Pannonia Bio Zrt v Edward Marciniak & Anor

On a challenge under section 67 of the Arbitration Act 1996, the court must determine substantive jurisdiction for itself. Where a sole trader’s business is transformed into a company under Polish law, the general effect of Article 584(2) of the Polish Commercial Companies Code is that the rights and obligations relating to the transformed enterprise pass to the successor company. Exceptions are narrowly defined and principally concern public-law permits, concessions and reliefs. Contractual rights arising from earlier breaches, and the arbitration agreements contained in the contracts, therefore transfer unless an express exception applies. The former sole trader ceases to be a party to the contracts and arbitration agreements. The retention of personal tax liabilities does not preserve contractual rights or arbitration standing.

Pannonia Bio Zrt challenged under section 67 of the Arbitration Act 1996 an LCIA tribunal’s interim award dated 1 July 2024. The tribunal had concluded that it possessed substantive jurisdiction over Edward Marciniak’s contractual claims concerning industrial alcohol supplied under two contracts containing LCIA arbitration clauses.

After the contracts were performed, Marciniak transformed his sole-trader business into a Polish company which succeeded to the business. Polish tax authorities later imposed duties and fines on him personally. The central issue was whether the contractual causes of action and arbitration agreements had transferred to the successor company, despite the personal tax liabilities remaining with Marciniak.

1. The section 67 challenge was a new hearing. The court was required to reach its own conclusions on substantive jurisdiction, applying National Iranian Oil Company v Crescent Petroleum Company [2023] EWCA Civ 826.

2. The tax liabilities and the contractual consequences of transformation were distinct issues. The fact that Marciniak remained jointly and severally liable for tax arrears did not mean that he remained a party to the contracts or retained their contractual causes of action.

3. Article 584(2) of the Polish Commercial Companies Code gave effect to a general transfer of the rights and obligations connected with the transformed enterprise. The exceptions concerned narrowly defined public-law permits, concessions and reliefs. They did not extend to private contractual rights.

4. The court accepted the evidence supporting the doctrine of quasi-continuity. On transformation, the contractual causes of action relating to the July and September contracts passed to the successor company. The transformation did not create tripartite contracts or leave Marciniak with a residual contractual claim.

5. The arbitration agreements were capable of transfer. They imposed binding obligations to arbitrate disputes and had sufficient substantive content to pass with the contracts. Marciniak therefore ceased to be a party to the arbitration agreements before commencing the arbitrations.

6. Any surviving non-contractual claim was not decided. Even if such a claim existed, Marciniak could not require arbitration after ceasing to be a party to the arbitration agreements and could pursue it in the relevant state court.

7. The tribunal was wrong to conclude that it had substantive jurisdiction over Marciniak’s claims.

The judgment describes an LCIA tribunal’s interim award dated 1 July 2024, which held that it had substantive jurisdiction. The High Court conducted a new hearing under section 67 and concluded that the tribunal lacked substantive jurisdiction.