Before you go to court - mediation and arbitration
A dispute with a debtor does not have to end in court. Mediation or arbitration allows for a much quicker settlement of business disputes than court cases.
Mediation
Mediation is a form of amicable dispute resolution, which is ideal for disputes involving your company. It is an amicable, confidential and out-of-court method of resolving disputes between entrepreneurs, in which an impartial and independent person (a professional mediator) helps the parties to a conflict to find a solution. Mediation in commercial and civil matters is regulated by the Code of Civil Procedure.
Thanks to the reduction of formalities, mediation allows for faster and cheaper completion of a dispute (conclusion of a settlement in the course of court proceedings results in reimbursement of 3/4 of the court fee on the statement of claim). The added value of mediation, apart from developing a satisfactory agreement between the parties, is that the parties to the conflict maintain good relations and they can continue their cooperation. Such a situation rarely occurs after a long court dispute.
What is important, it is the parties who decide how the mediation will be conducted and choose the person of the mediator. Mediation is also voluntary and can be terminated at any time.
Remember also that the commencement of mediation in civil cases interrupts the limitation period of the claim.
What is mediation?
Mediation is a kind of negotiation "managed" by a mediator chosen by the parties. The aim of mediation is to work out a legal solution to the dispute and its conclusion (especially in the form of a settlement concluded by the parties). The mediator does not resolve the dispute and does not impose its resolution. His/her task is to help the parties to identify their interests and establish a dialogue. The mediation process is voluntary and confidential, conducted in comfortable conditions for the participants. The success of the whole mediation process depends to a large extent on the professionalism of the mediator, as well as the high level of his/her professional ethics.
How to refer a dispute to mediation?
Even at the stage of concluding a contract with a contractor, you can introduce a provision in the contract that in the event of a dispute, the parties will primarily resolve it through mediation. The agreement may provide for mediation to be conducted by a mediator. You can indicate a specific person or a specific mediation centre that keeps a list of mediators and from this list the parties can choose a mediator together.
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You can contact the Mediation Centre at the Court of Arbitration at the Polish Chamber of Commerce.
An exemplary mediation clause in a contract may sound like this: "All disputes arising out of or in connection with this contract shall be resolved by mediation by a mediator of the Mediation Centre of the Court of Arbitration at the Polish Chamber of Commerce, in accordance with the Rules of that Court - in force on the date of submission of the request for mediation".
Mediation can also be carried out after a dispute has arisen, in which case the parties have the option of registering for mediation by a specific mediator or by a specific mediation centre. A mediation agreement may also be concluded by a party's consent to mediation if the other party has submitted a request for mediation to a mediator or to a mediation centre.
The court may decide to refer the parties to mediation until the closure of the first session scheduled for the hearing. After the closing of the hearing, the court may refer the parties to mediation only at the unanimous request of the parties. The mediation may not be addressed to cases heard in prescription, writ of payment and simplified proceedings.
Mediation proceedings are not public. The mediator is obliged to keep confidential the facts of which he learnt in connection with mediation.
A report is drawn up on the course of mediation, which contains information about the place and time of mediation, as well as the name, surname and addresses of the parties, the name and address of the mediator and the outcome of the mediation. If the parties have concluded a settlement before the mediator, the settlement shall be recorded in the report or annexed to the report. By signing the settlement, the parties agree to apply to the court for its approval.
After concluding the settlement agreement, the mediator sends the report to the court which would have jurisdiction to hear the case according to its general or exclusive jurisdiction, and if the court refers the case to mediation, the mediator submits the report to the court which will hear the case.
- Importantly, a settlement agreement concluded before the mediator, after its approval by the court, has the force of law of the settlement agreement concluded before the court. A settlement concluded before a mediator, which has been approved by giving it an enforcement clause, becomes an enforceable title.
For whom is mediation
Mediation is particularly suitable for disputes arising from long-term contracts, construction and real estate disputes. It is also a good way to resolve conflicts in which the brand and reputation of the company is important and those that need to be resolved quickly in order not to disrupt the functioning of the company. Mediation can also be used in international disputes. Mediation in cross-border disputes is governed by Directive 2008/52/EC, which, among other things, requires Member States to ensure that a request for a settlement is enforceable. However, mediation does not apply, inter alia, to tax, customs or administrative matters.
