Dr Ewelina Stobiecka

radca prawny

I’ve been supporting entrepreneurs for almost twenty years in resolving commercial disputes in and out of court. I represent my clients as an attorney and negotiator and also act as a commercial mediator...
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Online commercial mediation

Ewelina Stobiecka17 June 2020Comments (0)

Online commercial mediation

Commercial mediation is an increasingly used form of dispute resolution. The new civil procedure, which is only a few months old, is also conducive to its application and is based on amicable methods of dispute resolution during the so-called preparatory meeting, which is a new element of the classic court process.

The flexibility of the mediation procedure, the cost and time efficiency of this form of mediation among the available alternative methods of conflict resolution, makes it increasingly common for entrepreneurs to decide on mediation even before their case goes to court.

Such economic mediation – private – not only gives the parties full confidentiality regarding the dispute resolution process, but also involves the parties directly in the process of seeking creative solutions. The settlement reached in mediation is therefore a joint achievement of the parties acting with the participation of a professional mediator who actively supports the parties in this process.

Online dispute resolution,
applicable also in the court

Mediations can also take place online, which is used not only in conditions of forced social isolation caused by the epidemic, but also in situations where the parties for some reason, even logistical, cannot meet in one place.

Besides, the online form is also commonly used in arbitration, where witnesses or parties can be questioned using instant messaging.

This form will also be used by courts in Poland, as envisaged by the legislator in the last part of the “anti-covid” regulations, indicating that:

during the period of an epidemic or a state of epidemic danger and within one year of the cancellation of the last one, a hearing or an open meeting shall be held using technical devices enabling them to be conducted at a distance with simultaneous transmission of video and sound (…) unless holding a hearing or an open meeting without the use of the above devices will not cause an undue threat to the health of persons participating in it (art. 15 zzs’ of the Act on special arrangements for the prevention, prevention and combating of COVID-19, other infectious diseases and crisis situations).

Technical issues

Choosing the right communicator to conduct online mediation is the task of the mediator and the mediation centre offering such mediation. The only requirement is to ensure the confidentiality of the process as well as the possibility to hold joint and individual meetings with each of the parties.

This requires the use of a communicator providing the possibility of creating virtual rooms (2 or 3 at the same time), where the parties can talk individually with the mediator and meet all participants of the mediation in joint sessions.

Details concerning the use of a particular communicator as well as the conditions for conducting mediation in general are regulated in the mediation agreement concluded by the parties with the mediator or mediation centre.

If you want us to help you solve a dispute in business, please contact us under:

tel.: +48 669 73 79 79e-mail: e.stobiecka@taylorwessing.com

BIT and investment mediationThe effects of the pandemic will be felt globally. Lawyers of different jurisdictions, counting the losses of their clients, are considering the possibilities of claiming damages, for which there are different legal grounds.

It appears that investors from non-EU countries may soon be able to protect their investments in the EU better than intra-EU investors. Why?

Well, on 5 May 2020, 23 EU Member States have concluded an Agreement on the termination of Bilateral Investment Treaties (BITs) between the Member States of the European Union (“the Agreement”).

Thus, investment arbitration based on intra-EU bilateral agreements will soon be impossible. Of course, EU investors will be able to look for other grounds for their claims, not least the Agreement recently concluded by most EU Member States ends an era in investor relations.

As mentioned above, however, the Agreement does not apply to all EU countries, the other four countries that “broke out” are: Austria, Finland, Ireland and Sweden. Their intra-EU bilateral agreements therefore remain intact.

The signed agreement is still to be ratified and is due to enter into force 30 calendar days after the date on which the Secretary-General of the Council of the European Union receives an instrument of ratification, approval or acceptance from two Member States (it therefore takes effect for each third and subsequent Member State 30 calendar days after the deposit of its instrument of ratification, approval or acceptance).

It all started in Slovakia

The decision to dissolve the intra-EU BITs concluded by the Member States follows the judgment of 6 March 2018 in the case of the Slovak Republic vs Achmea BV (C-284/16). The Court of Justice of the European Union concluded in this judgment that a system where different types of State-investor protection existed throughout the EU is incompatible with EU law.

The Court considered that the possibility of arbitration on matters which may concern the application of EU law undermines the primacy of EU law and the role that the Court plays in its interpretation. The Court has consistently found that EU law prevents individual Member States from agreeing on investor and state protection bilaterally.

Following the Achmea judgment, all EU Member States signed on 15-16 January 2019 declarations (whereby Finland, Hungary, Luxembourg, Malta, Slovenia and Sweden refused to sign the Energy Charter Treaty “ECT” commitment) in which they committed to terminate all bilateral investment agreements concluded between them under a multilateral treaty or, if more favourable to both parties, bilateral.

