Arbitration news- Agreement to arbitrate prevented state courts from issuing P.O. ( payment order)
(Article by Dr. A. Tsavdaridis, published in the Arbitration Newsletter of the ILO on October 30, 2014)
A recent decision confirms that state courts lack jurisdiction to issue a payment order for an unpaid
cheque in a dispute between the issuer and the recipient when the parties have agreed to resolve the
underlying dispute through arbitration.
Facts
In 2010 a Greek trading company entered into an agreement with a Greek beer producer for the
production, packaging and delivery of beer. The agreement contained an arbitration clause stipulating
that:
“Any dispute or difference between the parties arising out of the present agreement, provided it
is not settled amicably within 90 days, shall be finally resolved by three arbitrators pursuant to
the provisions of the Code of Civil Procedure, to the exclusion of the jurisdiction of state courts.“
The buyer issued cheques to pay for the beer, which were not paid within the time provided. As a
result, at the seller’s request a state court issued a payment order. The buyer filed an opposition
claiming that the agreement of the parties to arbitrate prevented state courts from issuing a payment
order, while in separate proceedings it sought to stay the enforcement of the payment order until the
opposition hearing.
Decision
Regarding the request for a stay, the court held that the opposition ground was likely to succeed and
granted the stay.(1) The court observed that this matter does not appear to have arisen in reported
case law, considering this to be a prima facie indication that parties which have agreed to arbitrate do
not consider a payment order to be an option. The court went on to say that the payment order
issuance procedure is not isolated, but related to the opposition against the payment order, and both
are an alternative to ordinary or special proceedings available to the parties in state courts. The court
invoked Article 624 of the Code of Civil Procedure, which stipulates that a payment order cannot be
issued if the underlying claim is subject to a condition. It further states that arbitration is such a
condition, and thus an agreement to arbitrate the underlying dispute divests state courts of their
jurisdiction to issue a payment order.
The court explained that arbitrators still have no jurisdiction to issue a payment order or hear an
opposition against it; nevertheless, a state court, although it lacks jurisdiction to issue a payment
order, cannot abstain from hearing an opposition against an already–issued payment order, as
otherwise the claimant would have an absolute procedural weapon (ie, succeeding in issuing an
enforceable title (the payment order) without the defendant having any possibility of defence through
opposition). Finally, the court stated that subsequent bearers of a cheque were not bound by an
arbitration agreement relating to the underlying relationship between the issuer and the recipient,
unless a subsequent bearer knowingly acted to the detriment of the issuer. However, the issuer and
the recipient are bound by their agreement to arbitrate.
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