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How quickly and effectively can a conflict be resolved in business to avoid court?

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Date05 Apr 2017
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Tylor Wessing
 

Business ServicesWhen entering into an agreement or undertaking new business ventures one can never be sure that sooner or later there will be no disagreement or misunderstanding, which may result in a conflict between business partners. This may be related not so much to ill will of the parties, but changes to external forces which can affect business relationships.

Therefore it is worth considering to properly prepare yourself at the beginning of the working relationship for the worst-case scenario. This can be done by arranging mediation with a business partner.

Mediation is becoming an increasingly popular form of solving various conflicts, and this is as a result of the new regulations which aim is to promote this institution and came into force last year. Still, few entrepreneurs in Poland are fully aware of this method and most of them learn about mediation only after the court proceedings.

Mediation as a form of alternative dispute resolution is a legal tool which does not require many formalities, therefore it is extremely flexible and effective, and thus functions as private mediation, which means entrepreneurs can take advantage of it before filing a lawsuit to court.

Only advantages

What benefits can an entrepreneur have when choosing mediation, besides the savings associated with not having to pay for the court fees?

The primary benefit of mediation is the time necessary to resolve the dispute, which can often be resolved in a few weeks instead of a few years (as in the case of a court trial). Mediation also brings considerable cost savings. According to statistics solving a dispute through mediation costs about ten times less than traditional litigation.

In almost each commercial dispute with the help of a professional mediator, the parties can reach a settlement on the basis of which they can not only solve the existing dispute, but also regulate their future.

As practice shows, the level of satisfaction of entrepreneurs with a developed settlement is usually significant enough that the parties proceed to its implementation without any obstacles.

“The International Mediation Center conducts private commercial mediation among both international and domestic entrepreneurs, mediation within companies, as well as with the public sector.

Private mediation is popular with commercially aware entrepreneurs who recognise that this is an effective method to resolve a conflict. It also saves time and money in contrast to expensive and lengthy court proceedings and mediation is beneficial for the entrepreneur’s reputation. We hope that Polish entrepreneurs will increasingly move across to this form of resolving commercial disputes and not only disputes involving foreign entrepreneurs, but also domestic. Entrepreneurs have no desire to get embroiled in lengthy court proceedings lasting several years. It is far easier to take control of the situation and go to a professional mediator”- says Elisabetta Caprino, Secretary General of the Italian Chamber of Commerce in Poland, co-initiator international Mediation CenterCentre.

Important contractual clause

However it is worth mentioning that in principle any settlement reached during mediation may be approved by the court and have the power of a court judgement (such approval of a settlement in court is purely a formality and usually takes a few days).

However, in order to conduct mediation, consent from both parties is necessary, which can be expressed in any contract between them, in the form of an additional mediation clause.

Almost all private mediation centres offer such a clause, which can be incorporated into an agreement between entrepreneurs usually in the contract section called “Final Provisions”.

Below you can find an example of a mediation clause in the Polish and English languages recommended by the center of mediation conducted by bilateral chambers of commerce.

Mediation Clause of the International Mediation Center in Warsaw

Any dispute which results from such an agreement or which are connected, can be settled amicably by the International Mediation Center at the International Chambers of Commerce in Poland. If the parties cannot reach a settlement through a mediation proceeding within 60 days from filing the motion for mediation or other term agreed in written form by the parties, each party can file a case to the appropriate court.

Case study – Mediation between Polish entrepreneurs who were shareholders of a capital company

A case which is a combination of internal mediation and mediation between entrepreneurs. The dispute concerned two former shareholders of a capital company, who parted after a few years of working together and wanted to arrange matters related to the unsettled payment of an invoice between the parties in the most professional manner. Their business paths diverged some time ago but the issue of unpaid invoices was suspended and weighed heavily on mutual relationships, which simultaneously was threatening their image in a fairly narrow industry where news travels fast.

The case was complicated due to the fact that the shareholders had not entered into any formal written agreement as to the disputed payments and had not determined the conditions under which the payment should be settled. In fact it was only their oral agreements which were in place, however, which is often the case, these ceased to exist when the relationship between the former partners deteriorated.

