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

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.

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.

    

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.

Klauzula mediacyjna a umowa o mediacjeEntrepreneurs know more and more about alternative dispute resolution methods. Thanks to the Act on supporting amicable methods of conflict resolution, more and more often we talk about mediation also in courts, persuading conflicting parties, practically at each stage of court proceedings to mediate. 

It is worth noting, however, that private mediation centres also have an interesting offer for entrepreneurs, offering mediation also without any special intervention or encouragement from the court. Such centres are usually visited by entrepreneurs who take matters into their own hands and, being aware of the enormous benefits of using this method of conflict resolution, turn to a professional economic mediator for help. 

Mediation clause

Mediation can always be used, but not less to increase the chance of its application is introduced into agreements (virtually all agreements regulating some business relationship), the so-called mediation clause, which already at the stage of concluding the agreement is a formal expression of the will of the parties to use mediation in the event of a dispute.  

Such a clause is nothing more than an additional contractual provision, usually included in the final provisions, indicating this form of resolving potential conflicts, the duration of mediation and often also the center, which the parties can then decide on.

Practically every mediation centre offers exemplary mediation clauses. They can be easily applied by pasting them into their contracts.

Below is an example of a mediation clause in Polish and English recommended by a mediation centre at bilateral chambers of commerce and industry.

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

Mediation agreement

Once the parties reach the Mediation Center, they conclude a mediation agreement with the Mediation Center, which in turn refers to the mode of action during the mediation.  

A mediation agreement may be concluded in any form, including implied forms, although due to its procedural consequences, it is suggested that the parties remain in writing. Such a mediation agreement may be concluded either before or after the dispute has arisen, including the consent of a party to mediation when the other party has submitted a request for mediation to the mediator. 

In their agreement, the parties must in particular specify the subject matter of the mediation and the person to be mediated and the way in which the mediator is chosen or the manner in which he is chosen, but may, under the principle of freedom of contract, include other specific issues relating to the conduct of the mediation, such as the place, time, remuneration of the mediator or the rules governing the conduct of the mediation. 

Typically, a mediation agreement is a simple agreement which regulates the fundamental issues of mediation and provides the parties with a roadmap for dealing with conflicts. 

It also gives the parties a sense of security and control over the situation, which they usually lose in court when the case is taken over by lawyers and judges.  

I invite you to listen to an interview with me on Polish Radio 24. Together with the journalist we talked about commercial mediation in business (in Polish language):

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