The Agreement is one of the main steps in implementing these declarations. In addition, it also covers those BITs that have already been dissolved but, due to so-called ‘sunset clauses’ – still valid. The expiry clause is a provision which extends the protection of investments made before the date of BIT termination for another period.

Among other things, Poland started to terminate its intra-EU investment agreements already in 2017.

What about pending arbitration proceedings
or those with a judgment?

The Agreement provides that arbitration clauses in terminated bilateral agreements can no longer serve as a legal basis for initiating new proceedings. As a result, investors who have not yet initiated proceedings will no longer be able to do so.

However, the question remains open as to what will happen to ‘pending’ proceedings. Certain categories of cases are proposed here, i.e. “Arbitration Proceedings in progress” and “New Arbitration Proceedings”.

The former are proceedings initiated before 6 March 2018, which is the date of the Achmea judgment, and are not completed, while the latter are proceedings initiated on or after 6 March 2018.

Where one of the signatories to the Agreement is a party to pending or new arbitration proceedings, the Agreement provides that it must inform the arbitration tribunal that the arbitration clause contained in the relevant BIT does not apply.

In addition, the signatory must ask the competent national court to set aside, annul or refrain from recognising and enforcing any arbitration award already made in the context of such arbitration proceedings.

Lawyers of different jurisdictions express their concerns about these requirements.

It is argued that these requirements are intended to retroactively (and unilaterally) remove rights that one party has decided to exercise. They may also conflict with certain conventions, such as the International Centre for Settlement of Investment Disputes (ICSID).

There are now more questions than answers, including, for example, how national courts will deal with arguments based on the unilateral termination of an arbitration agreement, in particular where recognition and enforcement is sought outside the European Union.

Structured dialogue in ongoing arbitration proceedings /
facilitation or “investment mediation”?

The agreement between EU countries also provides that both parties – investor and state – may, under certain conditions, engage in a so-called “structured dialogue” with a view to launching a settlement procedure.

Thus, it may turn out that the arbitration procedures used so far (sometimes very complicated and formalised) will be replaced by a “dialogue”, which in the case of such disputes may be classical mediation or economic facilitation.

Or maybe it is worth to start talking about “investment facilitation” or “mediation”?

As proposed in Article 9 of the Agreement, an investor who is a party to arbitration proceedings in progress may request the ‘Contracting Party’ participating in those proceedings to enter into a settlement in accordance with the procedure set out in that Article, provided that:

(a) the arbitration proceedings in progress have been suspended at the request of the investor, and
(b) if an award has already been given in the course of arbitration proceedings but has not yet been finally enforced or enforced, the investor undertakes not to seek its recognition, enforcement, enforcement or payment in a ‘Member State’ or in a third country or, if such proceedings have already begun, to seek its suspension.

The Agreement provides for time-limits and a procedure for this dialogue, but it is important that the settlement procedure can only be initiated within six months of the termination of the PCA concerned.

The agreement also provides that the settlement procedure is supervised by an impartial facilitator to determine whether it is amicable, legal and fair between the parties.

The facilitator shall be appointed by common agreement between the investor and the “Contracting Party” concerned acting as respondent in the relevant arbitration proceedings. He shall be chosen from persons whose independence and impartiality are beyond doubt and who possess the necessary qualifications, including a thorough knowledge of Union law.

He may not be a national of the Member State in which the investment took place or the investor’s home Member State and may not be in a position of conflict of interest. The Agreement also provides for an indicative schedule of facilitator fees as set out in Annex D to the Agreement.

If an agreement is reached, the parties to the proceedings are obliged to accept it in a legally binding manner and without undue delay. The terms of the settlement must include: (i) an undertaking by the investor to withdraw the arbitration claim or to waive enforcement of an existing award or, where applicable, an undertaking to take into account any compensation paid previously in the course of the arbitration proceedings in order to avoid double compensation, and (ii) an undertaking to refrain from initiating new arbitration proceedings.

Whether it will be a classic facilitation or investment mediation, we will probably find out not only by learning the names of the indicated experts, but also the fate of the first proceedings using this procedure.

The signed Agreement opens a completely new chapter in bilateral relations between the EU countries, related to the protection of mutual investments. Of course, a lot of questions arise, including those indicated above. In addition, given the different dispute resolution cultures in different European countries, only the first experience of the ‘structured dialogue’ will show how strong and effective it will be.

If you want us to help you solve a dispute in business, please contact us under:

tel.: +48 669 73 79 79e-mail: e.stobiecka@taylorwessing.com

Compensation for retail in CEEIn many European Union countries, entrepreneurs are counting the losses caused by the coronavirus pandemic, or more precisely the losses caused by the restrictions introduced in their activity by the states in connection with the fight against the pandemic.

