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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Settle your dispute

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

ADR in Poland and in GermanyThis article is co-authored by Patryk Kulig, Counsel and Mediator from the German Arbitration Institute (DIS).

With the entry into force of the latest amendment to the Polish Civil Procedure (KPC), the question arises: do the new rules of civil procedure contribute to the increased importance of alternative methods of conflict resolution? Similar solutions have been functioning for a long time in Germany, where ADR is the basic tool for resolving disputes in business.

New civil procedure and ADR

One of the key objectives of the amendment is to accelerate and streamline proceedings. In order to achieve this, the legislator introduced a number of institutional and organisational solutions concerning the procedure itself. The approach to the procedure and proceedings in disputed cases has been changed, according to which at the initial stage of the proceedings the parties should strive to reach an agreement, in which the judge and his new tasks related to the institution of the preparatory meeting are to play a very active role.

It is the legislator’s intention that the preparatory phase should, inter alia, create the conditions and tools to effectively seek alternative forms of legal dispute resolution. The preparatory proceedings introduced into the Code of Civil Procedure largely relate to the organisation and operation of arbitration courts. During the preparatory session, the proceedings will now be planned. It is assumed that the parties will actively participate in this phase, as it is at this stage that a party should present all requests and statements of fact and evidence which it would like to carry out in support of these statements. The knowledge of the parties’ demands and statements should contribute to a new perspective to the case and to any possible settlement discussions with the active participation of the judge. Also at this stage of the proceedings, the parties will create a plan for the hearing.

In the hearing plan, it is the parties, as co-hosters of the trial, who will jointly decide with the judge on the dates and order of evidence. A similar procedure is in force in the regulations of many arbitration institutions, when at the very start of the proceedings the parties together with the arbitrators make careful planning of subsequent actions.

Communication between the judge/arbitrator and the parties

The rules of civil procedure in force in the new version as of 7 November 2019 also provide for a reduction of the distance between judges and parties to proceedings through a formalised preparatory meeting. At this stage, the judge will be able to present his preliminary view to the parties and the parties could be ‘encouraged’ to make a reasonable compromise (Article 2056 § 2 of the Civil Procedure Code). This is a novelty in the civil procedure, as so far at no stage of the proceedings has the judge been able to present his or her views or the envisaged solution until the hearing is closed and the judgment is formally announced. Such a reduction of the distance between the judge and the parties to the proceedings is another point of contact between the civil procedure and alternative dispute resolution methods. Efficient, formalized communication is also a more effective procedure.

As the drafters emphasize in the justification for the changes introduced, the resolution of a dispute does not necessarily have to rely on a judge’s consideration and the ruling of the case. Before this happens, all possibile solutions to conclude the dispute should be exploited, including with the help of the judge, but at the will of the parties themselves, for example by coming to a settlement.

The activity of the judge at this stage of the proceedings will complement that of the mediators, who may also act in the subsequent stages of the proceedings. Initiating attempts to reconcile the parties will require the judges to have special conciliation skills and a certain change of perspective on the objective of settling the case.

Mediation and arbitration

Of course, the same goal – to settle the matter – can be achieved by the parties both in mediation and in arbitration. Both of these tools are often chosen methods to solve disputes in business. Often both of these methods also occur within a single case (the so-called “Med-Arb” or “Arb-Med” procedure) or within a single arbitration institution.

Practice will show whether a change in the civil procedure will increase the importance of alternative forms of conflict resolution methods in Poland. It is worth noting that methods such as mediation are also available outside the civil procedure. Mediation can also be used privately, without referring the case to court and regardless of the jurisdiction or legal regime to which the dispute is subject. It is important to bear in m mind that a settlement concluded before a mediator can be confirmed in a common court or an arbitration court, which gains the legal value of a court judgment.

Mediation in more complex cases can take from a couple to several weeks, which is an excellent result compared to many years of court proceedings. The costs of mediation are also much lower than in a traditional court trial.

As for arbitration, the parties have to make an agreement on a specific arbitration and the so-called arbitration clause is crucial for the facility to initiate this procedure. Arbitration, like mediation, gives the parties complete guarantee of confidentiality, which the parties cannot always count on in the case of a courtroom where the principle is openness of proceedings.

