In recent years, Poland has been working hard to expand the use of alternative dispute resolution (ADR) in commercial disputes.[i] In 2005, Poland took one of its greatest steps forward toward accomplishing this goal by amending its Code of Civil Procedure. In essence, these amendments provided more detailed and extensive legislation on arbitration[ii] and introduced mediation into Poland’s civil procedure practice.[iii] Although these amendments have been praised for their early implementation, they have struggled to bring about a significant increase in the use of ADR in Poland.[iv] However, despite their slow development, ADR methods, such as mediation, have the potential to be very successful in Poland. In fact, a recent study published by the European Parliament described the situation in Poland as such: “more proactive actions for the promotion of mediation . . . are needed[,] [b]ut in the end . . . [m]ediation in Poland has huge potential and capacity for growth.” [v] Thus, it is clear that Poland would benefit from expanding its ADR legislation.[vi]
Having established that Poland should expand its ADR systems, the question becomes how it should do so. This article discusses one proposed answer: Poland should allow authorized mediators to validate mediation settlements by issuing such settlements in the form of arbitral awards.
This proposed process is built on the principle that underlies the growing processes of Med-Arb and Arb-Med: combining the amicability, cost efficiency, and speed of mediation with the finality of arbitration.[vii] However, unlike same-neutral Med-Arb or Arb-Med, this proposed process would not jeopardize candor, confidentiality, or impartiality.[viii] Instead, this process would ultimately give mediation settlements the res judicata effect of court judgments combined with the confidentiality of arbitral awards.
Same-Neutral Med-Arb and Arb-Med
Same-neutral Med-Arb is defined by America’s Alternative Dispute Resolution Practice Guide as such:
Med-arb is a two-step process. The first step involves mediation of the issues. The second step uses formal arbitration (by the same neutral) to decide the issues not settled at the mediation step. The final result is a binding decision which includes the agreements arrived at during the first step (mediation) together with the decisions resulting from the second step (arbitration). The final decision is enforceable as an ordinary arbitration award.[ix]
Arb-Med is based on a similar concept; however, the neutral first serves as an arbitrator and decides on an arbitration award.[x] The neutral does not immediately disclose this arbitration award; instead, the neutral moves on to serve as a mediator for the parties as they attempt to resolve the dispute through mediation.[xi] If the parties are unsuccessful at mediation the neutral will then disclose the previously decided arbitration award, which will become binding on the parties.[xii]
The key advantage that Med-Arb and Arb-Med provide over mediation or arbitration alone is that both processes always result in a final, legally enforceable judgment, regardless of whether a dispute is settled in the mediation or arbitration phase.[xiii] Thus, these processes can be especially helpful in decreasing the overcrowding of court dockets that plague many jurisdictions.[xiv] Additionally, these processes allow parties to avoid the costs and efforts of unnecessary arbitration if a dispute can be settled during the mediation phase.[xv] Furthermore, as stated by Brian Pappas, in Med-Arb and the Legalization of Alternative Dispute Resolution: “Med-Arb proponents argue that Med-Arb is more time and cost efficient[,] [t]he argument is that using the same neutral saves time and cost by eliminating the need for parties to identify, appoint, and educate an additional neutral.”[xvi]
Same-Neutral Med-Arb and Arb-Med Jeopardize Confidentiality and Candor
Despite the possible benefits of same-neutral Med-Arb and Arb-Med, these processes should not be implemented in some jurisdictions, including Poland, because they jeopardize the confidentiality and candor that characterize mediation.[xvii] A key attribute of mediation is that information revealed during mediation discussions cannot be used against a party in future arbitration or litigation.[xviii] This, in turn, promotes candor which leads to better problem resolution results.[xix] Because Med-Arb and Arb-Med use the same individual, confidentiality between the mediation and arbitration phases cannot exist in these processes, and thus candor is threatened.[xx]
To elaborate, during the mediation process of Med-Arb, the neutral “may learn information that would not normally be introduced during the arbitration[,] [t]his includes the flexibility in demands, offers, weaknesses, or more substantially prejudicial information.”[xxi] As explained by Brian Pappas:
Mediators rely on [this] free information exchange to identify interests, assist in correcting information asymmetries, reality-test assumptions, and build trust between the parties. When parties know that the mediator may later assume the role of arbitrator . . . parties will not be as candid with the mediator about the weaknesses in their arguments, or with information that may be detrimental to their positions. Out of fear that their statements could be used against them in arbitration . . . [parties] will carefully guard their statements. As a result, the information needed to craft lasting, reasonable settlement[s] will not be available.[xxii]
Proponents of Med-Arb argue that candor is not necessarily threatened because the neutral can simply ignore information learned in mediation, much in the same way that judges and juries are expected to ignore improper information learned during trial in the United States.[xxiii] However, critics of the process retort that it is nearly impossible for an individual to completely ignore information once it is learned.[xxiv] Regardless of the merits of either position, the important thing is that many parties will not trust that the neutral can fully ignore information, and thus, candor will suffer.[xxv]
Similarly, the use of the same neutral results in bias in Arb-Med.[xxvi] However, unlike in Med-Arb, the concern in Arb-Med is not that the neutral will be biased when issuing an arbitral award.[xxvii] Rather, the concern is that the parties’ discussions during mediation will be biased as each party attempts to figure out what the neutral decided in the sealed arbitral award.[xxviii] For example, party A might think that the neutral’s behavior indicates that he/she issued an award in party A’s favor; consequently, party A will be less willing to negotiate with party B.