The situation particularly affects the retail sector, including small, medium and large enterprises in the shopping centre sector, which generates about 30% of the value of retail trade in Poland and is an important contributor to the budget, employing around 650,000 up to 1 million employees directly and indirectly.

Of course, entrepreneurs, as other citizens understand the situation and reasons for the restrictions introduced, all the more so because the restrictions introduced are those to property rights and civil liberties, and the Constitution of the Republic of Poland makes it possible to measure compensation for material losses only in the case of emergency situations, entrepreneurs are entitled to compensation.

It transpires that claims for damages are more often formulated due to either illegal or discriminatory action of governments, which introduce restrictions without deeper legal reflection, and thus are legally flawed. Such position usually leads to  far-reaching deficiency of the introduced legal acts.

Such lawsuits are already filed, for example, in Austria, where one of the restrictions differentiated entrepreneurs according to the trade area (the so-called “zoning ban”) in a discriminatory manner and made it impossible to adjust the trade area to the requirements of the defective law, which is also discussed in more detail below.

In Hungary, one of the potential grounds for claiming compensation may be the recently introduced “extraordinary retail tax”. This tax seems to be levied in Hungary in a similar manner on both retail chains that may continue to operate during coronavirus restrictions and on those which cannot operate for objective reasons. Such a situation is liable to breach both the principle of ‘fair and equal treatment’ and the principle of ‘equal legal protection’ to which traders are entitled.

A lively legal debate is also taking place with our southern neighbours, the Czech Republic. The Municipal Court in Prague has already declared unconstitutional provisions issued without the benefit of the ‘state of emergency’ legislation (referring to a similar institution in Polish law).

In response, the government took action to rectify this irregularity. The court also gave the government a few days’ deadline to implement the prohibition in a manner consistent with the Constitution. Concerns are also being expressed about the (non)constitutionality of the anti-crisis measures implemented by the government. Against this backdrop, corporate lawyers in the Czech Republic may also formulate claims for damages from the state.

Poland. Legal facts.

Similar thoughts and conclusions are formulated in Poland. In a very interesting text, which appeared on April 23rd in Rzeczpospolita, Andrzej Mikosz, the Minister of Treasury in the years 2005-2006, presented the effects of the difference between “epidemic” and “pandemic” in a very neat way. This is not only a terminological issue, but also a legal one which has far-reaching consequences for entrepreneurs and the state.

In his text, Mr Mikosz suggested that only the introduction of a state of emergency in Poland could limit claims (of entrepreneurs) against the State Treasury.  The previously existing state of epidemic emergency in Poland, and now the state of epidemics, were introduced in a defective manner.

It is important for potential – related to that state – claims of entrepreneurs where the fact that the regulation of the executive authority, on the basis of which the state of epidemic was introduced in Poland, does not have a presumption of conformity with the Constitution. This means that in a potential trial any judge may consider such a regulation as not binding in the case.

In Poland we have de facto state of coronavirus pandemic, which meets all the conditions to declare a state of emergency in Poland. In any such state, however, in accordance with the provisions of the Constitution as well as the detailed act relating to compensation for property losses resulting from the limitation of freedom and human and civil rights and freedoms in time (Act of 22 November 2002), entrepreneurs are entitled to compensation, which (however) has been limited (appropriately measured) by appropriate regulations due to the existence of the state of emergency.

There is no doubt, however, that also in the current situation (“epidemic state”) we are dealing with restrictions in conducting a business activity which directly affected the interests of entrepreneurs. Furthermore, a number of these may be considered in the context of a restriction of the right of ownership, which is reserved for the Act, and which, as we know, were introduced by an executive act of the Minister of Health, or even the Polish government i.e. with a clear violation to the Constitution.

The “state of epidemic” does not cause the limitation of the liability of the State Treasury for violating citizens’ freedoms and rights, e.g. for property losses resulting from the restriction of the right of ownership. No measure of State Treasury liability will be applied here.

The Constitution provides for a situation in which – in the name of protection of the higher good, the public good – it is possible to limit the freedom and rights of persons and entrepreneurs, while at the same time measuring the responsibility of the Treasury for their property losses. Such a situation only concerns an emergency state, and therefore not a “pandemic state”.

Therefore, in the current state of the “epidemic”, covering – in accordance with the content of the Regulation of the Council of Ministers – the entire territory of the Republic of Poland, there are no legal grounds to avoid or measure compensation for entrepreneurs who have suffered or will suffer a property loss resulting from the “mandatory” (and introduced in violation of the law) of the Regulation restrictions on rights and freedoms.

Thus, in each case in which it will be possible to demonstrate an adequate causal link between the loss and the limitations introduced by the “state of the epidemic”, there will be grounds for claiming compensation from the Treasury.

The legal basis for such claims may be the attribution of liability for damages to the Treasury on the basis of Article 417 § 1 of the Civil Code, which provides for such liability for damage caused as a result of illegal activity in the exercise of public authority.

