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

One of the key issues of the current significant revision to the Polish Civil Procedure Code, which will come into force on 7th November 2019, is suitably preparing the parties and the court for the case, which is intended to contribute to the efficient resolution of the dispute. Ideally, the parties should already be able to conduct possible conciliatory negotiations at the preparatory stage.

How this will work in practice will be visible in the future. Meanwhile, let us look at the new regulations from the perspective of alternative dispute resolution methods.

Firstly I would like to point out that the new regulations also provide for a completely revised court proceedings structure which are based on the following three assumptions:

  1. court proceedings are subject to planning;
  2. the basis of the plan is all parties will have knowledge of their positions (audiatur et altera pars);
  3. the hearing is only conducted when there is a real need (the right to a court no longer identifies itself with the right to a hearing).

Thus, from the very start of the proceedings, the parties will be obliged to present all the evidence to confirm their claims and from the then, during the so-called “preparatory hearing”, they will be able to plan all the procedural steps with the judge, in particular the order in which the evidence is to be taken.

Thus in order to accurately plan and conduct the proceedings, the court must be fully aware of the claims and statements of the parties about the facts and all the conclusions of the evidence. Knowledge of the demands and statements of the parties at this stage may contribute to a new perspective on the case and to the start of possible settlement discussions.

The intention of the project implementers is that this preparatory phase should, among others, create conditions and tools for effective search for alternative forms of legal dispute resolution.

That aside, we anticipate there will be a huge new role for judges. The new regulations provide for their activation in the process of mediation between the parties, as described below.

Preparatory meeting

The key institution of the preparatory proceedings is the preparatory meeting. As a rule, it will be mandatory and should take place outside the courtroom. At this particular session, the respective activities will have an informal nature and it should be possible for the parties to conduct conciliatory negotiations during this session, which should not be disturbed by the parties’ fear that their statements made during these negotiations will influence the court’s later evaluation.

Therefore, in order to ensure the maximum effectiveness of the preparatory meeting, any statements made during the preparatory meeting will not be entered into the minutes.

The special role of the judge

As it is indicated in the justification of the proposed amendments, at the preparatory meeting during the judge’s debate with the parties and attorneys, the judge will determine the subject matter of the dispute in legal terms, i.e. he will explain the basis and factual background, while the parties will specify their claims. It will therefore be the time and place where the parties will initially familiarise themselves with their views on the legal aspects of the conflict, including possible methods to resolve the dispute. This debate must not be bound by formal rules of procedure, thus it is assumed that the judge will simply talk to the parties at this stage.

According to the project proponents, the judge’s presentation to gain a preliminary view on the case, including the possible outcome to the proceedings, will also strongly encourage the parties to reach a reasonable compromise (Article 205(6) § 2 of the Code of Civil Procedure).

This is a completely new situation in the Polish civil procedure, as so far at no stage of the proceedings the judge has presented his views or the envisaged decision until the hearing is closed and the verdict is formally announced.

It is clear that such meeting may contribute to emphasizing alternative methods of resolving conflicts and it is the judge, acting from the position of his authority, who will be able to take on the role of an arbitrator to try to find a resolution to the dispute and make the parties visible to the those elements that can resolve the dispute. At this stage it will be about seeking solutions for the parties to come to an understanding with convergence points.

As the project proponents stress, the dispute resolution does not necessarily need to consist of the judge determining and resolving the case, because prior to this, it is necessary utilise all possibilities to settle the dispute at the will of the parties themselves, i.e. by concluding a settlement, including with the assistance of a judge.

A hearing or the hearings in accordance with the plan agreed during the preparatory proceedings should be held on possibly several consecutive dates, with no interval of several months as it was so far.

The introduction of the preparatory proceedings phase aimed at concluding a dispute without a hearing also assumes the active involvement of the parties in the planning of the court proceedings in their case, thus making the parties jointly responsible for the manner and timing of the court proceedings.

Judge and mediator

The activity of the judge at this stage will complement the activities of the mediators (which, incidentally may also be carried out at subsequent stages of proceedings).

