Cross-Border Contract Claims Against a Polish Company: Damages and Recovery of Undue Charges

Cross-Border Contract Claims Against a Polish Company: Damages and Recovery of Undue Charges

A cross-border contract claim against a Polish company is a civil-law demand brought by a foreign counterparty (or a Polish party abroad) seeking monetary relief for non-performance or improper performance of a contract, or seeking the return of amounts charged without a valid legal basis. In practice, the two most common monetary tracks are (1) damages for breach of contract and (2) restitution for undue performance (often described as “undue charges” where invoicing exceeded the contractual or statutory basis).

Typical business scenarios and why early legal qualification matters

For international businesses, the legal qualification of the claim determines the evidence required, limitation periods, and recoverable amounts. Common scenarios include:

• Non-delivery, late delivery, or defective goods/services supplied by a Polish entity.
• Unilateral price increases, extra “handling” fees, or invoicing beyond agreed milestones.
• Termination disputes (e.g., alleged unjustified termination and “lost profit” claims).
• Double payment, payment to the wrong account, or payment under an invalid clause.

Applicable law and jurisdiction in cross-border disputes with a Polish company

Three layers usually govern strategy: (i) governing law, (ii) forum/jurisdiction, and (iii) enforcement.

Governing law: contract clauses and Rome I

Where parties chose the governing law, that choice is generally respected under Regulation (EC) No 593/2008 (Rome I) [1]. If no choice was made, Rome I provides default connecting factors (often the habitual residence of the party performing the characteristic obligation, subject to exceptions) [1].

Jurisdiction: courts, arbitration, and Brussels I Recast

For most civil and commercial matters involving EU parties (and, in many situations, EFTA states participating via the Lugano system), jurisdiction is assessed under Regulation (EU) No 1215/2012 (Brussels I Recast) [2], including special jurisdiction for contractual claims (place of performance). If an arbitration clause exists, the dispute may need to proceed in arbitration rather than state courts, with enforcement under the New York Convention [3].

Practical note: three recurring “exceptions” that change the roadmap

Cross-border claims often look straightforward until one of the following applies. These are frequent in disputes against Polish companies and should be checked early because they materially change timing and leverage:

1. An exclusive jurisdiction clause or arbitration clause may require the claim to be brought in a specific forum, regardless of where the Polish company is registered.
2. Insolvency of the Polish company can shift the case into insolvency proceedings, where individual litigation may be stayed and recovery depends on filing claims in the insolvency framework.
3. Consumer-status or employee-protection rules (when applicable) may override standard jurisdiction or choice-of-law assumptions and impose mandatory protective regimes.

Damages for breach of contract under Polish law: scope and proof

If Polish law governs (or if Polish courts apply Polish law), the baseline for contractual damages is found in the Polish Civil Code (Kodeks cywilny) [4]. As a rule, the injured party may seek compensation for losses that are a normal consequence of the breach (adequate causation), typically covering actual loss (damnum emergens) and lost profits (lucrum cessans), depending on proof [4].

What must be shown

• Existence of a valid contract and the obligation breached (including specifications, acceptance criteria, SLAs, Incoterms, or change orders if incorporated).
• Non-performance or improper performance by the Polish company.
• Damage quantified in a business-sound manner (cost of cover, rework, project delay costs, margin impact), supported by documents.
• Causal link between breach and loss (with attention to mitigation and intervening causes).

Contractual limitations and liquidated damages

Many cross-border contracts include caps, exclusions (e.g., indirect loss), and contractual penalties. Under Polish law, contractual penalties (kara umowna) are generally permissible and may be reduced by a court if grossly excessive (miarkowanie) or if the obligation has been performed in substantial part [4]. The exact outcome depends on clause wording and the factual record, including proportionality to the breach and the debtor’s performance.

Recovery of undue charges: restitution (undue performance) and unjust enrichment

When a Polish company collected money without a valid legal basis, the typical Polish-law route is a restitution claim based on unjust enrichment and undue performance (świadczenie nienależne) under the Civil Code [4]. This can apply where:

• Payment was made despite no obligation existing (e.g., invoicing outside the contract scope).
• The underlying obligation was invalid or ceased to exist (e.g., contract nullity, termination effect on certain fees).
• Payment exceeded the agreed price (e.g., incorrect indexation, duplicated VAT base, unauthorized surcharges).