Consequences for business

These legal “tricks” serve, in the current situation, entrepreneurs who have specific claims to the State Treasury for compensation caused by legally defective restrictions on their business activity.

Particularly affected industries, such as hotels, services or retail, can claim compensation from the State, regardless of any state action on the anti-crisis measures and support (so called anti-crisis shield) already introduced. It is of course not excluded that the court will take into account the aid received from the state when deciding on compensation. However, in no case can this aid exclude the liability of the State Treasury for illegal activities which lead to a reduction of entrepreneurs’ rights.

The discussion is particularly heated at the moment in the retail sector, which, as a result of restrictions and closures of shopping centres, does not operate for more than a month (or operates in a very limited way). Experts and analysts talk about the “earthquake” in this industry. The losses generated relate not only to lost profit from sales, but also to personnel maintenance costs, costs of renting premises or other fixed costs associated with the business (and currently not carried out).

In the current situation, there are no obstacles for an entrepreneur which operate in this industry to summarise its losses, calculate the costs and, with the help of lawyers, formulate a claim against the State Treasury.

With the state failing to utilise the facility  to measure liability, resulting from the Constitution of the Republic of Poland and reserved for state of emergency (and not epidemics state), may result in the calculated and raised claims being – sooner or later – adjudged.

Of course, each lawsuit filed is also (often) several years in a court battle. Today, all companies are fighting for survival. Those that will survive will be able to claim not only support but also compensation during the period until the statute of limitations for their claims. Creditors, and especially managers of those who do not survive, will even have to raise such claims to avoid their responsibility, often personal responsibility.

Case study: Austria

Similar opportunities are available to retail businesses in Austria and, as shown by the practice of the Austrian retailer, are already being used. There, among others, the general order of the Minister of Health, which only allowed shops with an area of 400 m2 or less to be open as of 14 April (the so-called ‘zoning ban’), is contested. According to my colleague, Ivo Deskovic from TaylorWessing’s Vienna office , the larger entrepreneurs, including those who had more than 400 m2 of sales space, but who declared their willingness to reduce it to the allowed 400 m2, were omitted.

Furthermore, Austrian lawyers dispute the same order in so far as it allowed grocery shops to be opened after 16 March and non-food products to be sold there as well, whereas non-food shops had to remain closed. The unfortunate order on the Austrian entrepreneur is therefore being criticised  in a two-stage procedure, the first one being referred to the Austrian Constitutional Court, in which they challenge the general order of the Minister for Health. In the second stage, they will submit an action for compensation by the State for losses.

Austrian lawyers speak of a breach of the principle of equal treatment, of the right to conduct business and also facility of the right to unencumbered property. The provision of law, which came into force on 16 March, stating that the compensation scheme provided for in the Austrian Epidemics Act of 1950 would not apply to the coronavirus crisis, is also questioned.

Cost of Errors

As you can see, entrepreneurs have a weapon to fight for compensation, and the mistakes of those in power and legally flawed restrictions on doing business are a European ‘epidemic’.

Each state of emergency, natural disaster, pandemic or epidemic is an emergency, unexpected state and it is difficult to talk about the possibility to prepare for such state by Mr. Kowalski (or Hans Meier in Austria) or by the entrepreneur. Therefore, the system of each state under the rule of law provides for such situation both the possibility of limiting the rights and freedoms of a human being and a citizen (entrepreneur), as well as appropriate – related – compensation, whichmay be measured by appropriate laws and this is also the case in Poland, but only in the case of emergency state situations. If this state is not introduced, which can at least be qualified as an omission of state authorities, and rights and freedoms are nevertheless restricted, then compensation is all the more justified.

For no one is able to adequately prepare for such a situation, and this state, acting both in the sphere of its dominium as well as imperium, has or should have adequate means to combat the effects of such a state in various areas of social and economic life.

If you want us to help you solve a dispute in business, please contact us under:

tel.: +48 669 73 79 79e-mail: e.stobiecka@taylorwessing.com

Dispute resolution in pandemic

How to resolve disputes when the courts are not functioning? Where to go for help regarding a business dispute at this particular time? What about disputes which are already pending in court?

These and other questions are undoubtedly being asked by entrepreneurs at this difficult time for the economy and business.

Entrepreneurs also review their contracts in search of clauses related to force majeure or   extraordinary situations. And since contracts are written for hard times, they will undoubtedly find such clauses in many contracts and apply them. The question remains, however, how to resolve disputes in a situation where the courts do not function and the parties have agreed to resolve possible conflicts by a competent common court. What should entrepreneurs whose cases already pending in the courts are being dismissed and (probably) will find themselves at the end of the queue in an already overloaded court system?