Initiating attempts to reconcile the parties will be a challenge for the judges. It is a completely new approach to the role of a judge in Poland, who until now has primarily been the host of the proceedings and the entire trial.

The new tasks will require judges to have special mediation skills and a certain change in the perspective of looking at the goal of settling the case. It will be important to make the parties aware of the benefits connected with an amicable settlement to a case.

The judge will be able to flexibly moderate the course of the conference with the parties. Therefore, if the parties are willing to open discussions to resolve the conflict, the judge should postpone the hearing in accordance with the new regulations (Article 205 (7) § 2, § 3 of the Code of Civil Procedure).

Also, the time set between consecutive dates, which in the new assumptions is to be short (in contrast to the current breaks of even several months), should be used to come to the necessary compromise between the parties.

According to the project proponents, as we read in the new law justification, it is important that the judge should be able to indicate the points to the parties at which their positions could be brought closer, to be active in seeking the circumstances with the parties which will bring them closer to the amicable settlement of the dispute. At the same time, it should be able to tone down those elements of the dispute which strongly antagonize the parties.

Participation of lawyers

The preparatory meeting will probably look completely different in cases with professional proxies and in complex cases. Here, it may be preceded by the exchange of further pleadings in order to clarify certain circumstances of the case.

Again, however, as the project proponents point out, it is emphasised that the main purpose of the hearing should be to seek a compromise with the parties and to settle the matter amicably at this stage of the proceedings. In the case of parties represented by professional lawyers and due to the complexity of the case, it may be all the more necessary to allow the parties to conduct longer negotiations or to seek the opinion of (external) experts.

The effectiveness of mediation during the preparatory phase will only be possible with the active involvement of the parties. Therefore, their attendance at the preparatory meetings must, in principle, be mandatory.

The penalties for failure to appear are relatively severe, especially in the case of the claimant. However, this is justified by the crucial importance of the preparatory meeting for the whole process.

When concluding a settlement agreement depending on the volume of the document covering it, it may be entered into the minutes of the preparatory meeting or included in a separate document, which is then an annex to the minutes (Article 205(8) § 2 of the Code of Civil Procedure). According to the new regulations, the settlement document itself may be prepared by the parties or their attorneys.

It would appear that the new provisions will significantly strengthen alternative dispute resolution methods and for the judge to actively participate in this process this may prove be crucial.

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

Disputes within companies

Ewelina Stobiecka10 July 2019Comments (0)

Business disputes are often a problem that can paralyze a company for many months, and sometimes even years, which are associated with conducting a long-term lawsuit. Also, disputes within companies and organizations may paralyze the functioning of the company, and an unresolved conflict, e.g. between departments responsible for strategic areas of the company’s activity, may cause considerable perturbation for the entire company. Often such dispute arising within the organization turns into an employee problem, which may end up in a lawsuit in which the employee speaks out against the organization.

Employee – Employer Relationship

Pursuant to Article 243 of the Labour Code, the employer and employee should aim at an amicable settlement of a dispute arising from the employment relationship. Such settlement of the matter begins within the organization. In the area of intra-organisational disputes, a special role is played by the human resources department (HR), which, being in fact a part of the enterprise, is involved in resolving disputes between colleagues from work or colleagues and its supervisor, e.g. a member of the company’s management board, so that this conflict does not end with specific claims of the employee resulting from the employment relationship and does not “land” in court.

It is a very difficult situation in which the person responsible for the employment relationships in the company, paid de facto by the company, must remain objective in a given situation, supporting the parties in search for an amicable solution. Such “mediation” of the dispute is far from ideal mediation, which assumes full impartiality of the mediator and as a person helping the parties to find the best solution to the situation. The mediator, in accordance with the binding provisions of the Code of Judicial Procedure, should maintain impartiality when conducting mediation (Article 183(3) of the Code of Civil Procedure).

Employee mediation may allow for an amicable resolution of such conflicts as:

  • disputes related to disciplinary proceedings,
  • disputes concerning mobbing or discrimination,
  • conflicts within a team of employees or
  • industrial disputes.

