‘The free market is not free-for-all and franchising is not serfdom’, reads the Ministry of Justice website. That is why, and in the name of equality and justice, the Ministry is finalising its work on the Franchise Act. The premises behind the bill have been sent for public consultation. The premises themselves are not available on the Ministry’s website. However, they can be found elsewhere, e.g. on the website of the Polish Copper Employers’ Association.
The premises behind the bill look to regulate the franchise contract. Does franchising really need regulation? That is a topic for another occasion. Suffice it to mention that this idea raises doubts in legal commentaries. The Ministry explains its work by the fact that attempts at self-regulation of the industry have failed and the Ministry has received many complaints from franchisees and franchisors. From my perspective, it is not the substantive but the procedural regulation that is important. Indeed, most of the premises of the bill deal with the introduction of an arbitration court ‘to hear cases regarding the franchise contractual relationship’. This makes one wonder whether franchising itself is not a pretext and the real plan is an attempt to return, on a small scale for the time being, to solutions known from the previous political system. To the State Economic Arbitration.
What the affiliation of this arbitration court should be, has not yet been decided (perhaps it will be the Ministry of Justice itself?). What is known, though, is that it will hear cases not on the basis of an arbitration clause (i.e. a contract, like ‘ordinary’ arbitration courts), but on the demand of one of the parties to the franchise agreement. In other words, it will be a compulsory arbitration (hence the title).
Obviously, the franchise arbitration court will not be a state court. The arbitrators will not even be required to have a legal education (the criteria are age: 30-70 years, full legal capacity and no criminal record). The idea is therefore unconstitutional. As the law currently stands, the right of access to a court is the right of access to a state court. It is the common courts that administer justice in our country (Article 45 in conjunction with Article 177 of the Constitution). Resolution of disputes by arbitral tribunals does not violate this principle, because it is done with the consent of the parties. It is the parties, to the extent permitted by law (Code of Civil Procedure) and following the principle of individual freedom (autonomy) (Articles 5 and 31 of the Constitution), who agree to exclude the competence of the common courts in favour of a private institution. They voluntarily waive their right of access to a court of law to a certain extent (the common courts retain supervision over arbitral awards anyway). However, the supervision is limited. The grounds for setting aside an arbitral award (Article 1206 of the Code of Civil Procedure) include, in principle, the most serious procedural defects or the award being contrary to the fundamental principles of the Polish legal order.
Voluntary nature is an immanent feature of arbitration, also emphasised in the case-law of the European Court of Human Rights. The ECtHR regularly notes that the exclusion of the jurisdiction of the common court (arbitration clause) is permissible, but must be explicit and freely made (e.g. Suda v. Czech Republic, Mutu and Pechstein v. Switzerland). In the latter case, the ECtHR considered as a violation of the right of access to a court a consent to arbitration forced by circumstances in which the applicant had the choice of either submitting to the jurisdiction of the CAS (Court of Arbitration for Sport) or giving up her professional sport.
Interestingly, the ECtHR has also taken a position on genuinely compulsory arbitration, compelled by statute. In Bramelid and Malmstrom v. Sweden, the ECtHR allowed such a solution, but only on the condition that the arbitration proceedings would meet the same strict rules that are required of the common court under Article 6 of the European Convention on Human Rights (independence, impartiality, publicity, etc.). In the above case, the arbitration under analysis did not meet the necessary criteria (shortly afterwards, Sweden withdrew this solution anyway). This view was reiterated by the ECtHR in Tabbane v. Switzerland, adding that, in addition to the need to give effect to the guarantees of Article 6 of the Convention, the exclusion must have regard to an objective that is worthy of protection and to the principle of proportionality.
Coming back to Poland, the arbitration court planned by the Ministry of Justice would therefore be unconstitutional, and even if it were otherwise, it would violate the European Convention on Human Rights. It would not provide any guarantees of impartiality and independence, and its introduction is not accompanied by any objective worthy of protection or proportionate to the gravity of excluding the right of access to a court.
Basically, we could stop there. However, it is worth noting the other shortcomings of the premises behind the bill. The bill provides that if a case is submitted to the common court, this will not preclude the case from being heard by an arbitral tribunal. The reverse stands too; only a final and non-appealable decision at the common court is to preclude arbitration. It is not clear what purpose such a doubling of forums is supposed to serve or how to proceed in the event of conflicting rulings. The bill unnecessarily regulates separately the procedure for challenging an arbitral award, which is already regulated in the Civil Procedure Code, instead of possibly modifying the long-standing procedure in the Civil Procedure Code (Article 1206). It is not clear why such cases should be brought under the jurisdiction of Regional Courts (ordinary complaints have long been heard by Courts of Appeal). The premises behind the bill are packed with details that should go into the court rules rather than statutes.
A particularly astonishing idea is also the rule that the arbitral tribunal is to apply accordingly the general rules of Part One of the Code of Civil Procedure. Apart from the fact that an ‘ordinary’ arbitration tribunal is not bound by the provisions of the Code of Civil Procedure, the new tribunal is to be staffed by persons without a legal education, and a reason for setting aside an arbitral award would also be a violation of the fundamental rules of procedure at the new arbitration court (Article 26(1) of the premises behind the bill). Part One of the Code of Civil Procedure has more than 700 Articles and distinguishes, for example, general provisions on procedural actions, but lacks separately defined ‘general rules of procedure’. The question of which rules to apply will therefore be a challenge even for lawyers, let alone for representatives of the franchisor and franchisee communities of which the new court is to be composed.
The already mentioned State Economic Arbitration operated between 1949 and 1989. It was an extra-judicial body affiliated with the Council of Ministers that examined disputes between entities such as state-owned enterprises or cooperatives. The State Economic Arbitration was also compulsory, but unlike the proposed one, its arbitrators at least were required to have a legal education and even to have completed an arbitration trainee programme. This arbitration was done away with 1989. A similar quasi-judicial body called misdemeanour tribunal was dropped in 2001.
It is to be hoped that the compulsory franchise arbitration court will not materialise and that the premises behind the bill remain just theory. It would be most unfortunate if in the future compulsory arbitration courts emerge for insurance, leases, contracts of mandate (the list could go on) and others, when this pilot project is considered by the legislators as a way of reducing the workload at the common courts.
Rather than looking to push through this kind of forced solution, it would be preferable to invest in the promotion of arbitration as a competing institution to the state judiciary in business, and not just for one type of contract, but in general. ©℗