Key business advantages and constraints

Restitution claims may be procedurally efficient because the primary focus is the absence of legal basis, not the full damage model. However, the Polish company may raise defenses, including that the payor knew payment was not due, provided the payment was not made with a reservation of return and no statutory exception applies, or that restitution is limited by specific circumstances described in the Civil Code [4]. The viability is fact-dependent and document-driven (contract version control and invoicing trails are critical).

Pre-action steps: evidence, notices, and settlement positioning

Before filing a cross-border claim, the legal team typically secures the evidentiary package and aligns it with the legal basis (damages vs restitution). Recommended actions:

• Preserve written communications, purchase orders, acceptance protocols, and payment confirmations.
• Prepare a claim chart: invoice-by-invoice identification of the “undue charge” component or a loss breakdown for damages.
• Send a formal demand letter identifying legal basis, amount, and deadline; in many commercial settings this supports later cost arguments and settlement leverage.
• Assess interim measures (e.g., security for claim) where risk of dissipation exists – subject to procedural requirements.

Limitation periods and timing risk

Limitation periods depend on the type of claim and the legal relationship. Under Polish law, limitation rules are regulated in the Civil Code [4], with additional nuances for commercial dealings and periodic claims. In cross-border matters, conflict-of-law rules may point to another limitation regime, so the governing law analysis under Rome I is not optional [1]. Timing should also account for service abroad (if relevant) and evidence collection from multiple jurisdictions.

Enforcement: turning a judgment or award into cash

A favorable outcome must be enforceable where the debtor’s assets are located. For EU judgments, Brussels I Recast simplifies recognition and enforcement within the EU [2]. For arbitral awards, enforcement typically proceeds under the New York Convention framework [3]. If assets are in Poland, domestic enforcement will follow the Polish Code of Civil Procedure and enforcement rules, including the role of court enforcement officers (komornik) [5].

Information disclaimer

This is informational material, not legal advice. The correct legal basis, forum, limitation period, and recovery strategy depend on the contract wording, governing law, evidence, and the debtor’s asset and solvency profile.

For a structured assessment of cross-border damages or restitution options against a Polish counterparty, a prudent next step is to contact us at Lawyersinpoland.com by Kopeć & Zaborowski.

FAQ: Cross-Border Contract Claims Against a Polish Company

1) Should the claim be framed as damages or as recovery of undue charges?

That depends on whether the key problem is breach causing loss (damages) or payment without a legal basis (undue performance/unjust enrichment). In many disputes, both are pleaded in the alternative, subject to the governing law and the facts.

2) Can a foreign company sue a Polish company in Poland even if the contract is in English?

Yes. Contract language does not determine jurisdiction. Jurisdiction is driven by the agreement (jurisdiction/arbitration clause) and, in EU cases, by Brussels I Recast rules on domicile and place of performance [2].

3) Are contractual penalty clauses enforceable against a Polish company?

Often yes, if properly drafted and linked to non-monetary obligations. Under the Polish Civil Code, courts may reduce a penalty that is grossly excessive or where the obligation has been performed in substantial part, depending on performance and proportionality [4].

4) What documents are most important to recover undue charges?

The signed contract (and amendments), price schedules, change orders, acceptance protocols, invoices, and bank confirmations. Version control and proof of what was agreed at the time of invoicing are usually decisive.

5) Does insolvency of the Polish company prevent recovery?

It can significantly change the recovery path. Claims may need to be filed in insolvency proceedings and recovery depends on ranking, the estate, and procedural deadlines under Polish insolvency rules [6].

6) Can a judgment obtained abroad be enforced in Poland?

In many cases yes. EU judgments benefit from the Brussels I Recast enforcement regime [2]. Non-EU judgments require an analysis under Polish procedural rules and applicable treaties, and arbitration awards are typically enforced under the New York Convention [3].

Bibliography

[1] Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I).

[2] Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I Recast).

[3] Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958).

[4] Act of 23 April 1964 – Civil Code (Poland) (Kodeks cywilny).

[5] Act of 17 November 1964 – Code of Civil Procedure (Poland) (Kodeks postępowania cywilnego).

[6] Act of 28 February 2003 – Bankruptcy Law (Poland) (Prawo upadłościowe).