CMS Case Study: Declaratory Arbitral Award Magorzata Surdek, FCIArb - - PowerPoint PPT Presentation

Małgorzata Surdek, FCIArb | 18 May 2017

CMS Case Study:

Declaratory Arbitral Award

Małgorzata Surdek, FCIArb | 18 May 2017

The Dispute (2012-2014)

2

• between a JV company (Claimant) and a public side (Respondent)
• arouse out of an agreement for the construction and operation of a

motorway in Poland (Concession Agreement)

• related to a bonus for an early opening of a section of the motorway

Małgorzata Surdek, FCIArb | 18 May 2017

The Public Private Partnership

3

JVC

Public side Independent Engineer Banks Operator EPC Contractor

Shareholder 1 Shareholder 2 Shareholder 3 Shareholder 4

Concession Agreement

Shareholders Agreement

EPC Contract Financing Agreements

Małgorzata Surdek, FCIArb | 18 May 2017

Dispute Resolution Mechanism

4

• Multi-tier mechanism: negotiations – expert determination – arbitration
• Arbitration clause:

‒ ad hoc under UNCITRAL Rules ‒ arbitration place: Gdańsk, Poland

• Applicable law: Polish law

Małgorzata Surdek, FCIArb | 18 May 2017

The Bonus

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• The EPC Contract provided for a bonus due to the EPC Contractor

from JVC for completing construction works before contractual deadlines (conversely, in the event of belated completion contractural penalties were due from the EPC Contractor to JVC)

• The Concession Agreement did not explicitly provide for a bonus for

JVC for an early opening of a section of the motorway, however the mechanism for calculating such bonus was ”hidden” in the Financial Model of the motorway constituting a schedule to the Concession Agreement

• The Concession Agreement provided for contractual penalties due

from JVC to the public side in case of belated opening of the motorway

Małgorzata Surdek, FCIArb | 18 May 2017

The Request for Relief sought by the Claimant (1)

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• Determination of the Phase 2 Scheduled Opening Date
• Confirmation that the JVC has the right to a bonus for an early
• pening of a section of the motorway
• Determination of the source of funding the bonus (out of two

alternatives presented by the Claimant)

Małgorzata Surdek, FCIArb | 18 May 2017

The Request for Relief sought by the Claimant (2)

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• Interpretation of the Concession Agreement
• Confirming the entitlement (right) of the Claimant to the bonus and the

method of funding thereof

• No payment was sought (legal interest? problems with enforcement in

the future? binding effect?)

Małgorzata Surdek, FCIArb | 18 May 2017

The Award

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• The Respondent did not challenge the Claimant’s request for relief on

the ground that requesting declaratory award is not admissible or on the ground of lack of legal interest

• The Arbitral Tribunal determined, inter alia, the Phase 2 Scheduled

Opening Date and ordered the Respondent to acquiesce to the funding of half of the bonus by loan disbursements (project cost)

• The Award did not include any comment on the declaratory nature of

the award

Małgorzata Surdek, FCIArb | 18 May 2017

The Post – Arbitration Proceeding

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• The Regional Court in Warsaw recognised the Award in its entirety

and dismissed the Claimant’s motion as to declaring the decision on cost of arbitration enforceable (I Co 178/14)

• The Appellate Court in Warsaw changed the Regional Court’s

judgement and declared the part of the Award including the decision

• n costs enforceable (I ACz 358/15)
• Interestingly, the Appellate Court in Warsaw explicitly referred to and

agreed with the position of the German Federal Tribunal (Bundesgerichtshof) which confirmed that the decision on costs can be enforced even if the operative part of the award does not explicitly state any amount

Małgorzata Surdek, FCIArb | 18 May 2017

The Award and further dilemmas

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• Next arbitration in respect of the quantum?
• What if the new Arbitral Tribunal does not reach the same conclusion

as to the Claimant’s entitlement to the bonus?

• Will the Award have a binding effect on the subsequent Arbitral

Tribunal?

• The Polish Supreme Court of 13 April 2012 (I CSK 416/11):

„if the parties and the arbitral tribunal want that the award produces the same

effects as a state court judgement, then they have to take into consideration the fact that in the same matter between the same parties an earlier award was

• rendered. If this earlier award was recognised or declared enforceable by the

state court (…) then the state court deciding on recognising or declaring enforceability of the subsequent award would be bound by the earlier decision of the state court recognising or declaring enforceability of the earlier award.”

Małgorzata Surdek, FCIArb | 18 May 2017

Takeaways – Polish Law position on declaratory arbitral awards

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• The requirement stipulated in the Code of Civil Procedure in respect of

declaratory reliefs (demonstrating legal interest) does not seem to apply in the arbitration proceedings

• The Appellate Court in Cracow explicitly confirmed that the parties

may request that arbitral tribunals issue declaratory awards (I ACo 52/16)

• Parties who seek confirmation of their right to monetary compensation

before seeking the actual payment should have the award recognised by the state court before commencing the dispute on quantum in order to benefit from the binding effect of the earlier award in subsequent arbitration (Supreme Court, I CSK 416/11)

Małgorzata Surdek, FCIArb | 18 May 2017 12

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