In Poland, the system of solving industrial disputes is specified by the Act of 23 May 1991 on solving industrial disputes. Pursuant to Article 1 of the aforementioned Act, a collective dispute between employees and their employer may concern working conditions, wages or social benefits, as well as trade union rights and freedoms. Under this Act, mediation proceedings are mandatory and must be carried out after the impasse of negotiations. Mediation may also precede strike action or, if the right to strike is not exercised, proceedings before the college of social arbitration. The function of a mediator may be performed by any person whose participation in the mediation proceedings is agreed by both parties to the collective dispute. Such a person should enjoy general trust and guarantee neutrality. Participation in mediation proceedings is obligatory for the parties to the dispute and evasion of participation in the mediation process by the employer is an illegal action – preventing mediation – which entitles the trade unions to organize a strike, without prior exhaustive  possibilities to resolve the dispute in accordance with the rules set forth in the Act.

Mediator

External experts who are not in any way dependent on any of the parties to the dispute are best placed to act as mediators within the organisation. The same applies, of course, in the case of industrial disputes, where there are trade unions on one side and the management board on the other.

The legislator also supports the use of mediation at the stage when the conflict has already reached the courtroom. According to the binding provisions of the Code of Civil Procedure, a judge is obliged to persuade the parties to the proceedings to settle the matter amicably through mediation at all times. Moreover, at any stage of the proceedings he may refer the parties to mediation (Article 183(8) § 1 of the Code of Civil Procedure). As of 8 September 2016, each statement of claim filed with the court should include information whether the parties have attempted to mediate or otherwise resolve the dispute out of court. If this was not the case, it is necessary to explain the reasons for such omission.

When deciding whether to engage an external expert/mediator to resolve a dispute within the company, it is worth looking at the potential losses that a badly ordered conflict that arises within an organisational structure can bring.

In addition to a potentially lengthy court case in a labour court, which could last for years, if the case was finally brought to the court’s attention, we may be dealing with a complete paralysis of activities of individual departments of the company, involved in a given dispute. Not without significance are also the general principles of labour law, which are binding on each court, namely the principle of protection of employee interest (from which it follows that any unclear issues should be interpreted in favour of the employee), the principle of employer risk and the principle of formalisation of employee’s actions, from which, in principle, less is required in court proceedings.

A solution for the future

Appropriate use of mediation in disputes not only allows to solve a given conflict, but also to make communication within the company so clear that it may also positively influence other processes which are important from the point of view of the functioning of the company. Similarly as in economic mediation between enterprises, internal mediation also allows to arrange relationships for the future.

Also, by concluding an agreement with a mediator it is possible to establish various solutions important for the functioning of the company and trade unions. Unfortunately, there are no statistics which show how much mediation within enterprises is used in Poland and what real savings it brings to entrepreneurs. Such disputes and mediation often do not come to light. Statistics and research conducted in relation to classical mediation indicate even ten times lower cost of mediation in relation to the costs that can be generated by an ordinary litigation, not to mention the indirect costs that any conflict generates for any company, such as the involvement of persons managing the company in the resolution of disputes, loss of image, broken relationships with the contractor, or paralysis of the company in connection with the conflict, such as key departments in the organizational structure of the company. Also, the lack of professional dialogue with trade unions may cause further escalation of the conflict. Through mediation, the culture of conducting business in general and intra-organizational culture in the company is significantly improved.

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

Mediation in tax proceedings

Ewelina Stobiecka10 June 2019Comments (0)

Mediacja w sprawach podatkowych

Mediation in tax law is one of the so-called “non-sovereign” forms of dealing with tax matters and as such it has not covered by Polish tax law so far.

A lot has been written about mediation in commercial disputes, mediation with the public sector has also been somewhat louder recently. Mediation in tax proceedings is less known and has not been used in Poland so far. The importance of using this alternative to court method of resolving disputes between entrepreneurs in the area of taxes was highlighted in the recommendations developed by the British-Polish Chamber of Commerce and prepared on the basis of exchange of good practices with experts from the United Kingdom and the broad business and tax practice of its member companies. 

