Arbitration courts are generally treated as the “younger brothers” of state courts. What is interesting is that historically it was the other way around and arbitration is older. However, over the years, the state judiciary gained primacy, and knowledge concerning arbitration began to disappear. If it is not “younger,” then surely it is the “smaller” brother. Arbitration is often something new, and unknown. At Jabłoński Koźmiński & Partners we believe that having thorough knowledge allows us to effectively use the advantages of arbitrational court.

To-do list before entering into an arbitration agreement

It is worth verifying whether an arbitration proceeding is adequate to the case. The “arbitration utility test” may be helpful. If (1) a dispute has arisen, but (2) you have not previously concluded an arbitration agreement with the other party, and nevertheless, (3) you are considering going to an arbitration court, you should check whether the following criteria are met:

• a quick resolution of the dispute is crucial;
• the matter might be complex and should be resolved by experts familiar with its matter;
• the proceedings should remain confidential, without open access by outsiders;
• the party/parties wish to avoid formalism typical to the proceedings before a national court;
• the parties want to be free to decide on the applicable law;
• a business relationship with the partner needs to be maintained.

When at least one of the conditions above is met, arbitration might be a better solution than going to a state court.

What if there is a currently binding arbitration clause

When an arbitration agreement has been conducted earlier, filing a lawsuit before an arbitration court is (in the Polish legal system) necessary. Were it to be brought to a national state without an arbitration court, the state court may reject the lawsuit (Article 1165 § 1 of the Code of Civil Procedure), which is an obvious waste of time and resources.

The costs of arbitration

Arbitration does not need to be more expensive than litigation before a state court. It can be cheaper if the following are well considered: (1) the selection of the type of arbitration (permanent arbitration court/ad hoc/ administered arbitration), (2) the procedure of resolving the dispute (normal v. accelerated/simplified), (3) number of arbitrators hearing the dispute.

The costs of arbitration proceedings can be reduced already at the pre-dispute stage. Permanent arbitration courts usually have tools that allow them to calculate the likely costs of conducting the dispute.

A common misconception that arbitration costs are higher results from ignoring: (1) costs of remuneration of attorneys in connection with a much longer dispute before a national court, (2) the possibility of agreeing on a lower fee in ad hoc arbitration than in proceedings before a national court, (3) completely unmeasurable costs arising in a much longer dispute in a state court (for example, the gradual growth of interest through the duration of the dispute), (4) the possibility for arbitrators to award the costs of the proceedings to the party winning the dispute.

Let’s compare the costs that must be paid to initiate a dispute:

Court	Value of the subject matter of the dispute	Amount of fees[1]
		SA KIG	SA Lewiatan	a court of law
PLN 100,000
SA KIG		PLN 7,257	PLN 8,437.80	PLN 5,000
SA Lewiatan
a common court
PLN 1,000,000
SA KIG		PLN 40,713	PLN 41,647.80	PLN 50,000
SA Lewiatan
a common court

As observable, above a certain value of the subject matter, arbitration might be cheaper than state court litigation.

Types of arbitration

There might be arbitration: (1) before a permanent arbitration court, (2) ad hoc, or (3) administered.

Permanent courts of arbitration usually hear “bigger cases,” also international ones. They have their infrastructure and maintain their list of recommended arbitrators. They have their own rules of procedure. The parties usually conduct disputes according to the national rules of civil procedure. If not decided otherwise, the court of arbitration proceeds according to its internal rules. The permanent courts of arbitration often publish their judgments.

Ad hoc arbitration is the examination of a given case or specific cases outside the structures of permanent arbitration courts. It can also cover the disputes that have already arisen or that may arise in the future. This is the most flexible form of arbitration. However, it is often a notorious practice to apply the rules of permanent arbitration courts in ad hoc arbitration. The remuneration for the arbiters can be easily set. Generally, the arbiters working in ad hoc arbitration do not use the permanent institutions’ facilities.

Administered arbitrationconstitutes a “bridge” between the choice of ad hoc arbitration or a permanent court of arbitration. With the consent of a permanent institution, the dispute may be resolved using the infrastructure of the permanent institution. The possibility of using the rules of a permanent arbitration court in this case is debatable. This is the least chosen type of arbitration.

The parties may choose from the three types of arbitration.

Undoubtedly, arbitration can be a better solution than litigation before a state court.

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[1] The amounts given regarding permanent arbitration courts are gross values, the case is heard by one arbitrator. The amounts in the table do not include the costs of appointing legal representatives.