> Prevention and Resolution of Disputes

Mediation – Resolution of Disputes at Party’s Will not at Judge’s Discretion

Last month we have all been watching the recent events in Catalonia. Will a new state arise or will they reach a different agreement with Madrid? Among others, we have also heard calls of the Catalan prime minister to resolve this political crisis by means of mediation.

What is actually mediation? Can a mediator really assist in resolving disputes? Is mediation useful only in the case of political crises or also for the resolution of everyday disputes? This column will try to answer those and similar questions.

Shareholders in a successful company cannot come to an agreement whether to pay out profit or invest it into bitcoins, which leads to a dispute. One of them is enforcing the right to exit the company in front of the court. In the dispute, the court will decide only on the exit from the company, while the real dispute (what should be done with the profit) will not be relevant for the court proceeding, although the shareholder might be enforcing the right to exit only because he needs money to renovate his house.

Is the exit of one of the shareholders really in the interest of the shareholders and the company? Could the shareholders still agree on the investment into bitcoins, and the company would give the shareholder a loan for house renovation?

Was a court proceeding the most appropriate solution for this dispute?

How would the dispute be resolved with mediation?

If the shareholders chose mediation as an alternative dispute resolution, this dispute would not be decided by a court. According to its definition, mediation is a voluntary, confidential and structured procedure, in which the mediator assists the parties in finding a mutually acceptable solution to the dispute.

Mediation can be used in inter-state disputes, political crises as well as disputes between individuals and companies arising from business, private, employment, family and other financial relations. Thus, the shareholders could also choose mediation; such procedure is governed by the Mediation in Civil and Commercial Matters Act (ZMCGZ).

Research shows that mediation is efficient. As follows from the recently adopted Resolution of the European Parliament of 12 September 2017 on the implementation of Directive 2008/52/EC of the European Parliament and of the Council of 21 May 2008 on certain aspects of mediation in civil and commercial matters (Mediation Directive), mediation provides a cost-effective and quick extrajudicial resolution of disputes through processes tailored to the needs of the parties.

Why mediation?

Compared to resolving a dispute in front of the court the main advantage of mediation is that the parties themselves can decide on the matter and on the resolution of dispute. Just as consent to mediation is voluntary, the parties can withdraw it at any time. The parties cooperate in forming an arrangement and agree only to such arrangement that suits them. On the other hand, in court proceedings even attorneys cannot foresee how a judge will decide. There are theories that the decision of a judge can depend also on his personal well-being at the time of making the decision. The decision, which (half in jest) might depend on how delicious the marmalade was which the judge had spread on his bread for breakfast, then has to be accepted by the parties to the conflict whether it is suitable for them or not.

The courts decide only within the limits of claims. Thus, in the above-mentioned case a court can decide only whether the shareholder is entitled to exit. Thereby, the law that serves as a basis for court’s decision is static, and the judges assess the dispute with respect to a fixed historical event. Life, on the other hand, is dynamic. Everything is changing constantly. This dynamics has an effect on relations between parties in a dispute, although the dispute arises from historical events. The discussion on past events, which have caused the dispute, is always stressful, and stress often hinders rational decisions and only deepens the dispute. In mediation we are searching for solutions for the future, therefore mediation corresponds better to the dynamics of life. With the help of a mediator, the parties are able to find solutions outside the initial claims. Each mediation starts with a talk on parties’ interests. The mediator will not ask the shareholder what does he want (exit from the company). The mediator will ask him why he wants to exit the company (because he needs money to renovate his house). Once the parties’ interests have been revealed, the arrangement can be adapted thereto and a dispute resolution can be found in this respect.

Furthermore, mediation is a confidential procedure. If there is no trust among the parties, it is also not possible to discover the interests of a certain party. In order to reinforce trust, ZMCGZ stipulates that nothing that has been disclosed in mediation can be used outside it, also not during possible subsequent court proceeding.

A frequent question is why mediation if the parties have already negotiated on their own without any success. It has been proven that the presence of a third, neutral person, which leads the procedure in a structured manner, has a positive effect on resolving the dispute and finding an arrangement. Maybe due to his belief and trust in bitcoins, the shareholder that wants to invest into bitcoins did not even hear that the other one needs money to renovate his house. Therefore, the mediator creates an appropriate atmosphere for discussion and takes care that both sides to the dispute listen to and hear each other.

It is also important that the ZMCGZ lays down that limitation periods and preclusive time limits do not run during the mediation procedure. The mediation procedure thus enables the parties not to rush with filing the lawsuit in order to secure their position.

I would also like to mention that mediation offers a possibility to resolve disputes faster and cheaper compared to long-lasting and relatively expensive court proceedings.

Possibilities of performing mediation procedure

In Slovenia, court-connected mediation is most widespread. After filing the lawsuit, the parties can agree on performing a mediation procedure. The performance of mediation procedure or (non)agreement to mediation have no effect whatsoever on the possible subsequent dispute between the parties in court.

In general, mediation is regulated by ZMCGZ, which applies in all cases when the parties have agreed to resolve the dispute with mediation. Thus, mediation can be initiated before filing the lawsuit. If mediation is successful, the parties save money for court fees at the very least. Mediation outside the court and before filing the lawsuit is possible at private mediation centres or the parties may agree on ad hoc mediation (they engage a mediator by themselves).

Among private mediation centres, I would like to highlight the Mediation Centre at the Bar Association of Slovenia. The Centre enables a quick and efficient performance of mediations and offers a wide range of mediators. The proposal for mediation can be submitted before filing the lawsuit. If the parties to the conflict have not agreed on the performance of mediation yet, the Centre may upon the proposal of one party offer mediation to the other party and try to obtain consent from the counterparty.

There are several possibilities of performing mediation and there is no reason why we should not try to resolve a dispute with mediation. After all, if we are not able to reach an agreement in mediation, we can still initiate or continue the proceeding before court.