Set-off: an obstacle in enforcement of arbitral awards

Arbitration has many advantages over going to state courts – mainly because arbitral tribunals are no such courts. However, that’s exactly why some of their procedural shortcomings may heavily influence the outcome of the dispute.
 
In Poland, like in many jurisdictions, obtaining a favourable arbitration award is just the beginning: a victorious party has to seek an enforcement clause before a state court to make its execution title – the award – enforceable. Thus, some additional patience is needed to finally execute the award.
 
However, it does not necessarily mean that the discussion on the merits of the case is finished. On the stage of obtaining the enforcement clause, or even after the clause is granted, the opposing party (the defendant in arbitration) may raise objections on the ground of a set-off of its corresponding claim, even if it has not been previously subject to dispute. To do so, it has to declare the set-off to another party prior to objection.
 
The corresponding claim does not need to be raised earlier, during arbitration or in a state court. No execution title is required to declare a set-off. Therefore, instead of submitting the corresponding claim to arbitration, one may wait with the claim to neutralise the unfavourable award or at least bog down the enforcement proceedings – it’s fully discretionary.
 
As there is no need for any order or award to declare a set-off, the court would have to assess the claim that is being set off. The nature of the claim, which should be closely related to the claim subject to arbitration award, would usually cause it to be examined in arbitration. But not this time – on the stage of adverse claim only a state court may take the case, as the enforcement clause issues are beyond the arbitral tribunal’s jurisdiction.
 
Hereby a state court may examine, in full accordance with the law, an issue in theory falling within the scope of arbitration clause. The case may not be returned to arbitration, since declaring the set-off disables making a counterclaim on the relevant matter. Consequently, the decision on declaration of set-off and the right moment to do so have to be cautiously considered.
 
That awkward uncertainty with regard to the final outcome of the dispute will fortunately be eliminated. From September, an amendment in the Code of Civil Procedure will allow a corresponding claim to be risen only if raising it earlier in the merits would have been unlawful. It will be at the defendant’s discretion no more.
 
But even with the amendment, the enforcement of award by both Polish and foreign arbitration institutions may take some time. In addition, new obstacles may still appear on the road, other than the set-off. Of course depending on the side, such a bumpy road may either be a blessing or a curse