Each party treated this settlement like a “hostage” situation until it was possible to clarify and close all matters which related to their former company. Although in terms of business they were independent entities, the unfinished business “divorce” was quite an important obstacle in mutual settlements of the separate entities.

This case is of particular interest for entrepreneurs – the former partners deliberately volunteered to a private mediation and acted without any external motivator in the form of e.g. a court referral. Their determination to professionally resolve the dispute was so strong that at the first mediation session meeting at the International Mediation Center, during which the parties effectively passed on the merits, and actually the matters, because as it turned out, despite the initial assumption that it is two separate entities, the mediator effectively touched the issue of their unfinished business “divorce” to clarify some important topics. Thereby this launched mediation between the entrepreneurs which was treated as two separate entities, they addressed the topic of mediation between the partners, who had still not dissolved the company.

Both entrepreneurs readily adapted to the binding terms and principles of mediation, which contributed to its rapid conclusion. With the help of a mediator they found a solution in less than two hours. The developed settlement not only solved the issue of payments, but they agreed on the terms and conditions as to future business contacts. It is worth mentioning that the entrepreneurs engaged in completely new business ventures with new partners and found a certain area of possible future common cooperation.

The applied method of mediation is based on the “U” model which is promoted within the International Mediation Center which proved to be an extremely effective tool. This case is also an example of a very conscious and professional approach to out of court dispute resolution methods.

 

On the expert

ExpertEwelina Stobiecka, PhD Managing Partner at Taylor Wessing Warsaw, the initiator and coordinator of the International Mediation Centre at the international chambers of commerce, a member of the Commercial Law Think Tank Team at the Ministry of Development.

Ewelina has many years’ experience in providing legal advice to entrepreneurs with regards to various aspects of their activity and development, as well to international companies investing in Poland.

The scope of her practice includes both advice in large inter-disciplinary projects and ongoing legal advice. A particularly important area of her activity is solving many forms of economic disputes between entrepreneurs.

She acts both in the role of negotiator and mediator, while promoting and widely using commercial mediation, which allows resolving disputes between entrepreneurs out of court in a more cost-effective and timely manner.

Ewelina Stobiecka is an avid observer of the domestic Polish and worldwide economies. She participated in numerous editions of the World Bank Report “Doing Business” (Poland). She is also the author of various publications concerning economic and legal matters.

About Taylor Wessing:

Taylor Wessing is a full-service international law firm. More than 1,200 lawyers advise clients in the world’s most dynamic industries. We take a single-minded approach to advising our clients, helping them succeed by thinking innovatively about their business issues. We support clients wherever they want to do business. Our 33 offices* in Europe, the Middle East and Asia as well as our two rep. offices in the USA are not token presences – they blend the best of local business, industry and cultural knowledge with international experience to provide astutely commercial solutions for our clients.

* including our associated offices in Indonesia, Saudi-Arabia and South Korea

About the International Mediation Centre:

The International Mediation Centre constitutes a platform for out-of-court dispute resolution, which is available for all entrepreneurs especially members of the International Chambers of Commerce in Poland. The International Mediation Centre’s objectives are to facilitate conducting a business activity in Poland, including assistance in out-of-court commercial dispute resolution and the introduction and promotion of the best standards related to out-of-court commercial dispute resolution.
Initiators of this venture are the International Chambers of Commerce and Ewelina Stobiecka, PhD, who is a mediator, a lawyer and the Managing Partner in Taylor Wessing in Warsaw and the Coordinator of the International Mediation Centre and Aleksandra Gąsowska, Managing Partner in Infinity PR&MarComm, General Secretary of the International Mediation Centre.
The declaration of establishment of the International Mediation Centre was signed by the British-Polish Chamber of Commerce, the French Chamber of Commerce, the Polish-Spanish Chamber of Commerce, the Italian Chamber of Commerce in Poland, as well as the Belgian Chamber of Commerce. The project is also supported by the Ministry of Economy. Partner of the International Mediation Centre is Lower Silesian Chamber of Commerce.
The International Mediation Centre is unique in that it provides entrepreneurs the opportunity to conduct mediation in numerous languages both on a local and international level; a list of mediators has been created and is continuously being updated. The mediators are experts in particular industries, who conduct mediation in various languages and have the theoretical background and practical experience, as well as extensive knowledge of cultural context.

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