The British-Polish Chamber of Commerce collected the most important recommendations concerning the tax system and the interaction between tax authorities and taxpayers and among the recommendations which are completely new for the Polish practice and legal environment is the strengthening of institutions of mediation in the area of taxes. 

The recommendations mentioned above argue that it is necessary to develop internal rules for the use of mediation for the tax administration and to include a system of incentives for their use. Moreover, it has also been pointed out that it is necessary to relieve an official who used mediation in a manner similar to the provision concerning settlements in civil proceedings from liability. When preparing the cited recommendations, it was established on the basis of data from the HM Revenue & Customs (Annual Report and Accounts 2017-2018) that the United Kingdom reported a 62% increase in the collection of disputed taxes as a result of mediation. The fiscal years under review are 2016 to 2017 and 2017 to 2018. 

The quoted research of the institution dealing with tax collection in Great Britain clearly indicates that the use of mediation in this area of state activity may be associated with a real benefit for the state budget. 

Is this a good solution for Poland?

It should be noted that also in Poland we have a draft amendment to the Tax Ordinance of 4 July 2018, where the justification stresses that mediation is established as a procedural mechanism facilitating communication between the tax authority and the debtor, and it is not a substantive dispute resolution mechanism. This type of solution applied in the draft Tax Ordinance Amendment Act, introduced into Chapter 11 of the Act (in articles 383 to 399), is de facto supported by negotiations between the tax authority and the taxpayer as a party to proceedings. Thus, we can also expect the introduction of mediation institutions to administrative proceedings concerning tax liabilities in Poland. 

As indicated in the literature on this subject, this mediation was formed with respect for the principles of voluntariness, impartiality, neutrality and confidentiality. Initiation of a mediation procedure is allowed at any stage of tax proceedings. The scope of mediation proceedings specified in the draft act provides that mediation may be conducted in cases where a tax agreement may be concluded. Thus, the purpose of mediation is to lead to the conclusion of a tax agreement, which is also a new institution introduced in the draft act in Chapter 10. 

Polish tax mediation solutions apply, among others, a time limit for completion of mediation, which may not exceed two months from the date of issue of the decision to refer the case to mediation. At the request of the mediator and with the consent of the party, the tax authority may extend the time limit in the form of a decision for the time necessary to complete the mediation. As in the case of a civil lawsuit, this time limit will not be included in the time limit for settling the case. As a rule, such mediation may be conducted by a mediator entered on the list of mediators, which will be conducted by the head of the National Tax Administration. The mediator will also be the Taxable Person’s Rights Ombudsman. 

The regulation amending the tax law also provides for a number of further detailed solutions concerning the conduct of mediation in taxes, which are known to be, among others, commercial mediation, provided for cases conducted in ordinary commercial proceedings. 

The justification for the draft act states that tax mediation may take the form of facilitation mediation, i.e. classic assisted mediation, where the mediator’s role is only to facilitate the agreement between the parties, i.e. the mediator does not propose or suggest a solution, and therefore does not need to have substantive knowledge of the subject matter of the case. However, the mediation described in the draft Tax Ordinance may be similar to an evaluation mediation, i.e. one in which a mediator with specialist knowledge may suggest a solution to the dispute to the parties. 

The decision to conclude a tax agreement to complete the mediation process is always a decision of the party and the tax authority. The solution proposed by the draft Tax Ordinance Act therefore meets the recommendations formulated by the Polish-British group of experts, gathered around the British-Polish Chamber of Commerce. Of course, it is also justified by social reasons and corresponds to the values underlying the relationship between taxpayers and tax authorities in a democratic state of law. The entry into force of the tax ordinance is scheduled for 1 January 2020 and from that date onwards, tax mediation will be possible. Whether this institution will work in practice will show us the future. Nevertheless, we should positively assess the introduction of mediation in increasingly wider use in disputed cases in various areas of business activity.

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

Rola prawnika w mediacjiThe role of a lawyer in mediation is extremely important, and it is often up to him to decide whether the parties to a conflict sit down at the table, as well as the success of mediation itself. Therefore, a lawyer should have, apart from substantive knowledge, a range of so-called soft skills.