Of course, contracts may also include a clause for an arbitration court, the so-called arbitration clause, which allows bypassing the common court. The question arises, however, whether the arbitration courts – even if they are functioning – will be able to deal with the case? Considering the rather high formality of the arbitration procedure, it may transpire that at this particular time when entrepreneurs are currently operating, arbitration courts will not be able to proceed normally. Any dispute resolution by a court (common or arbitration) involves meetings of the parties, experts, witnesses during a hearing or court session, which requires the participation of at least a few people.

Of course, practice will show how far arbitral tribunals will be able to adapt to the situation. However, entrepreneurs who have a business dispute or whose dispute has just “become bogged down” in a common court may use other alternative dispute resolution methods. Any dispute can be resolved through commercial mediation, which in turn may prove to be quite an effective tool that can also be used during a pandemic.

Mediation as a remedy for difficult times

Commercial mediation has been experiencing a revival in Poland in recent years. Mainly the legislative environment for mediation, including a number of subsequent amendments to the law are aimed at encouraging entrepreneurs to mediate.

Mediation is a highly informalized method of resolving disputes in business, which, in addition, is several times cheaper than court proceedings or arbitration proceedings. Mediation can also be carried out using various means of distance communication (by video- or teleconference, or even in writing on-line). Mediation in participation with a mediator can be carried out without their direct contact, i.e. – at present – without a threat to their health.

No special contractual arrangement between the parties is needed to use mediation. Mediation can also take place without a specific referral to a court when the parties themselves decide to have mediation conducted by an independent mediator of their choice or by an independent, specialised mediation centre (so-called private mediation).

In fact, mediation can not only resolve an existing dispute, but can also “mediate” special contractual terms and conditions under special circumstances such as a pandemic. This may be important precisely in a situation where the parties concluding the contract did not foresee certain circumstances of their performance, such as introducing a state of epidemics or epidemic threat throughout the country. Such situations and states of emergency can often lead to a disruption of business relationships between the parties or make it temporarily impossible. If the parties did not provide for such a situation in the contract, they may find themselves in a business poop. Commercial mediation may be helpful in such a situation, which will allow the parties not only to clarify differences in the interpretation of the agreement or its execution, but also to arrange the relationship for the future.

Classic commercial mediation consists of the participation of an independent mediator in communication between the parties in a dispute. The parties, as it were, moderated by the mediator in the mediation proceedings, strive to find a solution which would be acceptable to both parties. The mediation process should therefore lead to a win-win situation.

Settlement agreement replaces judgment

Practice shows that a solution achieved by both parties with the help of a mediator through commercial mediation is usually implemented by them on a voluntary basis and no steps are necessary to force the parties to implement the settlement reached. It is worth remembering, however, that the settlement reached through economic mediation can be confirmed in court. In such a situation, the mediator or attorneys of the parties ask the court to set a special court hearing during which the settlement agreement is formally approved by the court, which becomes an enforcement order, and thus gains the value and legal force of the court judgment.

This approval of the settlement may also take place a few weeks or months after the conclusion of the settlement agreement before the mediator. Thus, the fact that the court does not act at the present time does not prevent the parties from resolving disputes by means of mediation and subsequent possible approval of the settlement reached by the court.

The same applies to disputes which are already pending between the parties in court. In a situation where it is not certain when the court will be able to proceed with the case anew, the parties may conclude an out-of-court settlement by private mediation by regulating the fate of the pending dispute accordingly (e.g. by deciding to withdraw the statement of claim and mutual abolition of court costs).

I am convinced that this is the most sensible solution in the current situation, especially if the parties want to settle the dispute quickly.

It is estimated that mediation is at least ten times cheaper than a court process. Perhaps it is precisely this current, exceptional situation which will contribute to a greater use of economic mediation in business and entrepreneurs will use this tool for dispute resolution more often.

Cost comparison: Court proceedings vs. private mediation within the International Mediation Centre (www.mcm.org.pl)

The value of the dispute: 3,000,000 PLN

Costs

 

Court proceedings

 

Mediation

 

Initial fee / registration*

 

200,000 PLN court fee 1,500 PLN registration fee
 

Cost of legal support* / Mediation costs**

 

 

appr. 120,000 PLN

 

Net 15,000 PLN

(15 hours of mediation divided into the sessions)

Experts opinion

 

appr. 3,000 PLN Not applicable
Bailiff execution

 

appr. 2,500 PLN Not applicable
Sum of the main costs appr. 325,500 PLN 16,500 PLN

**costs calculated on the basis of the World Bank’s data published in Doing Business Report (Poland)

** mediation cost within the International Mediation Center

If you want us to help you solve a dispute in business, please contact us under:

tel.: +48 669 73 79 79e-mail: e.stobiecka@taylorwessing.com

Conference Mediation with public sectorIn January 2020 I had the pleasure to moderate the discussion during the conference “Mediation with the public sector”. The conference was hosted by the French-Polish Chamber of Commerce and the International Mediation Centre.

