Dr Ewelina Stobiecka

Attorney at law

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

How to solve disputes with the public sector. Real tools or pious wishes?

Ewelina StobieckaComments (0)

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.

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Tell me your problem and I will suggest what we can do together and how much my work will cost.

Dr Ewelina Stobiecka

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