Of all the methods of alternative dispute resolution (ADR), mediation appears to be the least expensive, most attainable, and most “alternative”. The other ADRs are generally related to some form of arbitration, a solution in which a judgment is cast not by judges but by selected lawyers  or laymen. Mediation, in its essence, does not produce a judgment but seeks a voluntary solution that is acceptable to all the parties involved in a dispute. For the mediation to be successful, there are a very few basic conditions that need to be satisfied. First, the law must provide a neutral mediator whose identity is protected so that the settlement negotiations with the participating mediator may not be used in subsequent litigation or arbitration. Second, and this is very important, mediation must be able to be stopped at any time by either party dissatisfied with the process. Finally, mediation must toll the Statute of Limitations, otherwise people may be reluctant to use it for fear of running out of time to commence litigation.

Mediation is a more cost-efficient and quicker form of dispute resolution than any other. As well, it fosters continuing relationships between the quarrelling parties due to its amicable style. This may be especially valuable in cases when a relatively minor dispute arises in the course  of a long-standing relationship. A court action or even an arbitration proceeding may aggravate the relationship to the extent that there may be no more room for further cooperation. Mediation is therefore potentially devoid of this threat of permanent damage to communication between the parties.

Mediation, therefore, appears to be a perfect ADR and can provide a solid solution to a commercial dispute. The question is, why is it so rarely used in Europe? The answer lies in the title of this article. Mediation is the most misunderstood form of ADR in Europe. Let’s take a look at the example of a vulnerable version of mediation, that of commercial disputes in a large European country: Poland.

Mediation has been on the books in Europe and Poland for a number of years, but is not widely practiced in these territories. In Poland alone, statistics on mediation use are dramatically low. The total number of commercial mediations initiated by Polish courts during the period of 2006–2011 was only 3,541, whereas Polish courts register approximately 1.25 million commercial cases annually.1 Out of these numbers, even fewer mediations take place in commercial disputes.

There is a great need for a solution that would ease the overburdened court system in Poland and in the whole of Europe.2  Arbitration is providing much-needed relief, but is still not considerably lowering the backlog of cases. Although arbitration allows for a less formal judgment procedure, in recent years arbitration proceedings have increasingly resembled court proceedings without the corresponding solid guidance of systematic court rules.3

Mediation in Europe

In Europe the need to fight the long backlog of court actions and to lower the expenses of litigation was recognized in the beginning of the millennium.4  It intensified in 2002, when the Council of Europe’s Recommendation of the Committee of Ministers was adopted on 18 September 2002 (REC 2002), which encouraged member states to clarify the mediation process within their legal systems. Further, in 2004 the European Commission’s Directorate of Justice and Home Affairs adopted a Code of Conduct for European Mediation Services and a proposal for legislation to ensure uniform practices and standards (SEC 2004/0251) (COD). This was followed in 2008 by the European Union Directive 2008/52/EC of the European Parliament and of the “Council of Certain Aspects of Mediation in Civil and Commercial Matters” providing a framework for cross-border mediation. This directive, which has been in force since 13 June 2008, required the European member states to implement necessary laws, regulations, and administrative provisions on cross-border mediation by 20 May 2011. In 2011 the European Parliament entered a Resolution regarding the implementation of the 2008 Directive (2011/2026 (INI)). In effect, individual states must regulate mediation in their own systems in order to meet the requirement for regulation of cross-border mediation.

Accordingly, most European countries adopted appropriate legislation regarding mediation. Adoption of laws, however, does not necessarily result in a broader understanding of mediation to the extent that attorneys would be comfortable suggesting it as a method of conflict resolution. Moreover, such a suggestion, once it is made by a party, may not be fully understood by the other side as to the intention of the proposal.

Mediation in Poland

In Poland, mediation as an ADR dates back to 1991, when the first labor-related mediations began. Mediation was adopted for criminal proceedings in 1997, for consumer matters in 2000, and finally for civil and commercial disputes in 2005.5

There was a long struggle by Polish mediation supporters to encourage the Polish legislature into understanding that arbitration is not the only solution to the courts’ backlog. Poland eventually followed the European Union’s initiative and adopted the necessary laws laying the groundwork for the deployment of mediation as a common ADR. So, following the requirements of EU law, Poland’s legislature adopted mediation-related rules by amending the Code of Civil Procedure in 2005. It provides that mediation can be initiated three different ways: either by parties executing an agreement on mediation, by one party applying for mediation with the other party consenting to it, or, finally, by a court order with no party objecting. It appears that the law definitely favors a voluntary mediation, accepted by both parties. The court’s powers are, however, limited in this regard. In a court-induced mediation, a judge has the power to issue an order for commencement of mediation only until the end of the first hearing in the case. Further, after the first hearing the court may order mediation if both parties apply for it.6 Under the Code of Civil Procedure, a court may order mediation only once during the proceedings. This is unfortunate, because in other jurisdictions the judges are free to order mediation whenever there is an issue that the judge would consider to be appropriate for this type of resolution. This limitation denies a Polish court the flexibility to direct a separate litigation issue to an in promptu mediation, which may be very beneficial for speeding up a court proceeding.