There are many arbitration institutions which offer their services in the framework of arbitration in specialised sectors or fields. There are also many institutions that handle disputes arising from international trade. Foreign investors are reluctant to submit their disputes to common courts. Contracts of multi-million monetary value and often huge investment projects are often submitted to international arbitration. Taking into account the fact that Germany is one of the largest and most important trade partners to Poland, economic disputes between Polish and German companies are on the agenda.

Solving these disputes on the traditional court route, even taking into account the amended provisions of civil procedure, may be protracted. This is not only related to organisational issues such as international service, but also to issues of a legal nature when, for example, the Polish court has to apply German substantive law or vice versa.

Private arbitration institutions which offer alternative legal dispute resolution proceedings may be a solution to such dilemmas.

Commercial arbitration and common courts in Germany

The amicable nature of commercial dispute resolution is deeply rooted in the German procedural culture – both in common courts and in arbitral tribunals established to resolve individual disputes.

The Polish legislature seems to directly draw on German solutions, in particular on the mandatory pre-trial negotiation procedure (Güteverhandlung), when the court, often in the presence of not only attorneys-in-fact but also of the parties themselves, discuss the dispute with them, taking into account all circumstances of the case known to the court and the parties at the time, actively ask questions and share a non-binding preliminary factual and legal assessment. On the basis of Article 278 of the German Civil Law Code, the court may further refer the parties to the so-called conciliation judge (Güterichter), who has no judicial capacity and whose role is limited to mediating between the parties, in a role comparable to that of a mediator and negotiator between the parties. He may also offer the parties an attempt to settle the dispute out of court, based on amicable methods such as mediation.

Arbitration and the general courts in Germany have one thing in common – a high percentage of commercial disputes are resolved amicably. As for arbitration, the most common amicable form of dispute resolution is for the parties to participate (and often, at least indirectly, also through an arbitral tribunal) in determining the content of a so-called arbitration award with agreed content; in the case of a court, the conclusion of “classic” court settlements.

The current Article 278 of the German Code of Civil Procedure, which refers directly to Article 279 of the Prussian General Code of Civil Procedure of 1794, obliges the court to take measures for the sake of procedural economy, thereby increasing the time and cost efficiency of the proceedings by considering at each stage of the proceedings, an amicable settlement of the dispute or individual litigation issues.

Statistics on all resolved civil and commercial disputes in 2018 in ordinary courts indicate, depending on the forum concerned, the conclusion of court settlements in between 16% and 40% of proceedings:

– Amtsgericht (equivalent of a district court) – 923,179 of all proceedings, of which 134,510 were concluded in the form of a court settlement, which accounts for 22% of all proceedings;

– Landgericht (equivalent of a district court) as a court of first instance: 303,993 of all proceedings; 80,544 court settlements; which accounts for 39% of all proceedings, in the second instance: 43 030 of the total number of proceedings; 5 471 court settlements; which accounts for 30% of the total number of proceedings;

– Oberlandesgericht (equivalent of a court of appeal) 49 164 of all proceedings; 7 841 court settlements; 16% of all proceedings.

In Germany, the trend is to conclude arbitration awards in the form of arbitral awards with agreed content. This means that the parties to the proceedings themselves agree on the content of the settlement and request in the arbitral tribunal that the content of the settlement becomes an arbitral award (with agreed content). The second possibility to conclude a settlement, which is characteristic of German arbitration, is the conclusion of a settlement as a result of the parties’ prior acquaintance with the preliminary assessment of the legal and factual situation, which may be shared by the arbitral tribunal with the consent of all parties. This form often involves the parties making a statement of no res judicata if the parties do not reach a settlement on the basis of the tribunal’s preliminary assessment.

In practice, the arbitral tribunal supports the settlement of the dispute in the arbitration proceedings, also in the subsequent stages of the proceedings by indicating the possibilities for conciliation, and the common court tries to point out settlement issues from the very beginning of the hearing in the framework of the mandatory negotiation procedure (Güteverhandlung).

The specificity of arbitration and one of the key reasons for its choice instead of the common court system by its very nature encourages users of arbitration – business entities and representatives of the broadly understood business – to be efficient in terms of time and cost, and thus to seek agreement and, as a result of the amicable settlement of the dispute, to further cooperation.

Another important practical aspect, which is an established part of the German tradition of dispute settlement, is the possibility to reduce court costs and the higher rates of attorneys at law in the case of settlement in proceedings in common courts, and often the reduction of administrative costs and arbitrators’ fees in the case of institutional arbitration.