I would like to thank the panelists and conference participants for our discussions and constructive conclusions!

Below you will find a short report from this conference together with conclusions and recommendations.

State of mediation between the public and private sectors: progress and problems:

  • The pro-mediation rules already work.
  • No global data – out-of-court mediation and settlements are not publicly recorded.
  • Positive and encouraging partial data.

Mediation with public sector:

  • Mostly concern investments of both high value and of enormous importance for the economy and society:
    • Roads, Bridges, railway lines, public buildings and spaces, ICT projects which are necessary for the effective functioning of government authorities and municipal institutions.
  • A court dispute in such situations almost always poses:
    • Large delays in achieving the public objective,
    • Increase (or even multiplying) the cost of its execution,
    • Significant expenditure on the dispute itself, ultimately burdening all citizens.

The legislative landscape of public-private dispute resolution:

  • Mediation has been functioning in Polish civil procedure for 15 years,
    • Introduced by the Act of 28.07.2005 on amending the Act – Civil Procedure Code, provisions of which entered into force on 10.12.2005 (previously mediation in collective disputes and criminal procedures was introduced).
  • Amendment of the CPC – Act of 10.09.2015 on amending certain acts in connection with the promotion of amicable dispute resolution methods. Accompanying lower-order acts, among others, which regulate the institution of so-called permanent mediators.
  • Educational and dissemination activities using state and EU funds, and changes in regulations which facilitate mediation also in other areas of law.
  • The result:
    • According to data from the Ministry of Justice, the so-called mediation rate (more specifically, the percentage of referrals to mediation by courts to the adequate impact of cases) grew steadily in the years 2014-2017 and (after a decline in 2018) again last year.
    • The current value estimated at less than 1.2% of cases possible to mediate still cannot be satisfactory.
  • Act of 7.04.2017 on amending certain acts to facilitate debt recovery,
    • art. 54a to the Public Finance Act together with paragraphs to art. 5, 11 and 5 of the Act on Responsibility for breaching Public Finance Discipline.
      • Determination of the requirements at the fulfillment of which a public finance unit may conclude a settlement in the case of disputed civil law receivables
      • Indication that implementing such settlement is not a violation of discipline.
    • Work on the new Public Procurement Law, changes come into force at the beginning of 2021. Act of 11.09.2019, Section X. Out-of-court settlement of disputes.
      • Mediation with expressis verbis conciliation allowed and specified,
      • Under certain circumstances (appropriate value of the procurement and the dispute, lack of information about pre-litigation amicable attempts) the court must address them (naturally, the consent of the parties will ultimately decide on the actual participation).

The State Treasury Attorneys’ Office of the Republic of Poland (pl. Prokuratoria Generalna Rzeczypospolitej Polskiej):

  • In 2018, compared to 2017 (when Article 54a of the Public Finance Act was only introduced), there was a threefold increase in settlements concluded with the public sector entities represented by it.
  • In total, more than 80 settlements were reached, but it is worth remembering that this is often a dispute arising from the largest domestic investments – the sum of the settled claims amounted to about PLN 1.2 billion.
  • In 2019, an increase was visible – the value of claims of similar disputes, which concluded with settlements, reached as much as 1.5 billion.
  • The State Treasury Attorneys’ Office of the Republic of Poland conducts more than three thousand court cases annually (of which, à propos, about 90% wins), which accounts for about 3% of amicable settlement of disputes, so more than the mentioned ratio of (referrals to) mediation in the judiciary.
  • The data of The State Treasury Attorneys’ Office does not take into account the origin of settlements, i.e. whether they were concluded in the course of mediation or through negotiations between parties without a mediator, in court or before trial.
  • The State Treasury Attorneys’ Office of the Republic of Poland also has its own platform for mediation: The Court of Conciliation at The State Treasury Attorneys’ Office of the Republic of Poland together with the Mediation Centre.
    • Expression of support for mediation and amicable settlement of disputes, which should strongly encourage public entities to participate in these forms.

Warsaw City Hall (pl. Urząd Miasta Stołecznego Warszawy):

  • Establishment of the Investor Cooperation Department.
  • Among its tasks is a broadly understood explanation of the business issues to the clerk, and thus proving the dialogue between this largest municipal government in Poland and private entrepreneurs who work within its tasks.

