Unlike a state court (litigation), (the arbiters an arbitration court) is generally not bound by substantive law or procedural rules in force in each country. The parties and arbiters can agree on playing by different “rules of the game”—regardless of whether it concerns institutional arbitration, ad hoc, or administered. It is therefore worth being actively engaged in specifying the arbitration clauses or arbitration agreements.

There is the following hierarchy of determining the “rules of the game” in arbitration

1. the mutual will of the parties is crucial;
2. the lack of consensus means that the arbitrators determine “the rules of the game”;
3. nevertheless, even considerable freedom of choice for the parties or arbitrators is not unlimited.

The choice of substantive law

The substantive law determines whether a claim exists or not. Relatively – it allows you to defend yourself against claims made.

Firstly, arbitrators should apply the law chosen by the parties. Therefore, the activity of the parties in this regard is crucial. They can choose different substantive law than the national law, which is particularly important in international arbitration (where often foreign law is chosen). Secondly, the parties may expressly request that the dispute be resolved not according to the statutory norm of substantive law, but according to the principles of equity and general principles of law. These are not however the principles of social coexistence known for example to the Polish Civil Code. Thirdly, if a choice of law is not made, the arbitrators may apply the law applicable to a given legal relationship. It may also be foreign law, especially in cross-border cases. Fourthly, in arbitration, the place where the arbitration award is to be issued is crucial. It can be specified in the arbitration agreement (by the parties) or in the award itself (by the arbitrators). An award may be issued abroad, even if the dispute is subject to Polish law because the parties can determine the place of proceedings. Fifthly, even the fact of choosing proper substantive law does not oblige the arbiters to unconditionally apply it. They should respect the provisions included in the canon of so-called basic principles of the legal order. These principles are defined by the doctrine and case law of each legal order.

“The less substantive law, the greater the discretion of the arbitrators,” especially when the arbitrators rule according to the principle of equity.

Some practical remarks

• While drafting arbitration clauses it is worth:
• choosing the appropriate law or the place (the country) of issuing the arbitration award,
• remembering that a decision based on the principle of equity means there is practically zero chance to challenge the arbitrators’ judgment in the national court,
• having in mind that the bigger the passivity of the parties is, the bigger is scope of arbitrators’ freedom to choose the rules
• bearing in mind that the parties’ choices are not binding to the arbitrators, especially when an arbitrator does not know the foreign law. It is therefore worth verifying the chosen arbitrator’s knowledge of the foreign legal system.

Procedural rules

The procedural rules of arbitration proceedings determine how the dispute is resolved, but they do not determine whether a claim exists or not.

Firstly, arbitration should not be treated like a dispute before a state court. The parties may decide to apply the rules of a procedural act (such as the Code of Civil Procedure), however, it is not practiced. Secondly, an arbitration proceeding is usually a one-instance one. Appellate proceedings in arbitration are very exceptional. After issuing an award, only the state court can question the arbitrators’ decision. Thirdly, a failure to specify the rules of the dispute means the obligation to apply statutory regulations (in ad hoc or administered arbitration) or the internal rules of a permanent arbitration court (in institutional arbitration). However, national provisions regulating the basic principles of the procedural legal order should be applied (such as the principle of equality between the parties). Fourthly, a breach by arbitrators of the procedural rules agreed by the parties is more important than a breach of substantive law. Such a verdict can be questioned (for example by filing a complaint to overturn it). Similarly, one can demand that the state court refuses its recognition or refuses to declare it enforceable.

Arbitration, procedurally, is, however, always less formalized than standard litigation before a state court.

Practical remarks

When agreeing on the procedural rules remember that (1) in arbitration, the procedural act (the Code of Civil Procedure) is not directly applied, and (2) there are significant differences compared to proceedings before a state court: the atmosphere is more relaxed, no objections to the protocol are raised (under Article 162 of the Code of Civil Procedure), and the announcement of the judgment does not take place at the hearing, (3) the arbitrator’s award cannot be questioned by invoking a violation of the rules of procedure at the stage preceding the award’s issuance; the award must violate these rules, (4) even the less formalized form of dispute resolution present in arbitration does not guarantee proper proceedings.