Each commercial dispute is different and requires special instruments in order to achieve the most qualitative, time and cost effective resolution. Settlement is not always the best solution, just as arbitration is not always the best way to resolve a dispute. Awareness of the wide range of instruments for the choice of commercial dispute resolution is crucial, and in the case of complex disputes, both in fact and in law, particularly in cross-border disputes, amicable settlement methods based on settlement can often be a way of resolving the dispute quickly and engaging in further business cooperation.

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

Is it possible to settle "Swiss franc borrowers" cases

More than two months ago, on 3 October, the Court of Justice of the European Union issued a ruling on mortgage CHF borrowers in response to questions referred for a preliminary ruling by the District Court in Warsaw, before which one of the cases against the bank is pending. This ruling represents a very important legal stage in the way franc borrowers assert their rights in court in relation to credit agreements containing prohibited contractual clauses.

Recently there have been many comments, both from banking experts estimating potential risks for the banking sector and lawyers representing borrowers. However, all agree that more lawsuits are expected in these cases.

Will Polish courts be flooded by a wave of Swiss franc borrowers lawsuits? Listening to the public discussion in recent weeks in Poland, this seems to be a very likely scenario. However, are other solutions possible? Could the solution to the problem of franc mortgage agreements containing abusive clauses be mass settlements between borrowers and banks?

Let us look at such a scenario.

First of all, it is worth noting that the average duration of the court litigation in these cases is well over two years in the first instance. If either party would like to appeal against the judgment of the first instance, the next several months should be added to this time. Not without significance, however, is the fact that on 7 November this year the amended provisions of civil procedure came into force, which reformulate the Polish civil procedure. It is likely that the courts will need some time to find themselves in the new procedural reality, which foresees several important novelties, which will be extremely important. These novelties are intended to contribute, among others, to faster processing of cases.

Paradoxically, however, it may transpire that in order for the regulations to achieve their goal, the training of judges related to mediation skills, i.e. such moderation of discussions between the parties to a dispute at its initial stage (here, during the so-called preparatory meeting) that the parties reach – assumed by the authors of the amendments – an agreement. This is related to the introduction of a completely redesigned procedural element, the aforementioned preparatory meeting, which is to precede court proceedings and which, in the intention of the amendment, is to aim, among others, at an amicable resolution of the dispute. It seems that this institution may also be a good tool in franc borrower cases, because at this initial stage the judge will be able, after familiarizing himself with the parties’ positions, to estimate the expected duration of the trial and – as the authors of the amendment wish – indicate the potential direction of the decision. This is the moment when the judge will be able to persuade the parties to conclude an agreement.

In a situation where the parties need more time to negotiate, the judge – as it is the case so far – may refer the parties to mediation. It seems that resolving individual franc borrowers cases by way of a settlement is a very good solution for both parties to a dispute. On the one hand, the consumer suing the bank has the opportunity to settle the dispute more quickly and possibly free himself from credit agreement with foreign exchange risk and prohibited clauses. On the other hand, the bank will be able to very actively mitigate the risk associated with a contract containing prohibited clauses and an ongoing lawsuit.

Importantly, the parties in such settlement negotiations may decide to annex the contract by replacing the invalid contractual clauses with possible valid clauses or to shape the legal relationship between them in such a manner that, in the event of cancellation of the credit agreement, they may conclude a new agreement which would serve the purpose of refinancing the credit.

The confidentiality of mediation or settlement negotiations also seems to be a great advantage for a bank which values its reputation and customer relationships.

There are several mediation centres in Poland which have very good practice in resolving business disputes, including disputes between financial institutions and consumers. It is enough to mention the Mediation Centre at the Polish Financial Supervision Authority or the International Mediation Centre established by bilateral chambers of commerce operating in Poland. It seems that both these institutions may be an excellent platform for the amicable settlement of disputes between banks and consumers.

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

Evidence agreementAs part of the amendment to the Code of Civil Procedure, a new tool has been introduced to the Polish legal system, which may be helpful for entrepreneurs. It is the so-called evidence agreement which entrepreneurs may conclude at the stage of establishing their contact relationships with business partners, and which may be helpful in the possible settlement of disputes between them.