Even court-ordered mediation may not go through if one of the parties objects, or, as the rule states, “refuses to agree to mediation” within a week of the court’s order.7 The court issuing an order for mediation determines how long the mediation should last, but no more than one month, unless the parties apply for extension of this time.8

The basic conditions for a successful mediation, namely an impartial mediator and confidential proceedings, were provided for in the civil procedure code.9 The confidentiality applies only to the mediator, who, not unlike a lawyer in an attorney-client relationship, may be released from this obligation only by the parties.10 The parties, although not obliged to keep the proceedings confidential, are prevented from bringing up in any subsequent litigation or arbitration any statements made during the mediation. This provides mediating parties with the freedom to make compromise proposals without fearing that they may be used against them in a subsequent, related dispute.11

Under Polish law, a settlement agreement achieved during mediation could be sanctioned by the court. This happens in both court-induced and voluntary mediation. In the latter case, even though no court proceedings are involved, a court of appropriate jurisdiction would be asked to sanction the mediated settlement by issuing an appropriate court order. Accordingly, the settlement agreement reached in mediation, when confirmed by the court, may acquire the legal force of a judgment reached by a court.12

Discussion of the effectiveness of the Polish legislation on mediation is still ongoing. But the  issue does not appear to be in the legislation. As in many social and legal areas, new legislation  is not always a solution. Sometimes, it perpetuates the problem. The solution is the practice and enforcement of the existing law rather than any new legislative activities. There are some needed corrections but not anything major.13

At the end, how it is practiced determines whether mediation becomes popular, because unless legal professionals embrace mediation, it will never succeed. This relates to both judges and attorneys in Poland, many of whom show a deep aversion to mediation for the following reasons: (a)there is a general lack of understanding of the existence of mediation as an effective ADR; and (b) there is a misunderstanding of the process due to sometimes unfortunate prior experiences with less than professional mediators who did not know how to handle the assigned mediation.

To alleviate misunderstandings and promote the proper development of mediation, sufficient training of mediators is required. Mediation’s success often lies in the competence, talent, and wisdom of the mediator.14 A mediator who does not fully understand the role he or she plays or  who is unprofessional in any way could create lasting damage to the mediation process. Parties   left disappointed by an unprofessional mediator might never again consider mediation as a viable path. Professional conferences and seminars are full of horror stories detailing how an ineffective mediator would just ask assembled parties to do their best to settle the dispute and leave it at that. A trained and well-respected mediator would never do this. There is much more to mediation than simply bringing the parties together.

For lawyers wanting to become mediators, the basic introductory mediator training should involve at least 30 to 60 hours of lectures and workshops. Appropriate training is available at law schools, through professional legal organizations and numerous mediation centers.  

Mediation Must Be Understood to Be Effective

For a successful commercial mediation, one must have the consent of both parties and an excellent understanding on the part of participating lawyers of the process and its value. As Michael McIlwrath (et al.) comments, in international mediation it is always a guessing game as to whether the mediation will be successful. It is more likely to be successful when the lawyers involved in the case may confidently suggest mediation as the best way to solve a particular dispute. Further, it is successful when the other side knows exactly what is being proposed, because their lawyers are familiar with the mediation process in their respective legal systems and their practice.15

Many judges and attorneys do not confidently promote mediation because of a widespread uncertainty as to how mediation works in practice. There are various reasons for misunderstanding of mediation, most of them stemming from a lack of practical knowledge with the matter as well  as a tendency to confuse mediation with other ADRs. In the following sections we will try to debunk these misunderstandings.

