Disputes, being an inherent part of doing business, are time consuming, costly, and can potentially harm the reputation of the business involved. Unfortunately, the Polish administration of justice is still a far cry from satisfactory effectiveness in dealing with such issues, as demonstrated by Poland being ranked as low as 97th among 142 countries in The Global Competitiveness Report 2011-2012 of the World Economic Forum. For that reason, Alternative Dispute Resolution (ADR) is an alternative worth noting.
The two principal dispute resolution methods, alternative to litigation before a common court of law, are mediation and arbitration, both of which being regulated under the provisions of the Code of Civil Procedure.
The main difference between mediation and arbitration is the way of finding solution to the problem. While during mediation, the parties attempt to find a consensus with the involvement of a mediator who, however, has no executive authority and does not settle the dispute. The mediator’s task is to enable the parties to reach agreement and negotiate a settlement. On the other hand, under arbitration, the parties refer the dispute for resolution to an arbitration tribunal where an independent arbitrator resolves the case finding one of the parties to be in the right.
The first of the above methods, mediation, can be undertaken in every case when a settlement is possible. Consequently, all disputes where a sole trader, partnership or company is a party, relating e.g. to payment of amounts due, claims of partners/shareholders, or determination of damages, can be resolved by mediation. The key features of mediation include voluntary participation in the process and the ability to withdraw at any time. The decision to seek mediation rests solely and exclusively on the parties involved and it is only up to them how fast a satisfactory arrangement is worked out.
The process of mediation requires the presence of a neutral mediator who acts to facilitate negotiating a settlement. It is significant that the mediator is bound by the confidentiality obligation unless the mediator is released from by the parties. Consequently, a business party to mediation should not fear disclosure of information that is significant from its point of view. It should also be noted that mediation is far less formalised than court litigation. The parties are free to agree convenient venue and time for mediation which without any doubt affects the duration of the process and by the same token significantly reduces its costs compared to the standard proceedings. Moreover, arriving at a common solution in the process of transparent talks conducted in a pleasant atmosphere helps not only resolve the conflict but is also conducive to further collaboration between the parties to the dispute.
The strengths of mediation hold as true for arbitration, including as a rule a swifter resolution of the dispute, guaranteed confidentiality of commercial data, ability to align the proceedings with the specific needs of the parties, or lower costs than in the case of proceedings before a common court of law. Yet, it must be borne in mind that there are specific charges associated with entering into arbitration. The rates would depend on the object of the dispute and on the specific court of arbitration hearing the case. And so, according to the table of fees and charges of the Court of Arbitration at the Polish Chamber of Commerce (Sąd Arbitrażowy przy Krajowej Izbie Gospodarczej), arbitration may prove more costly if the matter involves a small amount of money. Similarly, in the case of a multi- million dispute, the fee applied may prove much higher than stipulated under the Act on Court Costs in Civil Cases, under which the prorated court charge is capped at PLN 100,000. Nonetheless, in the majority of cases arbitration will still be attractive, as the standard court proceedings, in addition to their costs, include also costs of expert opinions, attorneys’ fees, etc, which often represent the principal financial burden the amount of which cannot be foreseen ahead of time.
It happens that despite the presence of the grounds making it highly likely for a party to prevail in litigation, such party after all decides to go for one of the ADR alternatives. This is the effect of cool calculation as reliance on ADR helps save time, money, and energy that can well be used for some other constructive purposes.
Summing up, the Alternative Dispute Resolution techniques offer enough advantages to deserve being considered in each case. As an indication of how effective ADR is, one should note the US case Department of Transportation v. City of Atlanta (President Parkway), which took nine years of litigation and even got as far as the Supreme Court. Once mediators entered the stage, 9 meetings was all that was needed, to resolve the dispute. This case clearly demonstrates the utility and purpose of ADR application.