 

Entrepreneur as a “co-host” of the trial

The changes proposed in this amendment are to contribute to improving and accelerating court proceedings, including commercial proceedings, i.e. entrepreneurs’ cases which go to court. The new formula of civil trial places firm emphasis on greater involvement of the parties in conducting the trial, which is to be facilitated, among others, by its new stage, the so-called preparatory meeting, at which the parties together with the judge will plan the entire proceedings. The scope of the parties’ autonomy in the trial has also been significantly extended by adding another procedural agreement, i.e. the evidence agreement. It is the party, i.e. the entrepreneur, who can now influence the course of the proceedings to a much greater extent and be its “co-host”.

Up until now, the parties could (in an agreement which shapes a given business relationship) arrange for, inter alia:

  1. the jurisdiction of the court (art. 46 of the CPC),
  2. mediation (art. 183 (1) § 2 of the CPC),
  3. national jurisdiction (art. 1104 and 1105 of the CPC),
  4. the arbitration court (art. 1161 § 1 of the CPC),
  5. the rules and manner of conduct in the arbitration court (art. 1184 § 1 of the CPC).

However, there were inadequate tools which would have a real impact on the procedure and the scope of proving one’s rights in the process.

The concept of evidence agreement

The very concept of evidence agreement used in other jurisdictions implies that the parties may be able to influence the scope and course of taking the evidence, as well as the manner in which evidence is taken. Within this category of procedural agreements, we deal with agreements:

  • which extend or narrow down the possibility of evidence, i.e. which define a catalogue of evidence necessary or sufficient to establish certain facts by the court (called evidence agreements in the strict sense of the word). This category also includes agreements which exclude specific evidence for the future, e.g. the parties agree that a person who is not an expert cannot confirm any facts concerning a given business relationship, or which indicate that to prove a specific circumstance it will not be sufficient to take given evidence.
  • concerning the object of evidence, i.e. which determine the circumstances under which it is necessary to take the evidence.
  • as to the distribution of the burden of proof (onus probandi), i.e. who can prove what facts,
  • which regulate the manner in which evidence is taken, e.g. indicating that a witness may or must be examined in the presence of an expert, examined outside the court or by videoconference.

Evidence agreement in the Polish procedure

Since the evidence agreement is a new institution in Polish law, the legislator decided to limit its scope to the most obvious issue, i.e. the possibility to exclude certain types of evidence. The new art. 458(8) § 1 of the CPC, which reads as follows, contains an appropriate regulation concerning this procedural agreement:

“Art. 458(8)

§ 1. The parties may agree to exclude specific evidence in commercial proceedings in connection with a specific legal relationship arising under the agreement (evidence agreement).

2. The evidence agreement is concluded in writing under pain of invalidity or orally in a court. If there is any doubt, it is deemed that the later agreement maintains the provisions of the previous agreement which are reconcilable with it.

3. The evidence agreement concluded subject to a time limit is invalid.

4. The allegation of invalidity or ineffectiveness of the evidence agreement may be raised at the latest at the meeting at which the agreement was invoked, and if it was done in a pleading – at the latest in the next pleading or at the next session.

5. Including evidence taken in court before the agreement was concluded does not deprive it of its evidentiary value.

6. The court will not ex officio take into consideration evidence excluded by the evidence agreement.

7. The court may determine the facts to be proved by evidence excluded by the evidence agreement on the basis of the parties’ statements, taking into account the overall circumstances of the case. If the amount of due benefit needs to be determined, art. 322 applies accordingly”.

In order to prevent abuse of position by the stronger party to the agreement, the scope of applying the evidence agreement is limited to a particular (one) legal relationship arising under the agreement. Such an agreement binds the parties, and thus the court, in cases relating to this one legal relationship, and not in all matters between the same parties.

The evidence agreement must be concluded either in writing under pain of invalidity or alternatively orally in court, i.e. after commencing the proceedings. However, the agreement may not be concluded under condition or subject to a time limit, which would make it invalid.

Parties who have concluded an evidence agreement are obliged to present it to the court at the earliest possible stage of the proceedings. It seems that the most logical point in time to present such an agreement to the court is at the preparatory meeting, during which a hearing is planned. Since the evidence agreement significantly affects the shape of taking evidence, the allegation of its ineffectiveness or invalidity must be raised immediately after the agreement is presented to the court, while the late allegation will not be effective, as explicitly indicated in § 4 of art. 458 (8) of the CPC.