Arbitration
Arbitration is an out-of-court, informal method of resolving disputes between entrepreneurs. The advantage of arbitration is its uniformity, lower and pre-determinable costs and speed of reaching an agreement, as opposed to conducting a court dispute. The parties to the arbitration proceedings have the opportunity to maintain good economic relations and to continue their cooperation. Issues related to arbitration proceedings are regulated in the Code of Civil Procedure.
You should know that a judgment of an arbitral court after its enforcement has the same binding force as a judgment of a common court.
Advantages of arbitration
The principle of arbitration is first of all its flexibility. It is the parties who decide on the choice of a specific court and arbitrators who will decide on a given case. Arbitrators know the realities of the market, the requirements related to running a business and the specificity of a given industry (they are specialists in a given field, e.g. construction industry or real estate sector) - all these factors greatly facilitate the resolution of a dispute. Arbitration proceedings are confidential (which ensures, among other things, the confidentiality of business secrets) and conducted in a comfortable atmosphere for the parties.
Permanent arbitration courts are usually located next to chambers of commerce. They operate on the basis of their own rules of procedure and keep lists of arbitrators. These courts have specific tables of commissions, which ensures that the parties are able to determine the costs they need to bear. Some courts have a cost calculator on their websites.
Arbitration clause
When can you take advantage of arbitration? There are three possibilities:
- making an arbitration clause in the contract
- the conclusion of an additional arbitration agreement when a dispute arises (compromise)
- introduction of an arbitration clause to the statute of the company, foundation, association.
Conclusion of the so-called arbitration clause in the agreement enables the arbitration court to settle the dispute. As a rule, the arbitration clause should be made in writing. The agreement should indicate the subject matter of the dispute or the legal relationship from which the dispute has arisen or may arise. The written form is retained if the provision has been included in the letters or statements made between the parties by means of remote communication, which allow their content to be recorded (e.g. in an annex to the agreement, e-mail correspondence, in an invoice).
The conclusion of an arbitration clause in the contract of the parties may take the form of an example: "Any disputes arising out of or in connection with this agreement shall be resolved by the Court of Arbitration at (indicate the court herein) in (indicate the locality) in accordance with the Rules of this Court in force on the date of filing the statement of claim. The solution is also to introduce an arbitration clause in the statutes of the company, foundation, or association.
Arbitration is dealt with, among others, by the Court of Arbitration at the Polish Chamber of Commerce.
Mediation or arbitration?
A friendly settlement of disputes in business has many benefits - it not only allows you to avoid costly and long-lasting court proceedings, but also gives you a chance to continue cooperation with the partner with whom we have entered into a dispute. By choosing an amicable way, you may face the problem of what kind of proceedings to choose. When to use arbitration, and in what cases will mediation suffice?
First of all, you should choose mediation when you are still engaged in cooperation and the dispute prevents you from continuing it. We will choose arbitration when it is no longer possible to solve the dispute on your own.
Mediation and arbitration - differences
It is worth knowing what the basic differences between mediation and arbitration are. Mediation differs from arbitration in that a dispute is resolved by the parties with the participation of a mediator. In arbitration, the case is submitted to the arbitration court, in which the arbitrator will settle the dispute, admitting that one of the parties is right. In other words, the mediator supports the dialogue between the parties, seeks a compromise, while the arbitrator decides who is right.
Mediation is also different from an inducement to settle by a court - a judge, when inducing the parties in court proceedings to settle a dispute, has a limited mode of action, can only indicate the advantages of a settlement. The mediator has the possibility of unlimited dialogue, identifying the causes of the conflict, considering various alternatives and joint resolution of the dispute. Remember, mediation is cheaper, but it does not always guarantee that the dispute will be resolved in a binding way - e.g. it is not possible to seek a settlement abroad. The mediation fee is usually lower than the arbitration fee.
Medarb and arbmed
If the mediation procedure does not lead to a settlement, it is possible to refer the case to arbitration. However, this entails additional costs and the need to initiate new proceedings. This can be avoided in advance by opting for the medarb or arbmed procedure.
Medarb - in the case of non completion of mediation, the case is referred to the arbitration court.
Arbmed - as a result of the arbitration case conducted, the parties agree that mediation would be useful for the resolution of the conflict. The case may be reverted to arbitration.
The so-called multi-step clause may also be applied. It means that before the commencement of an arbitration case, the parties must undergo mediation for a specified period of time - only when mediation does not lead to the settlement of the dispute within the time limit specified by the parties, it is possible to bring the case to arbitration proceedings.