The arbitration path to resolving corporate disputes to become less bumpy
There are many concerns encountered in arbitration of corporate disputes. The biggest one relates to the mechanism governing composition of the arbitration tribunal, as demonstrated by the German example – DIS problems with formulation of their rules. On the one hand, fairness to all participants, to the shareholders and to the company concerned must be ensured. On the other hand, measures taken in good faith to ensure this fairness may render the entire proceedings clumsy and drag them out in time, compromising those aspects of arbitration which account for its value in the first place.
The other problem concerns the very definition of the corporate dispute and its arbitrability. The recent amendment of the Polish Civil Procedure Code (“CPC”) promises to make life easier at least as regards the former issue.
August 2019 brought publication of the legislative Act of 31 July 2019 regarding amendment of certain acts on reducing regulatory burdens. The legislative changes thus effectuated include amendment of certain provisions of part V of the Civil Procedure Code governing arbitration. The attendant parliamentary work proceeded with remarkable speed, as is the not-always-welcome norm in Poland as of late; in this specific case, however, this speed could have actually been a positive factor.
Changes regarding arbitrability of corporate disputes were introduced in art. 1163 CPC. The first major amendment concerns the aspect of ratione personae. To date, arbitration practice grappled with the question whether company boards and their members are covered by the relevant arbitration clause contained in the articles of association. Now it has been expressly clarified that such a clause shall cover disputes based on the corporate relationship not only between shareholders and the company, but also between the company’s governing bodies and their individual members. This change will move the discourse onto the ground of ratione materiae – which disputes involving boards and their members should be qualified as corporate disputes, and which as mere commercial disputes?
As regards defining the arbitrability of particular corporate disputes, the amendment of art. 1157 CPC should be helpful, in that it clarifies the definition of arbitrability of disputes. There are two qualifying factors in this respect: proprietary/ non-proprietary character of the subject matter, and the possibility of settling it. Before this amendment, it was unclear whether the settlement criterion applies to both proprietary and non-proprietary matters, or only to the latter; now, it is clear that it applies to the latter only. In practice, this may expand the scope of corporate disputes which may be taken to arbitration.
As regards procedural problems with proper participation of all interested parties in repealing or declaring invalidity of a resolution adopted by a shareholders meeting of a company , an arbitration clause is effective if it provides for the obligation to announce the initiation of proceedings in the same manner as is required for company announcements within one month from the date of its initiation. Such an announcement may be published by the company or by the claimant. Each shareholder may join the claimant or respondent in the proceedings within one month following such announcement. This does not, however impact upon the composition of the arbitral tribunal. The tribunal appointed in the case before subsequent parties joined it will retain its jurisdiction. This conclusion follows from the more general statement that, where there are multiple cases concerning the same resolution, the tribunal appointed in the earliest case will be competent in all other cases relating to the same resolution. This solution is likely to have as many proponents as objectors.
It appears that the multi-party Dutco case has been resolved in line with the new provisions. Based on the newly introduced art. 1169 § 2(1) CPC, if two or more persons file a claim or are sued, they shall appoint the arbitrator unanimously, unless the arbitration agreement provides otherwise. The consequences of failure to present a unanimous decision, i.e. appointment of all the arbitrators by an appointing body, was not introduced.
What is striking in this solution, as observed by Dr Rafał Kos, is the fact the authors of the amendment did not take into consideration all the arbitration clauses which have been included in the articles of association of many companies before the change, making them in fact ineffective. It would have been easy enough to envisage solutions to convalidate all such clauses, but there is nary a word about it. Maybe the speedy parliamentary procedure did not work so well after all, once again demonstrating that “haste makes waste”.