Content of the evidence agreement

Each business relationship has its own specificity. Arranging a given relationship between entrepreneurs, the parties should protect themselves against the most difficult moments when the relationship may break down and a dispute arises. In addition to safeguards and other typical contractual clauses securing the parties (e.g. confidentiality clauses or non-competition clauses), it is also worth considering the regulation of the evidence agreement.

Among the detailed solutions which could be provided for in such an agreement, it is worth considering e.g. appointing an expert (assessor) at the stage of the performance of the agreement, which would be binding for the parties. This could be particularly important in the case of complex projects of high-value, where verifying the accuracy of the implementation of particular stages would be difficult after some time. Another element of such an evidence agreement could be, for example, limiting the possibility of taking into consideration and taking the evidence from an expert’s opinion and limiting such opinions to the private opinions of specific experts, research or scientific centres. The parties could also introduce restriction regarding hearing certain witnesses into the agreement, such as employees at a certain level, or limiting taking the evidence to certain types of evidence (e.g. the opinions of independent experts themselves).

The adopted regulation implies that the court will not ex officio take into consideration evidence excluded by the evidence agreement. On the other hand, facts which are to be proved by evidence excluded by the evidence agreement may be determined by the court on the basis of the parties’ statements, taking into account the overall circumstances of the case. If the amount of due benefit needs to be determined, the court, pursuant to art. 322 of the CPC, will assess the due amount to the plaintiff, taking into account all the circumstances of the case.

Whether entrepreneurs will use this new institution, practice will show. It is important that the issues of evidence agreements do not lose the basic objective of the amendment, which is to improve and accelerate the proceedings in commercial cases.

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

Taking evidence in a new civil procedureTaking evidence is the most time-consuming and crucial stage of the proceeding in proving the parties’ points.

Also the legislator has foreseen a few novelties which are aimed at accelerating the proceeding and making it more effective. There are also many changes of a purely ordering or specifying nature. All amendments will enter into force on 7 November, so it is important to take a closer look at them, also in the context of considering the choice of alternative dispute resolution methods.

First of all, a good plan

The first important decision concerning taking evidence in the new civil procedure will be taken at the preparatory meeting, which I wrote about in the first part of this series of publications. It relates, in fact, to a plan for taking evidence submitted by the parties, described in detail in the so-called timetable of the trial prepared by the parties together with the judge during the preparatory meeting (added Article 205 (5) of the Code of Civil Procedure).

The very preparation of the trial timetable and planning the sequence of taking evidence activates the parties and makes them jointly responsible for the course of the proceeding.

Motions for evidence

The new provisions also explicitly describe that each party is obliged to make a statement as to the facts (no longer “factual circumstances”, which is a change of ordering terminology nature rather than of a substantive nature). A party is obliged to specify the facts which it denies (and some of them it admits), which is a novelty and is intended to prevent denial of all the other party’s statements in bulk. This wording of art. 210 of the Civil Procedure Code is intended to encourage the parties to clearly list the facts to which they deny, which will significantly restrict the process of proving evidence.

Similarly, the provision of art. 228 of the Civil Procedure Code relating to commonly known facts which do not require proof, has been clarified. Nevertheless, the previous provisions did not give the parties the certainty that such facts are taken into account by the court. In the current wording of the provision of art. 228 of the Civil Procedure Code, “the court takes them (facts commonly known) into account even without reference to them by the parties”.

Moreover, in order to improve the process of proving evidence, the provisions concerning the evidence motions formulated by the parties have also been clarified. So far, parties have been formulating their motions for taking evidence “on circumstances” instead of ” confirming concrete facts”. In practice, such motions were formulated very broadly and were often based “on the legitimacy of the claim”, which made it very difficult to assess the use of such evidence. In this respect, a new art. 235¹ of the Civil Procedure Code was added which introduces an unambiguous requirement that a motion for evidence must indicate the facts which a party wishes to prove with given evidence.

According to the wording of this provision, “In a motion for taking evidence a party is obliged to mark evidence in a manner which enables it to be taken and to determine and specify the facts which are to be proved by such evidence”.

The phrase “determine and specify” stresses that this indication is to be individualised as to each fact and as to each piece of evidence, so the party is obliged, on the one hand, to exhaustively list all the facts which are to be proved by the requested evidence and, on the other hand, to indicate which piece of evidence provides the relevant proof.