A lawyer is by definition a “warrior” and a “mercenary” who will fight on our behalf. This is generally accepted, because in our cultural area we usually go to a lawyer when “milk is already spilt” and the conflict has started for good.

Usually in such situations, the client’s primary expectation towards the lawyer is a brave and ruthless attitude, so as to win the case, because there is a war going on. This is all true, although such a zero-one system does not always work in reality.

Often the role of a lawyer in the course of conducting a case changes. From “warrior” it has to turn into a negotiator, and sometimes into a “midwife”, which we will explain a bit further in this particular context.  

Different faces of a lawyer

An ideal lawyer is therefore a person who, like a chameleon, can adapt to a changing situation, a dynamic court process and accompany his client in the course of resolving a dispute or conflict both inside and outside the courtroom. 

The ability to transform is particularly important for a lawyer, to whom the client entrusts his or her dispute with the expectation or order of the most effective (time and cost effective) solution. 

When accepting such an order, a lawyer usually offers his client at least two alternative paths: judicial (where he simply becomes a warrior attorney fighting on behalf of his client) or out-of-court (where he uses alternative methods to resolve conflicts). Both can of course intersect and overlap, depending on the efficiency of the lawyer and other persons accompanying the parties, e.g. the judge or mediator.

So let’s look at the different roles of the lawyer to whom the client entrusts his or her legal and economic dispute in order to find the quickest and most effective solution. It is interesting to note both the perspective of procedures and legal regulations within which the lawyer moves and the perspective of the so-called soft skills of the lawyer, which give him unusual flexibility in adapting to the dynamic situation of the dispute.   

Partner, negotiator, midwife.

One of the first actions taken by a lawyer in a dispute case conducted by him or her is to present various scenarios of action to the client, for and against particular paths of action and legal and business consequences of a given path. 

At this stage, a lawyer is not only a lawyer informing his client about possible methods of action, but also a partner of the client, helping him to make the most business-oriented decision on the future of the dispute. 

In the case of the choice of an amicable method, including negotiations, the lawyer usually takes the role of a negotiator. In the case of choosing a judicial path, the lawyer becomes a “warrior” with a clearly defined military position, usually expressed in a lawsuit.  

At this stage, a formal “corset” for a lawyer is, among others, Article 187 § 1 point 3 of the Code of Civil Procedure, according to which a claim should satisfy the conditions of a pleading and, moreover, contain information whether the parties have attempted to mediate or otherwise resolve a dispute out of court or, if no such attempt has been made, explain the reasons for their failure to do so. Thus, before a lawyer takes his or her role as a “warrior” in the courtroom, he or she should try to resolve the dispute amicably outside the courtroom.   

However, if a peacekeeping mission fails and the case goes to court, the lawyer, armed with knowledge and experience, is a “warrior” and fights on behalf of the client, according to a strategy agreed with him/her. A whole range of regulations and formal restrictions is provided for by the aforementioned code of court proceedings, which for a lawyer is a set of rules how this “war” is played out in court.   

In court, however, the roles of the lawyer may change again and the armour may be removed again. Well, the judge himself can contribute to this, who, according to Article 10 of the Code of Civil Procedure, is to aim at reaching an amicable settlement in all stages of the proceedings, in particular by persuading the parties to mediate.

Also in accordance with Article 210 § 2 (2) of the CCP already dealing with the hearing itself indicates that the court instructs the parties about the possibility of settling the dispute amicably, in particular by way of mediation.

Thus, a “lawyer-warrior” at each stage of the dispute must be prepared to change his or her role as a lawyer controlling the case on behalf of the client before the court, into a lawyer accompanying the client in possible negotiations or mediation. 

In this way, among others, a lawyer responds to a decision to refer a case to mediation, which the court, pursuant to Article 183 (8) of the Code of Civil Procedure, may issue at any stage of the proceedings. It is worth mentioning here that such a decision directing the parties to mediation may be issued at a closed session, and thus also outside the courtroom. Of course, according to the article regulating civil procedure, mediation is not conducted if a party has not agreed to mediation within a week from the date of announcement or delivery of the decision directing the parties to mediation.

