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...
[Read more>>>]

Settle your dispute

Case study: how mediation can contribute to business development

Ewelina StobieckaComments (0)

Mediation on leasePARTIES TO MEDIATION:

– Landlord
– Tenant

VALUE OF DISPUTE SUBJECT MATTER:

PLN 1.5 million

BRIEF DESCRIPTION OF THE CASE, INCLUDING THE SETTLEMENT AGREEMENT

The case arose between a developer, the owner of an office building located in the centre of a large city, and its Scandinavian contractor, the tenant in the building. The lease agreement was concluded for a fixed period and regulated in detail all matters relating to mutual settlements. As a result of, among other things, IT system errors on the part of the Lessor and errors resulting from the erroneous takeover of the leased area on the part of the Lessee, a dispute arose between the Parties, which at the time the case was reported amounted to one and a half million zlotys.

Due to the fact that the Lease Agreement was coming to its end and the value of the subject of the dispute constituted a significant part of the annual budget of the Lessee’s company, the case went to court. Bearing in mind the need to ensure financial liquidity on the part of the Lessee, the Parties decided to settle the case out of court.

The Mediator’s task was to assist in finding such a solution that would ensure relatively quick settlement of the Lessor’s claims, with simultaneous elimination of the system errors on its part which had caused the erroneous calculations, as well as regaining financial liquidity on the part of the Lessee and a smooth move to a new office. As a result of the mediation proceedings, after less than three hours of meeting, the landlord waived interest on the debt and reduced the value of the principal debt by the part which could have been (in the opinion of both parties) generated by the faulty system calculating the fees. The tenant undertook to pay the debt in instalments, setting a schedule that allowed him to maintain his financial liquidity.

Additionally, the parties also reached an agreement with regard to other locations of their subsidiaries in Central and Eastern Europe, and initially discussed the terms of potential lease of office space in those locations.

As a result of the Mediator’s actions and the mediation proceedings, the Parties not only found a solution to their current problem, i.e. the backlog resulting from errors that occurred on both sides of the lease relationship, but also agreed on other markets on which they operated through their subsidiaries. The Parties’ satisfaction with the manner in which the matter was resolved also translated into their good relations in Poland and continued talks regarding the potential lease of other office space.

Mediation in shopping malls. A remedy for the coronavirus crisis in dispute resolution …?

Ewelina StobieckaComments (0)

Mediation in shopping malls

In many EU countries, entrepreneurs are counting the losses caused by the coronavirus pandemic, which has had a particular effect on the retail sector, including small, medium and large enterprises in the shopping centre sector, which generates about 30% of the value of retail trade in Poland and is an important contributor to the national budget and which directly and indirectly employs about 650,000 to 1 million.

In addition lessees in shopping centres have been deprived of the opportunity to earn money and owners of these centres, where their income has significantly decreased, have been financially injured there.

The direction of claims are different because both owners of shopping centres with tenants (e.g. for the exemption from rent for the time during  closure of the centres) and tenants towards the state (e.g. due to unconstitutional restrictions introduced, a problem which is present in many European jurisdictions) may be in dispute.

Entrepreneurs have reviewed their contracts in search of force majeure or emergency clauses and there is a lot of discussion on how the state can support the industry with state aid.

This business reality raises the question of how to resolve disputes in a situation where the courts do not operate or operate to a very limited extent through a sanitary regime, which sometimes means extended waiting times or cancellations.

The answer to these or other issues of entrepreneurs are alternative methods of conflict resolution, including economic mediation. This is because any dispute can be resolved through mediation, which in turn may prove to be quite an effective tool that can also be used during a pandemic.

Commercial mediation

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

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

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

In fact mediation can not only resolve an existing dispute, but can also “mediate” special contractual terms and conditions under special circumstances such as a pandemic. This may be important precisely in a situation where the parties concluding the contract did not foresee certain circumstances of their performance, such as the introduction of a state of epidemics or epidemic threat throughout the country.

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

The settlement agreement replaces the judgment

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

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

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

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

Costs Court proceedings Mediation
Preliminary fees / registration of a case 100,000 zł court fee 1,500 zł net registration fee
Legal support services during the proceedings* approx. 120,000 zł

 
Mediation cost**  

 

 15,000 zł net (15 mediation hours)
Experts opinion

 

 approx. 3,000 zł Not applicable
Enforcement proceedings approx. 2,500 zł Not applicable
Total sum approx. 225,500 zł 16,500 zł

*costs calculated on the basis of World Bank data published in the Doing Business Report (Poland) 2017

** Cost of mediation sessions at the International Mediation Centre (www.mcm.org.pl)

Case study: from arbitration to mediation

Ewelina StobieckaComments (0)

From arbitration to mediationMEDIATION PARTIES:

– property development company
– architectural studio

VALUE OF THE SUBJECT MATTER OF THE DISPUTE

PLN 1,200,000

BRIEF DESCRIPTION OF THE CASE, INCLUDING THE WORKED OUT SETTLEMENT

The parties concluded a contract for the performance of fit-out and design works for a new shopping centre in one of Polish cities. The contract amounted to PLN 6,000,000 and concerned the entire shopping complex.

As a result of problems related to the macroeconomic situation, the developer had to discontinue the investment and break the contract with its contractor. On the part of the contractor, i.e. the architectural studio, certain costs have already been generated, related to the design work performed to date, valued at approximately PLN 1,200,000.

The design company demanded the return of the amount due for the performed works, while the development company justified its failure to complete the works and to discontinue the entire investment due to its poor financial situation. The parties reached an impasse.

The contract linking both parties provided for arbitration for the disputes that arose, which, as it turned out after preliminary calculations, would generate additional costs of conducting the dispute at the level of initial fees of approximately USD 60,000. The arbitration clause in the Agreement effectively blocked the Parties from pursuing the claim in court. Therefore, the Parties decided to engage in out-of-court talks, in a mediation formula.

As a result of the mediation, the Parties managed to reach a Settlement Agreement, in which both Parties agreed to pay a significant part of the remuneration for architectural works already performed, with a simultaneous reduction of certain additional costs and interest that were related to the claim. The payments were spread in instalments convenient to both Parties and so that the developer, who was currently in a poor financial position, could meet its obligations.

Due to the desire to approve the Settlement before the Court, the Parties applied to the Court for approval of the Settlement and at the court date set within a few days, the Parties officially approved the Settlement reached before the Mediator.

This case is also an example of how mediation has successfully reduced the costs of proceedings from approximately USD 60,000 for an entry in arbitration to several thousand PLN in total costs of the entire (private) mediation process.

Online commercial mediation

Ewelina StobieckaComments (0)

Online commercial mediation

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

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

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

Online dispute resolution,
applicable also in the court

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

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

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

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

Technical issues

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

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

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

The end of BITs in Europe is the end of investment arbitration. Facilitation or “investment mediation” as an alternative?

Ewelina StobieckaComments (0)

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

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

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

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

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

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

It all started in Slovakia

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

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

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

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

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

What about pending arbitration proceedings
or those with a judgment?

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

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

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

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

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

Lawyers of different jurisdictions express their concerns about these requirements.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

← Previous Entries

Next Entries →