Refusal of taking evidence

It appears that there is no need to differentiate between the decision concerning the refusal to take certain evidence on the rejection of a motion for evidence, its reimbursement, rejection, etc. Therefore, the legislator has opted for a collective, uniform formula of “omission of evidence”, which includes all these decisions.

The catalogue of conditions under which the court may refuse to take the evidence (which takes place by way of a decision) is provided for in the new art. 235² of the Civil Procedure Code, which states:

 “In particular, the court may disregard the evidence:

1) the performance of which is excluded by the provision of the Civil Procedure Code;

2) which is to prove an indisputable fact which is irrelevant for the decision on the case or which has been proved in accordance with the applicant’s statement;

3) which is not useful to prove a given fact;

4) impossible to take;

5) only aimed at extending the proceedings;

6) if the party’s application does not comply with the requirements of art. 235 (1), and the party has not remedied this despite being requested to do so.

2. Disregarding the evidence, the court makes a decision stating the legal basis on which it is based’.

The change of the requirements concerning the content of the motion for evidence similarly entailed a change in the mandatory content of the decision on admitting the evidence. The current wording of art. 236 was too imprecise.

“Art. 236. § 1. In the decision on the admissibility of evidence, the court will indicate the evidence and facts to be proved by it and, if necessary and possible, also the date and place of taking evidence.

2. If a party requested that the resolution should be given as to the evidence, it is sufficient to refer to the decision to the content of the application.

3. Commisioning a designated judge or a requested court to take evidence, the court will appoint the judge or the court. If no time limit or place for taking evidence has been specified, it will be specified by the designated judge or the requested court.

Activation of parties when taking evidence

The new Article 242¹ of the Civil Procedure Code introduces changes which are significant from a practical point of view, which provides for activating a party when taking evidence. Experience shows that it is difficult to take evidence from witnesses’ testimonies: it transpires that witnesses reported by a party, even those closely related to it, do not appear (for various reasons) in court. The new regulation imposes, as far as it is possible, the obligation on the party to make efforts to ensure that the person summoned to the court, upon the party’s motion, appears in the indicated place and time.

This provision makes the party co-responsible for the efficient conduct of evidence proceedings, and thus for the whole process.

“Article 242 (1) A party which has requested to summon a witness, an expert witness or other person to the court’s activities, should endeavor to have that person appear at the specified time and place, in particular to inform them of their duty, time and place of appearance”.

Documentary proof

In the current legal situation and in accordance with the letter of the law, the judge issued a decision on admitting evidence from a document attached to the case file. This was unnecessary for the judge, while the specificity of the documentary proof, i.e. the provision of information contained therein, only requires (for its performance) reading that document. Therefore, issuing a decision in this matter seems unnecessarily formal. Besides, issuing a decision on attaching a document to evidence would obviously be illogical: it would be necessary to read the document in order to convince oneself that it should not be read. In such cases, such evidence will be accepted (automatically) and taken (by reading it once).

Another situation occurs when we are dealing with the exclusion of an evidentiary document from the material evidence. Then issuing an appropriate decision should be necessary.

“Article 243 (2) Documents contained in the case file or attached to it constitute evidence without issuing a separate decision. Excluding evidence from such a document, the court will issue a decision”.

Witness statements

The appearance of a witness at the request of a court may be prevented by not only illness or lameness, but also by other insurmountable obstacles, such as imprisonment. Therefore, following the criminal procedure, the legislator has extended the grounds for examining the witness in the place where he/she is staying. At the same time, terminology has also been modernised, replacing the outdated term “lameness” with the term “disability”.

“Article 263: A witness who is unable to appear upon request because of illness, disability or other insurmountable obstacles shall be heard in his place of residence”.

An important novelty in taking evidence is the introduction of the facility to give evidence in writing. This facility, hitherto only foreseen in the European Small Claims Procedure, has just been extended to the whole civil procedure.

The new provision of art. 271¹ of the Civil Procedure Code states that “a witness gives evidence in writing if the court decides so. In such a case, the witness makes an oath by signing the text of the oath. The witness is obliged to give the text of his/her testimony to the court within the time limit specified by the court (…)”.