In addition, the presiding judge may invite the parties to attend an information meeting on amicable dispute resolution methods, in particular mediation. An information meeting may be chaired by a judge, court referendary, court clerk, assistant judge or permanent mediator. In such a situation, the lawyer again moves from the role of a brave defender of the best interests of his client to a more diplomatic phase, namely mediation, the aim of which is to work out a joint settlement by both parties.

Pursuant to § 5 of Article 183 (8) of the CPC, before the first meeting scheduled for a hearing, the chairperson shall assess whether to refer the parties to mediation. For this purpose, the Chairman may, if it is necessary to hear the parties, call them to appear in person at a closed session. If a party fails to appear at an information meeting or an implicit hearing without justification, the court may charge the party with the costs of the ordered appearance incurred by the other party.

Thus, throughout the entire judicial process, in mediation or in out-of-court settlement negotiations, a lawyer must change his or her view of the dispute and think in business rather than legal terms. The aforementioned role of the “lawyer-accuser” refers to the whole range of soft competences that allow him to accompany the client during the various phases of mediation. Competences are more oriented to leading/supporting the client than to “arming”. This refers to skills such as active listening, asking questions that are not only inspiring to seek solutions, patiently waiting for answers, building partnerships through empathy and understanding. Empathy in this role not only refers to the emotional state of the client, but also to understanding the client’s situation on the market, building long-term relationships, PR of a business partner who, despite conflicts, is looking for solutions, not only in court, but also in a court of law. These competences require constant strengthening and learning. 

It is particularly important to be able to give constructive feedback without evaluation or interpretation. Changing the perspective and seeing the conflict situation from the other side can also help to broaden the perspective of the conflict. 

Such an attitude is usually expected by a client who, while agreeing to refer a case to mediation or seeking agreement through negotiations outside the courtroom, assumes the possibility to leave his or her usual court path (e.g. presented in a lawsuit) in order to reach an agreement. A lawyer, acting in the best interest of the client, should at this stage accompany him/her as a kind of “midwife” of the agreement concluded in mediation or a builder of the agreement concluded in the course of negotiations. 

Unfortunately, out-of-court talks do not always lead to a happy-end in the form of a settlement. In such a situation, the lawyer, like a chameleon, returns to his role as a “warrior”, while in his weaponry and the weapons he uses in his further fight he must take into account a very important aspect resulting from Article 183 (4) of the Code of Civil Procedure, according to which the mediation proceedings are not open, and thus the mediator, parties and other persons participating in the mediation proceedings are obliged to keep secret the facts about which they learned in connection with the mediation. The same usually applies to negotiations, during which a “non disclousure agreement” is concluded. It is worth remembering that the parties may exempt the mediator and other persons participating in the mediation proceedings from the obligation of confidentiality, which in a way “gathers” the parties in further arguments before the court.

The aforementioned Article 183 (4) of the CPC, in a situation in which the parties were not exempt from the obligation to maintain confidentiality, in its next paragraph confirms that it is ineffective to invoke in the course of proceedings in court or an arbitration court settlement proposals, proposals for mutual concessions or other statements made in mediation proceedings.

Another important role of a lawyer is emphasized at the stage of formulation of a settlement agreement. Here, the lawyer again “accompanies” his client in the professional paper transfer of all findings made outside the court. At this stage, the lawyer may also apply for a declaration of enforceability of the settlement agreement, where – for the moment only – the parties return to court to formally approve the content of the settlement agreement.

In this respect, in the case of an agreement concluded before a mediator, this procedure is governed by Article 183 (14) of the CPC, pursuant to which, if an agreement has been concluded before a mediator, the court, at the request of the party, will immediately conduct proceedings to approve the agreement. If the settlement is enforceable by enforcement, the court approves it by making it enforceable. At this stage, the court also verifies the quality of the lawyer’s work because, pursuant to § 3 of Article 183(14) of the CPC, the court refuses to enforce or approve an agreement concluded before the mediator, in whole or in part, if the agreement is contrary to the law or to the principles of social conduct or seeks to circumvent the law, or if it is incomprehensible or contradictory.

