Manchester Securities Corp. v The Republic of Poland

Case summary

At a glance

Parties: Manchester Securities Corp. (United States) v. the Republic of Poland
Case no.: PCA Case No. 2015-18; Brussels Court of First Instance roll no. 19/3390/A; Belgian Court of Cassation No. C.22.0348.F
Forum and rules: UNCITRAL Arbitration Rules, administered by the PCA; seat Brussels
Treaty: Poland–United States BIT of 6 August 1994 (Article IX(3))
Court: Brussels French-speaking Court of First Instance (Sabine Malengreau, sole judge); Belgian Court of Cassation, First Chamber (Christian Storck, presiding)
Underlying award(s): Award of 7 December 2018 (PCA Case No. 2015-18)
Sector: Real estate development finance; secured bonds
Outcome: The Brussels court annulled the 2018 award as contrary to Belgian international public policy (18 February 2022). The Court of Cassation quashed that judgment and sent the case to the Liège Court of First Instance (12 April 2024).
Amount: Award: PLN 37,603,514.12 plus interest at 3.88%. Annulment costs ordered against MSC: EUR 12,380.02, plus the EUR 165 roll fee. Cassation costs reserved for the court on remand.

The dispute

Manchester Securities Corp. (MSC), a New York investment company, bought bonds worth PLN 66.5 million from the Polish developer Firma Inwestycyjna Leopard S.A. The bonds paid 25% a year and were secured by mortgages on Leopard's Wierzbowa and Kijowska properties in Kraków. Leopard defaulted and went bankrupt in 2009. On 9 February 2012 the Polish Supreme Court invalidated MSC's Wierzbowa mortgage as contrary to the "principles of social coexistence" in Article 58 of the Polish Civil Code. In other cases, however, it upheld the mortgage held by the state bank PKO and MSC's Kijowska mortgage (the Vectis case). MSC claimed under the Poland–US BIT, and in an award of 7 December 2018 a PCA tribunal found that Poland had breached fair and equitable treatment through a denial of justice. The tribunal found the Supreme Court's treatment of MSC arbitrary and discriminatory, and found that the Court had relied on new findings of fact without hearing MSC. Poland applied to the Brussels courts to set the award aside, arguing that the tribunal had acted as an appeal court over the Polish Supreme Court, in breach of public policy.

Key holdings

The prohibition of denial of justice under international law forms part of Belgian international public policy. This is so even though the Belgian domestic notion of denial of justice is narrower. Brussels judgment ¶¶ 49–52
Under Article 1717(3)(b)(ii) of the Judicial Code, the court reviews whether the tribunal could reasonably find that the elements of a denial of justice were established. The court described this review as a marginal check of legality. Brussels judgment ¶¶ 53–61
The tribunal did not apply the demanding international standard for denial of justice. It found no failure of the Polish judicial system as a whole and no fraud or bad faith by the Supreme Court. Differences between Supreme Court decisions given years apart, in a system without binding precedent and in cases with different aims, do not show discrimination. Brussels judgment ¶¶ 74–81
By closely examining the factors that distinguished the Wierzbowa and PKO mortgages, the tribunal set itself up as an appeal court over the Polish Supreme Court. An error in a single judgment, even if one were established, could not reasonably amount to a denial of justice. The award was annulled, and MSC was ordered to pay costs of EUR 12,380.02. Brussels judgment ¶¶ 82–97
The Court of Cassation held that Article 1717(3)(b)(ii) does not allow the annulment court to reassess the dispute in light of the public-policy rules the arbitrator applied. The court may only check whether the award itself contradicts public policy. The Brussels judgment annulled the award without examining its effects on public policy, and so violated that provision. Cassation judgment, p. 15
The Court of Cassation quashed the Brussels judgment, reserved costs for the court that will decide the case on remand, and sent the case to the Liège Court of First Instance. Cassation judgment, p. 16

Procedural history

9 February 2012The Polish Supreme Court invalidates MSC's Wierzbowa mortgage under Article 58 of the Civil Code.
9 March 2015MSC files its notice of arbitration under Article IX(3) of the BIT.
7 December 2018Award: Poland is ordered to pay PLN 37,603,514.12 plus interest, and MSC must withdraw its Polish insolvency and enforcement claims up to the amount paid.
6 March 2019Poland files its application to annul the award before the Brussels Court of First Instance.
13 December 2019Interim judgment: the court records MSC's undertaking not to enforce the award until the court gives its judgment.
18 February 2022The Brussels Court of First Instance annuls the award as contrary to Belgian international public policy.
12 April 2024The Belgian Court of Cassation quashes the annulment judgment and sends the case to the Liège Court of First Instance. The Advocate General's conclusions are published separately.

Tribunal, counsel and experts

Decided by: Sabine Malengreau Judge, Brussels French-speaking Court of First Instance (sole judge)
Christian Storck Judge, Belgian Court of Cassation (presiding)
Mireille Delange Judge, Belgian Court of Cassation
Michel Lemal Judge, Belgian Court of Cassation
Marielle Moris Judge, Belgian Court of Cassation
Simon Claisse Judge, Belgian Court of Cassation
Bénédicte Inghels Belgian Court of Cassation, Belgian Court of Cassation (Advocate General)
For the claimant: Clifford Chance · Paul Lefebvre
For the respondent: Liedekerke · Simone Nudelholc · Caroline De Baets