commercial litigation before the general courts. Right now, where the value of a dispute exceeds PLN 2 million, the fee for submitting a statement of claim is not more than 5% of this value, capped at PLN 100,000. Once the reform becomes effectively binding, the initiation fee will be 5% of the value of the dispute tout court – provided that the value contented does not exceed PLN 4 million, in which event the fee will be PLN 200,000 plus 0.5% of the excess over PLN 4 million, and not more than PLN 500,000. In practical terms, then, bringing a claim before a Polish general court may become five times more costly (…)

A premium on confidentiality

Another advantage of arbitration over classic litigation is comprised in confidentiality of the proceedings and the general rule that awards are not published without consent of all the parties involved. This culture of confidentiality enables business enterprises to wage law while safeguarding their public image and commercial secrets. Logically enough, arbitration is often opted for in cases which have already attracted media attention, for example the dispute between PKP Intercity and Alstom, supplier of the Pendolino high-speed trains (PKP Intercity was awarded EUR 40 million in damages by the Arbitration Court of the National Chamber of Commerce).

It is also worth emphasising that, as a point of difference from the general courts, in arbitration nobody tries to educate or to inculcate, and enforcement of the law relies on amicable solutions attuned to the principle that, for as long as possible, business cooperation between the disputant parties should be preserved. This may be the reason that lawyers have been known to remark that the parties to arbitration proceedings generally suffer less stress. “The emphasis is on achieving closure of the dispute, not on aggravating it”, Natalia Jodłowska, attorney at GESSEL, explains, “and, quite often, the arbitrators themselves actively encourage reconciliation – not a very frequent spectacle in the general courts”. (…)

The full text of this article (in Polish) is available on My Company Polska.