    

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

Disputes with the public sector

Public investments in which public funds are spent, including those originating from the European Union, are often a source of conflicts between the public sector spending these funds and the entrepreneur implementing the investment, i.e. the private sector. 

The first pages of newspapers reported on an ongoing basis on disputes between entrepreneurs in the infrastructural area. These disputes often have had an impact, whether on the sub-contractors of investors or on ordinary road and motorway users. 

Entrepreneurs in such situations complain about multi-month (often long-term) processes, and thus about unusually long time to recover debts. These are complex processes, with a very high value of the subject matter of the dispute, not only requiring extensive evidentiary proceedings, but also the so-called special knowledge, requiring the involvement of experts of various specialties. 

Not everything has to be decided by the court

According to the World Bank’s “Doing Business in Poland” report for 2018, the average time for pursuing claims in Warsaw, i.e. in a market with a huge saturation of real estate investments, is about 685 days, i.e. almost two years. On the private sector side, for an entrepreneur, this often means “frozen” assets and getting involved in costly processes in terms of time and finance. For the public sector, such costly disputes are also one of the factors that have a negative impact on the economy.    

Several legislative attempts have been made to settle queues in courts, among others, through the provisions of the Act on the Promotion of Amicable Dispute Resolution, which came into force on 1 January 2016. The aim of these regulations was primarily to strengthen mediation as an alternative means of resolving disputes. And while economic mediation in the area of the private sector is slowly but surely developing, the number of agreements concluded with the public sector is still not impressive. 

Although no one needs to be convinced of the advantages of mediation: the time taken to resolve a dispute (usually about a few weeks) and money (mediation costs several times less than court litigation), unfortunately, the amount of mediation with the public sector still leaves much to be desired. One of the barriers is the purely human fear of settling agreements with entrepreneurs, where a public official simply does not want to be accused of mismanagement in the spending of public finances. Partly, this fear was justified by the rigor of the Polish provisions of the Act on Liability for Violation of Public Finance Discipline. 

New “mediation tools” for the public sector. Is it effective?

From June 1, 2017, the regulations which respond to the problem of mediation with the public sector came into force. These are the amended provisions of the Public Finance Act and the Act on Liability for Violation of Public Finance Discipline. 

The changes introduced in these acts directly regulate the issue of making settlements with the public sector, saying that a unit of the public finance sector may conclude an agreement on a disputed civil law liability if it is assessed that the effects of the settlement are more favourable for this unit or the State Treasury or the budget of a local government unit respectively than the probable outcome of court or arbitration proceedings (Article 54a of the amended Public Finance Act).

Another provision of this article provides guidelines for the aforementioned assessment of the effects of such a settlement. The assessment of these effects is to be made in writing, taking into account the circumstances of the case, in particular the legitimacy of the disputed claims, the possibility of satisfying them and the expected duration and costs of court or arbitration proceedings.

In the justification for the changes introduced, we read that the condition for reaching an agreement is mutual concessions of both parties, and it is precisely this requirement of mutual concessions – in connection with the provisions on liability for breach of financial discipline – that has so far been one of the barriers to the use of mediation and other amicable methods of resolving disputes involving the public sector. 

Appropriate changes were also introduced in the Act on Liability for Violation of Public Finance Discipline. This is where Article 5, Article 11 and Article 15 were amended, where it was stated that: execution of an agreement, making an expense from public funds and incurring or changing a liability do not constitute a breach of public finance discipline if they result from an agreement on a disputed civil law liability, concluded in accordance with the provisions of law (in particular on the basis of Article 54a of the Act on Public Finance, quoted above).

Unfortunately, there are no official statistics as yet on how the new rules are used, i.e. how many agreements have actually been concluded with the public sector. Advisers of the General Prosecutor’s Office have a huge role to play in this area and they are to be a real support for the public finance sector entities also in the field of dispute resolution. 

One thing is certain: the costs of mediation in any dispute are much lower than those of a long and costly trial. The related savings concern both parties, both the private and the public sector, i.e. us taxpayers.

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