This solution may give rise to controversy and concerns regarding the possibility for the interested parties to influence the content of the statements written down by the witness. A significant limitation of this type of written statements is that one cannot verify all the elements of the witness’ examination, which are important to acquire the truth, such as, the possibility to  ask  precise questions, observing the witness’s behavior and his/her body language, etc.

To what extent and how this new institution of witness’ testimonies in writing will function in practice, we will probably see very soon.

In addition, following an institution which has been operating for a long time in criminal proceedings, the civil court has also been granted an additional tool allowing it to determine whether a witness is suffering from any disability. This tool is to ensure that a medical expert (psychologist or neurologist) or a psychologist may participate in the proceedings when hearing a given person.

The new art. 272¹ of the Civil Procedure Code provides for the appropriate regulation, which stipulates that:

“If a court doubts the ability of a witness to perceive or communicate observations, it may order that the witness be heard in participation with a medical expert or psychologist, and the witness may not object to this”.

Participation of experts

The hitherto judicial practice is based on a complete separation of a witness and an expert as two sources of evidence: no statement is taken from the expert and no opinion is given by the witness.

However, judicial practice has shown that in certain situations it is purposeful to repeal this incompatibility. Often, before the trial, the parties commission specialists in a given field to draw up expert analysis, initially to show them the subject matter of the dispute. It is clear that the value of such statements cannot be over-estimated because they are often made by the best specialists in a given field. However, such person may be heard in court at most as a witness, but he or she must not draw conclusions from the described facts with the use of his or her own expertise.

To this end, the court “must ” appoint an expert, which of course prolongs the proceedings and duplicates the costs of such analysis. As practice shows, an opinion commissioned by the court is usually drawn up by a weaker expert than a “witness” interviewed by the court, who has been commissioned to prepare a private opinion.

The solution to this disadvantage is to repeal the prohibition of combining the roles of a  witness and an expert. However, the legislator has not decided to make wider use of such a facility and, as the justification for the amendments reads , “(…) until such time as the criteria for admissibility and evaluation of such evidence are developed in the case-law, its use should be limited to simplified proceedings, and thus to cases with a lower value of the subject-matter of the dispute, in which the consequences of possible errors when applying to a new institution will not be too severe (…)”.

Thus, the relevant provision was only introduced for the simplified procedure in art. 505 (7) § 3.

“Article 505 (7). § 1. Whenever the legitimacy of or the amount compensation should be determined using special information, it is up to the court to decide whether to make an independent assessment based on the overall circumstances of the case or to consult an expert.

2. The expert’s opinion should not be sought if its foreseeable cost would exceed the value of the matter at issue, unless exceptional circumstances justify it.

3. Giving evidence by a witness should not prevent him/her from being consulted as an expert, including the facts about which he/she has testified (witness- expert), even if he/she has previously drawn up an opinion commissioned by an entity other than a court.

In legal transactions, experts’ opinions are widely used which are prepared at the entire private request or at the request of an entity conducting proceedings provided for a separate law (e.g. insurance winding-up proceedings, the complaint proceedings) or at the request of an out-of-court body conducting proceedings other than a judicial one (criminal preparatory proceedings, all types of administrative proceedings), or at the request of a court in another case, whether civil or criminal.

Nevertheless, the existing provisions which regulate the evidence from an expert’s opinion do not explicitly state whether it is permissible in civil court proceedings to take evidence from an expert’s opinion which has not been prepared at the request of the court which is conducting the case (out-of-court). If so, what is the nature of such evidence? However, practical benefits, including the efficiency and speed of proceedings resulting from the use of such evidence in civil proceedings, are clear.

Therefore, in accordance with the new art. 278 ¹ of the Civil Procedure Code, “The court may admit evidence from an opinion commissioned by a public authority in other proceedings provided for in the act”.

As regards participation of an expert in the case, the legislator has introduced a number of other improvements aimed at meeting the needs of practice and the demands of an efficient process.

The changes concern, among others, clarifying the procedure for excluding an expert from a case, issues related to taking the statement from an expert concerning the reliability of his/her opinion, providing the expert with materials for his/her opinion, the procedure for supplementing and explaining the opinion and allowing for an additional opinion, as well as issues related to determining the expert’s remuneration.

It seems that the new provisions on evidence proceedings have met the needs not only of judicial practice but also the need to “dust off” and modernise the regulation which has been operating for over 50 years.

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