Mediation Is Not Arbitration

The most common mistake in understanding mediation arises from the fact that a lot of professionals associate mediation with arbitration. This means that people do not distinguish between the ambience of a mediation, where the mediator is withholding his or her own opinion on the resolution, with that of an arbitration, where the arbitrator makes a distinct judgment. Instead, the job of the mediator is to bring the parties to a common resolution, mostly by posing well formulated questions. Accordingly, the mediator is not preset to give a judgment. This important distinction must be understood by all the parties involved in the dispute as well as the professional mediator running the proceedings. Without proper and extensive mediation training, this condition might not be observed, as people involved in the dispute resolution may fall into a tendency of casting judgments or, at least, binding suggestions. Even well experienced lawyers (and maybe lawyers especially) must undertake extensive training in order to understand and properly practice the role of a mediator in commercial disputes.

Mediation Is Not Just a Settlement Negotiation

Many people would say – why should we use a mediator when it is in reality just a settlement negotiation? In commercial matters, the parties usually believe that they can negotiate themselves and do not need a third-party mediator. These and similar erroneous opinions may be greatly responsible for deficiency in implementing the mediation concept. A mediator who is properly equipped with true neutrality and the protection of his/her confidentiality might be uniquely helpful in the negotiations and could be the difference between a successful resolution and the negotiations crumbling into litigation. Crucially, any propositions for compromise made during the mediation process may not be used by the parties in any subsequent litigation in case the mediation fails and litigation ensues. Also, a mediator, unlike an arbitrator, is allowed to meet with the parties separately to examine their position with properly posed questions. Accordingly, a mediator may suggest solutions that a party itself might be reluctant to put forward, in case the other party considered the compromise proposition to be a sign of weakness in their adversary. This protection and confidentiality is not available to parties if they merely conduct settlement negotiations.

Aversion to Pre-Litigation Dispute Resolution Clauses

Mediation may be at its best when it is used in its facilitative form, before the parties resort to litigation. At the litigation stage, mediation becomes more of an evaluative exercise, where the mediator must bring each party to a realization as to how strong or weak their case against the other party is. Once the parties come to a conclusion that the only way to gain profit from the relationship is through a favorable judgment/award mechanism, mediation as a condition precedent to the filing of a lawsuit or arbitration claim may draw severe criticism, especially when executed in a less than careful manner.16 Unlike arbitration, which is a well understood and widely used ADR, mediation may be viewed in a similar way to a pre-litigation dispute resolution clause (PDRC), which invites the negative response of legal practitioners, due to the fact that PDRCs are recently, and justifiably, suffering a wave of bad publicity.

PDRCs, originally thought a healthy concept of contract clauses that should prevent the parties from hastily seeking arbitration or a lawsuit at the first sign of a dispute, are becoming a substantial problem. Unfortunately, pre-litigation settlement too often turns into a technique of avoiding commencement of litigation, sometimes in the context of statute of limitations to the benefit to one of the parties. Accordingly, contractual pre-litigation settlement clauses (which have been known  to often constitute a substantial portion of the contract itself), only invite elaborate legalities that take precious resources and time away from the actual court resolution, and therefore damage the concept of ADRs in general.17 A badly drafted pre-litigation settlement clause, even one introducing mediation, may be a problem that causes unnecessary delays in the actual dispute resolution. This could be easily prevented if mediation is used in its proper form, as a process that may be stopped by any party at any time. The concept of commercial mediation is built on the mutual consent of  the parties to commence and continue mediation. Most established mediation centers in many jurisdictions have regulations which provide that mediation should end immediately upon the request of one of the parties. This should also be clearly stated in a contract’s mediation clause as well as in any subsequent mediation agreement.

Therefore, elaborate PDRCs could be easily replaced with provisions for mediation at one of the reputable mediation centers, whereby the fact that mediation could be stopped at any time without need for explanation or without a cause by one of the parties could be found either in the contractual mediation clause itself or in the appropriate regulation of the selected mediation center. This could prevent unnecessary litigation over the pre-litigation settlement clauses.18

Conclusion

Mediation is a well-developed, tested, and litigated method of resolving disputes in the United States and Australia. In Europe, all the significant efforts to bring it up to the prominence it enjoys in America have not yet been successful, because mediation is grossly misunderstood by European legal professionals. It is either not even considered as a viable option for lack of basic familiarity with it as a practice, or it is mixed with other pre-litigation actions that are known as tactics designed to get in the way of the better-known ways of resolving a dispute, such as through a court or arbitration process.

Having concluded this, we can only urge legal professionals involved in the practice of law, as well as business activists concerned with the delays and costs of conventional litigation, to drop their prejudices and familiarize themselves with mediation as a form of ADR through self-education  and a pursuit of its implementation in a day-to-day practice.