General Directorate for National Roads and Motorways:

  • This is a leader among public entities which uses conciliatory dispute resolution methods. Some of its regional branches already have extensive practice in using mediation, and since mid-2017, i.e. since the introduction of Article 54a to the Public Finance Act, the General Directorate for National Roads and Motorways has concluded about 60 settlements in infrastructure disputes.
  • The General Directorate for National Roads and Motorways’ practical experience shows that in such cases there is always a prepared:
    • Analysis of whether to enter into a court dispute,
    • Risk assessment of such conduct,
    • Conditions for a possible settlement (to meet the requirements of Article 54a).
  • Representatives of the General Directorate for National Roads and Motorways have also previously indicated that mediation and settlement are most beneficial for investment already at the stage of the occurrence of disputed matters during its implementation – when the case goes to court and from court to mediation, a number of additional costs and losses naturally occur.

Other examples:

  • Solutions of the Ministry of Funds and Regional Development in the field of public-private partnership
    • The cooperation of sectors in the implementation and subsequent use of investments, even if, due to the long period of time (from just a few up to more than twenty years), could not be successful without amicable procedures and a concerted response to changes, which are inevitable with such cooperation.
  • The Anglo-Saxon PPP model,
    • Several stages of work with discrepancies: from negotiations between the parties, through the participation of an independent expert, to – only at the end – arbitration or court.

Public procurement:

  • The new Public Procurement law regulation comes into force in 2021.
  • The new act in response to
    • Public decision-makers’ fear of settlement talks and concluding the settlement
    • Assurance remaining within the framework of overly understood public finance discipline and tender rigors has resulted many times in extending the completion of an important investment for society for many years, as well as in exceeding the necessary expenditure.
  • Consideration to use mediation and settlements will be seen as an obligation of a cost-effective and reliable state and local government entities in the event of a dispute.

The most important problems of cooperation between contracting authorities and contractors resulting from the research conducted as part of the work on the new act are:

  • Lack of communication and negotiations at the stage of planning and awarding the contract, then in the course of its implementation and the appearance of inevitable problems and risks, and further – in the resolution of the already formally occurring dispute.
  • Hence the intention to base public procurement and, in particular, work with disputes arising against it on the grounds of
    • Partnerships,
    • Dialogue,
    • A fair and clear allocation of risks,
    • The joint responsibility for the implementation of the investment.
    • In this respect – also a clear indication of the amicable mode as the primary method to resolve contentious situations, with the protection of unit managers against the fear of “punishment for settlement”.
  • Effectiveness of Public Procurement Law regulations is to be verified after some time, also with regards to facilitating mediation.

Responsibility for concluding a settlement and for its conditions adopted or proposed as the main brake of using mediation in the public spher:

  • The solutions of Art. 54a of the Public Finance Act and the related provisions on liability for breaching them are a great facilitation to determine what control criteria to adopt, and thus what people who manage public institutions or perform tasks within their scope should do to not to be afraid of such liability.
  • The creation and successive development of regulations on mediation and settlements should definitely be seen as a guideline for the legislator to properly apply these solutions.
  • The fear of “Will I expose myself to liability by participating in mediation?” It should be replaced by a reflection: Did I duly consider using mediation as the potentially most cost-effective, purposeful, reliable and legal choice in this case?

Current trend:

  • The private sector indicates a small number of settlements, whilst emphasizing that usually they only take place when the dispute is in the cause list.
  • A court trial is often a “safety valve” for a civil servant or a state or local government manager.
    • At this stage, because they usually have a better idea of the chances of settling the case and then they decide to make a settlement in court.
    • The public sector is, as a result, more motivated to conclude a settlement seeing less chance of success in the process and usually only if it is the defendant.
  • Private parties’ approach to mediation
    • The awareness of mediation as a standard method of working with a contentious situation is still too low,
    • It largely consists of the traditional call for an attempt at reaching a settlement – usually a non-negotiable demand for the full amount of the benefit, but more to the formal interruption of the limitation period than to actual negotiations.
      • In this respect, a painful increase in costs has been noted in the latest amendment to the Code of Civil Procedure, so this approach will have to be changed).
    • Private companies are more motivated to make seasonal settlements, just before the end of the financial year.

There is no certainty that the parties can do something good as a result of mediation or concluding the settlement:

  • A settlement is a series of savings for both parties.
    • Interest
    • Decrease in generated value and functionality (e.g. unused buildings)
    • Additional unproductive costs
  • Mediation is extremely important from the point of view of the civil servant’s responsibility for the conclusion of the dispute: there will be no generalisation of settlements, where for decision-makers, avoiding them will be the equivalent being ‘safe’ in the event of various inspections.
  • According to representatives of construction companies and expert engineers, the popularisation of mediation and settlements is clearly positive.

