- Arbitral Award
- ICC International Court of Arbitration 11295
CONTRACT FOR TRANSFER OF RIGHTS - BETWEEN A SWISS COMPANY AND A POLISH COMPANY - LEGAL ISSUE AT STAKE NOT SPECIFICALLY ADDRESSED BY APPLICABLE DOMESTIC LAW (POLISH LAW) - ARBITRAL TRIBUNAL ENTITLED TO RESORT TO INTERNATIONAL INSTRUMENTS SUCH AS THE UNIDROIT PRINCIPLES
CONTRACT INTERPRETATION AND SUPPLEMENTING - ACCORDING TO COMMON INTENTION OF PARTIES, PURPOSE OF THE CONTRACT AND GOOD FAITH (ARTICLE 65(2) OF THE POLISH CIVIL CODE AND ARTICLES 4.1(1) AND 4.8(2) OF THE UNIDROIT PRINCIPLES
Claimant, a Swiss company, had been granted by Defendant, a Polish company, certain exclusive rights which Claimant later transferred to one of its subsidiaries. When Claimant initiated arbitration proceedings on the grounds of an alleged violation of these rights by Defendant, the question arose as to whether Claimant, when transferring these exclusive rights to its subsidiary, had transferred them alone or had transferred the whole contract it had concluded with Defendant including the duties.
The Arbitral Tribunal held that, since the applicable Polish law did not provide any specific solution on this point, it could "subsidiarily apply international law instruments" such as the UNIDROIT Principles. However, after having found that the question as to whether a party is entitled to transfer to its subsidiary only the active parts of the contractual obligations while withholding the passive ones or whether this party has to transfer the whole contract was not specifically addressed by the UNIDROIT Principles either, the Arbitral Tribunal concluded that the solution could only be found by interpreting the terms of the contract. In this respect the Arbitral Tribunal referred to the canons of interpretation laid down in Article 65(2) of the Polish Civil Code as well as in Articles 1.1, 4.1(1) and 4.8(2) of the UNIDROIT Principles, i.e. that a contract is to be interpreted and supplemented having regard to the common intention of the parties, the nature and purpose of the contract, good faith and fair dealing and reasonableness.
44. Section VIII Of the Terms of Reference provides that:
... the laws of the state of Poland, shall be the main rule of law to be applied …… to the merits of the dispute...
Even if the current question is included by the Terms of Reference within the “Preliminary Issues: Admissibility” and not within the "Further Issues: Merits" of the dispute, it cannot be validly denied that interpretation of the Contract regarding an issue such as its transfer and the legal effects of it, falls under a question of substantial law and not under procedural law.
Polish rules of law applicable as such to the current matter contribute only as follows to determine the disputed issue:
45. Basically Polish law bears out the principle of the Freedom of the Contract as provided byArticle 353 of its Civil Code:
The parties to a contract may arrange the legal relationship as they deem proper on the condition that the contents or the purpose of that contract are not contrary to the nature of the relationship, with statutory law, and with the principles of community life.
It means that [Claimant] and [Respondent] may be deemed as having arranged the transfer of rights as they decided to do, as long as no mandatory rules forbid it.
There are no mandatory Polish rules which would oblige the contractual parties to transfer such a contract either totally or partially.
46. Regarding non mandatory clauses, it is true that the Polish Civil Code provides separately for:
- the change of creditor in articles 509 to 518;
- and the change of debtor in articles 519 to 526.
Nevertheless, it also provides for contractual relationships where the same party is both creditor and debtor, i.e. in a bilateral contract (in Polish "umowa wzajemna").
That is the case for a named contract such as a lease agreement, but, by analogy, those rules may be applied for unnamed contracts.
In the current case, the contract seems very close to a lease agreement since its purpose is the renting of advertising space on kiosks where parts of unmovable property owned by a lessor ([Respondent]) are granted to a lessee ([Claimant]) against rental fees; but as having meanwhile a broader scope it might also be considered as an unnamed agreement.
47. In both cases, i.e. named or unnamed, the above-mentioned Polish non mandatory rules of law can be applied.
Hence, as far as Polish law is concerned for this issue, there are neither mandatory clauses which oblige, nor non mandatory clauses which lead, to the transfer of a bilateral contract either totally, with rights and duties or partially with either rights or duties.
However, as it provides only for either a change of creditor or a change of debtor regarding a single obligation, or assignment of a contract including all its obligations (both active and passive, i.e. rights and duties), it can be said that in such bilateral contracts, a transfer limited to the sole rights to receive the duties, would be rather atypical.
In its [sic] Treaty of Civil law “System prawa cywilnego” Prof. Zbigniew Radwanski does not deny the theoretical possibility of such a transfer provided it is subordinated to a true economic objective.
48. The sole arbitrator stating that Polish law belongs to the civil law tradition, considered appropriate to study the pertinent case-law but did not find however any specific decision suitable to really clarify the matter.
The sole arbitrator therefore deems that Polish law being the main rule of law to be applied, does not provide any other specific solution on the substance of the issue.
However, the sole arbitrator points out that, as in many other law systems, as regards the interpretation of acts in laws, Polish law provides, in article 65 § 2 of its Civil Code:
In the case of contracts, the congruent intention of the parties and the purpose of the contract, rather than relying on its literal wording, must be established.
49. In International Arbitration, when the national law(s) to be applied to the dispute, does (do) not provide any specific solution to settle the point of law involved, the arbitral tribunal may subsidiarily apply international law instruments.
In the present case, the latter are indeed more relevant than French law referred to by both parties but deprived of any legal link to the case.
Accordingly, if the sole arbitrator considers that, subsidiarily to Polish laws applicable as main rules of law, the UNIDROIT Principles of International Commercial Contracts 1994 may also be applied to the dispute, it [sic] does not see however any UNIDROIT rule liable to determine whether within an international agreement a party is entitled to transfer to its subsidiary only the active parts of the contractual obligations while withholding the passive ones or whether this party has to transfer the whole agreement.
Such silence is expected in other equivalent international law instruments.
However, converging on the above mentioned general Polish rules, said UNIDROIT Principles provide:
- the "Freedom of Contract" (cf. Article 1. 1),
- their interpretation in accordance with especially:
- The "Common intention of the Parties"
- The nature and purpose of the Contract,
- Good faith and fair dealing,
- Reasonableness (cf. Articles 4.1(1), and 4.8(2)).}}
Excerpt in ICC International Court of Arbitration Bulletin, 2005 Special Supplement, pp. 88-89.}}