Furthermore, same-neutral Med-Arb and Arb-Med also seem to be disfavored under some Polish arbitration policies. For example, the Polish Court of Arbitration at PKPP Lewiatan provides that “[i]n assessing the independence . . . of an arbitrator, the IBA Guidelines on Conflicts of Interest in International Arbitration shall apply as the minimum standard.”[xxix] Under the IBA Guidelines, situations in which “the arbitrator has previous involvement in the case” are considered serious.[xxx] Such situations are on the “waivable red list,” meaning that they “should be considered waivable only if and when the parties, being aware of the conflict of interest situation, nevertheless expressly state their willingness to have such a person act as an arbitrator.”[xxxi] Additionally, The Court of Arbitration at the Polish Chamber of Commerce provides that: “[u]nless otherwise decided by the parties, a mediator cannot participate as an arbitrator . . . in a case that was subject to mediation.”[xxxii] Thus, although same-neutral Med-Arb/Arb-Med are not expressly prohibited, the above examples show that situations in which an arbitrator has previous involvement with a dispute are disfavored in Poland.
A Different Combination of Mediation and Arbitration
Although same-neutral Med-Arb and Arb-Med should not be used in Poland, the underlying idea of combining mediation and arbitration has its merits and should serve as a platform for Polish ADR expansion. Building off this platform is the idea of validating mediation settlements by issuing them in the form of arbitral awards.
In Poland, current law already allows for mediation settlements to be enforced as more than mere contracts: they may be given the effect of court judgments.[xxxiii] In order to achieve the effect of a court judgment, a mediation settlement must first be validated by a court of law. Poland’s Code of Civil Procedure provides that: “[a] settlement reached before a mediator, once validated by the court, has the binding effect of a settlement reached before the court.”[xxxiv] A settlement reached before the court essentially has the res judicata effect of a court judgment. Thus, under the current system, once a mediation settlement is validated by a court of law, it is effectively a court judgment and is enforced without further litigation. By contrast, in systems which only treat mediation settlements as contracts, parties can bring claims for breach of contract.[xxxv] Therefore, Poland’s current system is theoretically more effective in decreasing the amount of new cases added to court dockets than are systems which only provide for the enforcement of mediation settlements through contract litigation.
However, Poland’s current system has a big disadvantage: because court judgments are publically available, the confidentiality of mediation settlements is compromised during the validation phase. Thus, parties who are especially concerned with maintaining confidentiality are reluctant to attempt mediation.[xxxvi] Arbitral awards, on the other hand, are always kept confidential.
The recommended process in this article seeks to combine the benefits of res judicata with the confidentiality of arbitral awards. The process first calls for a mediator to be added to the list of authorized arbitrators in a permanent court of arbitration, and then to be appointed as a sole arbitrator once the case is successfully mediated and settled. Once appointed, a mediator would be able to validate a completed mediation settlement by issuing it in the form of an arbitral award. All arbitration courts in Poland could implement this process by adding appropriate provisions to their existing rules. For example, the Court of Arbitration at the Polish Chamber of Commerce (KIG) already provides for such a process in its rules which state: “[u]pon the joint request of the parties to give the settlement reached in the mediation proceedings the form of an award, the Arbitral Council shall appoint the mediator as an arbitrator authorized to issue an award.”[xxxvii] In essence, this process effectively turns mediation settlements into judgments that are confidential, final, and legally enforceable. The Code of Civil Procedure provides that an arbitral award has the same res judicata effect as a court judgment;[xxxviii] therefore, once a mediation settlement is confirmed and issued in the form of an arbitral award, it would have res judicata effect.[xxxix] Additionally, the issued award would always be kept confidential as provided by arbitral court rules. Thus, this proposed process will increase the use of mediation by parties who are especially concerned with the finality and confidentiality of their mediation settlements,[xl] and will help decrease the backlog of court actions in Poland.[xli]