Mediation and qualification of mediators:

  • It is particularly important for them to have not so much legal preparation, but so-called soft skills and orientation, and preferably experience in technical matters and conditions of public-private cooperation.
  • It is also necessary to be sure that in their work they will be truly independent, not involved in any conflict of interest.
  • Real conciliation and mediation capacity limited by the proxies being unconvinced and the participants’ lack of preparation for the talks.
  • The attitude, substantive preparation and decision making of mediation participants is crucial
  • Mediation is not a simple procedural step or pro forma presence, but honest, solid and creative work on solving problems.
  • Experienced mediators recommend that lawyers , decision-makers, engineers or other specialists in a given industry in mediation participate, and each of these groups has an important contribution to make to the work on solving a dispute.
  • Mediation does not tolerate the rush in cases involving large and complex investments.
  • Attempts to impose a schedule of talks unilaterally are not conducive to mediation.

Conclusions and recommendations:

  • All legislative activities, including in particular Art. 54 of the Public Finance Act and the new Public Procurement Law, together with the accompanying activities of the Public Procurement Office, the State Treasury Attorneys’ Office of the Republic of Poland and the Supreme Audit Office, should be treated as an encouragement for more frequent, as it were, standard use of mediation or more broadly amicable settlement of disputes along with cooperation between public and private entities.
  • Inactivity of state and local government units in this respect cannot be equated with security, as consideration of amicable methods should be considered as their duty
  • The fear of settlements is definitely exaggerated – responsibility against this background occurs very rarely, and the regulations mentioned above provide a concrete framework for securing against it.
  • The need to promote practical solutions in connection wth the ignorance of the public party, which has little experience in this area.
  • The possibility to consult publicly available published criteria, messages and Supreme Audit Office’s post-audit statements.
  • It is necessary for the private party to take into account that, in addition to business-like economic criteria, their public partners must be guided by the public interest and sometimes also take into account the political environment.
  • It is crucial to promote the proper application of art. 54a.
    • The scope of the written opinion it requires and the choice of its authors should be flexible in relation to the scale and nature of the dispute.
    • However, under no circumstances should an opinion be limited to legal issues – the legitimacy and nature of claims and litigation risks are obviously necessary, but not sufficient.
    • Appropriate technical analysis and opinions of experts, economists, accountants, and especially specialists in a given field (e.g. contract engineers) are important.
    • Comparison of the effects of a settlement and the presumed decision of the court:
      • Costs of a new tender,
      • Changes in input prices,
      • Delays in the execution of works and investment,
      • Problems with financing (including eligibility of expenditure for EU funds),
      • The effect on local taxes and the local labour market.
    • Opinion is an element developed at the final stage of mediation or generally amicable work with a dispute. It is not necessary in order to enter into negotiations.
    • It is worthwhile preparing documentation on the grounds for entering into settlement talks, but this should not be a blockade to an amicable approach.
  • When working with investment disputes, time plays a key role in the final effectiveness of the designed solutions.
  • Settlement talks should be undertaken:
    • As soon as possible, when discrepancies appear,
    • When there have not yet been significant losses, breakdown in cooperation and obstacles to its continuation,
    • For the parties to invest in confrontation activities and stiffening positions.
  • The contracting authorities and contractors must be prepared for mediation and settlement during the contract execution.
  • “Claim bombing” doesn’t build trust.
  • Both sides need to change their approach and even mentality: understand the obligation of the contracting authority and the contractor to co-pursue the public procurement, understand the need for constant dialogue, build as many confidence bridges as possible, and allocate natural risks in partnership.
  • These activities should be documented on an ongoing basis so that they are transparent for possible controls. The difficulties of such an approach, which is generated by the conflict situation itself, help to minimise the participation of an impartial, neutral third party – i.e. a mediator.
  • Proper preparation of the parties’ proxies is necessary for a settlement or mediation:
    • Exiting traditional procedural roles to work together with problems may not be easy, but it is necessary.
    • It indicates the modern approach of lawyers and corresponds to the new regulations.
    • Changing the priorities of a proxy means changing a certain philosophy of the profession.
  • Currently, the court has a huge role to play in the amicable resolution of disputes.
  • Under the new civil procedure, the judge is to guide the parties to a settlement and encourage out-of-court resolution of the dispute during the preparatory meeting (and at many other stages of the proceedings).
  • The authority of the judiciary has been and should continue to be a significant incentive to seek compromise solutions and use mediation.
  • To the review clauses already developed by the Public Procurement Office (which make it easier to modify conditions in the event of market changes) could be added:
    • If not the contract templates, at least templates of their new element, i.e. mediation clauses (or “multistep”), which normally provide for the amicable search for a solution, instead of immediately referring the dispute to the court for settlement.
  • Training courses on mediation are available for representatives who precure both public and private contractors.
  • A joint team of public institutions which deal with the execution and control of procurement, which would result in a distinction for state and local government units which use mediation most effectively. This would encourage private entities to work in partnership with award-winning contracting authorities.

If you want us to help you solve a dispute in business, please contact us under:

tel.: +48 669 73 79 79e-mail: e.stobiecka@taylorwessing.com