NEWSLETTER 15/2010
Commentary
JURISDICTION: WHAT COUNTRY'S COURTS SHOULD DECIDE AN INTERNATIONAL TRADE DISPUTE?
Increasing international commercial contracts represent increased opportunities for business growth - but also a higher risk of unsuccessful dealings.
Ideally, disputes should be settled out of court. But if the parties can't agree, it will be necessary to enforce the contract through the courts.
It is crucial to examine a number of procedural and substantive issues prior to filing suit in order to achieve a quick and effective resolution and restore the parties to their bargained-for asset position.
One of the first things to check in an international commercial dispute is jurisdiction - that is, which country's courts should hear the case. If the other party is a foreign company or individual, should the case be filed with a Polish court, or in another country, and if so which one?
In Poland this issue is governed by Part Four of the Civil Procedure Code, "Provisions Concerning International Civil Procedure." New regulations have been in force in this area since 1 July 2009, designed to adapt international civil procedure to the needs of contemporary cross-border commerce.
The starting point for determining which country's court have jurisdiction is the defendant's registered address (or domicile or habitual place of residence). Alongside this test, the amended Civil Procedure Code also provides additional bases for determining the given country's jurisdiction to decide a dispute (also referred to as grounds for jurisdiction or links).
Another basis for determining which country's courts have jurisdiction to decide a contract dispute is the place of performance or the place where the obligation arose.
In cases involving the activity of a branch or establishment, a new basis for jurisdiction is the option to file suit where the branch or establishment is located in Poland.
In cases involving labour law, commenced by the employee, an additional link is the place in Poland where the work was or is usually performed, or was supposed to be performed.
In cases involving insurance and in consumer cases, additional grounds for jurisdiction have been added to strengthen the position of the presumed weaker party - the insured or consumer.
When examining jurisdiction to hear a given type of case, it is also important to consider instances where a country's courts have been vested with exclusive jurisdiction. These include cases involving real estate located in Poland (e.g. title, possession, lease or tenancy), dissolution of legal personality with their registered address in Poland, or a challenge to resolutions by the authorities of such entities.
Under the changes from July 2009, implementing EU regulations, it is also possible for the parties to a dispute to consent to jurisdiction through their behaviour, in the sense that if the plaintiff files suit in a court that would not have jurisdiction, but the defendant fails to object to jurisdiction, then the parties are de facto deemed to have appointed the court to decide the case and it will have jurisdiction.
Under the amended code, as under prior law, it is permissible to agree to submit disputes to the jurisdiction of the Polish courts. However, under the new law, the list of cases in which this is possible has been extended to include all monetary and property claims.
However, it is not possible to agree to the jurisdiction of the Polish courts in cases where a foreign court has exclusive jurisdiction, or in cases involving labour law, insurance, or contracts made by a consumer with his or her domicile or place of habitual residence in Poland.
If jurisdiction is not correctly determined prior to filing suit, the plaintiff may face dismissal of the claim, and will then have to re-file suit. But the lost time and unnecessary costs resulting from a hasty decision in this respect may be particularly hard to bear for a company.
Małgorzata Majkowska
attorney-at-law
The Newsletter is published free-of-charge and is designed chiefly for clients of the law firm of Mikulski & Partners. The articles are written by lawyers at the firm, but do not constitute legal advice.