Mediation as a method of dispute resolution at the time of epidemic emergency

​​​​​by Adrian Cop

19 March 2020

The spreading coronavirus is increasingly affecting the global economy. Both small and large enterprises, and consequently their workers, will feel that impact, regardless of whether they are hired under a contract of employment, a contract of mandate or a contract for specific work. The employee and business relationships will be revised during the crisis. Many enterprises will not be able to perform their contractual obligations, as a result of which their workers will lose jobs or a portion of their remuneration.

In their publications lawyers come up with an option to exercise the force majeure clauses included in contracts, or the rebus sic stantibus (fundamental change of circumstances) clause in order to revise the contracts, thereby giving the enterprises or their workers (meeting certain conditions) a weapon in the fight for postponing the contract performance or for a release from liability for its non-performance. The Polish government has passed and announced the planned passing of more special laws to regulate specific aspects of everyday life to partially release enterprises from liability for non-performance of contracts and for a failure to pay wages to their workers.

In many cases the other party to the contract will not be happy about exercising the force majeure clause, the rebus sic stantibus clause or following the special laws, and may try to challenge them. The dissatisfaction may be especially high if the party has made major expenditures on the investment project or has long-term liabilities, and the non-performance of the contract will result in a major loss. As there is no option to conclude annexes to such contracts, this will spark another increase in the number of lawsuits, which will protract the already long court proceedings.

Court trials on hold

Most courts in Poland are closed until the end of March (except for emergency trials) and it is hard to tell when they will resume regular work. Currently, in many cases court letters are not sent, which means that even when the courts open for business, it will take them a few or more days to get back on track. It is estimated that once courts resume normal business, the waiting time for trials in bigger courts will be approximately 3–4 months. Every day of the pandemic and the potential increase in the number of litigations extends that period, in particular for highly complex cases. Therefore, the statutory deadlines for pre-trial sessions, as provided for in Article 2054 of the Polish Code of Civil Procedure, will be hard to meet.

Arbitration proceedings and mediation as an alternative

An interesting alternative in this case may be to attempt to resolve a dispute amicably by way of arbitration proceedings or mediation.

Arbitration consists in all forms of referring a case to an independent arbitrator to be resolved. Arbitration proceedings are independent of court proceedings and should be initiated by and at the request of the parties. However, before initiating arbitration proceedings it is worth checking whether your contract includes a special clause referring the dispute for settlement by arbitration (the so-called amicable resolution clause or arbitration clause) If there is no such clause in the agreement, the parties in dispute can still refer the case to arbitration by filing a request for arbitration with the competent arbitration court and obtaining the other party’s consent to it.

The other option is to try to resolve the dispute by mediation. Mediation can deal with commercial cases, but also civil-law and labour-law matters, as well as medicine-related cases.

How to start the mediation process

To engage in contract mediation both parties must consent to it. The consent must be voluntary and uncoerced because the party dissatisfied with its outcome can withdraw from the process at any time, which means a waste of time and money. Therefore, the decision to go into mediation must be well-informed and with respect for the right of both parties.

What to look for in a good mediator

When the parties in dispute mutually agree to go into mediation, the next step is finding the right mediator. A list of mediators is available on the websites of regional courts of relevant territorial jurisdictions. The websites contain also a list of mediator organisations and associations whose services you can use. In the case of mediation related to contracts, the parties can select any mediator entered on the mediators’ list countrywide.
When selecting a mediator, it is worth checking his/her specialty, education and experience. The parties should select a person who, in their opinion, knows that area of law, has the appropriate or related education and experience.

In the case of contract mediation, the parties agree the costs of the mediation with the mediator – there are no statutory or fixed fees in this case. In difficult circumstances, some mediators agree to conduct mediation free-of-charge or to postpone the payment date.

Signing a mediation agreement and court settlement

Once the mediator is selected, a mediation agreement should be signed and the process should be commenced. What is important is that at the time of the pandemic mediation can be carried out through a conference call or Skype so the parties do not have to leave home to make a settlement. Court trials using the same procedure are extremely rare (individual proceedings).

Once the parties reach a settlement, the mediator sends it to court for approval. We can risk an opinion that once the complications connected with the coronavirus pandemic cease and once courts reopen for business, a settlement made at that time before a mediator will most probably be approved sooner than the first hearing in a trial takes place. Therefore, it is worth considering mediation.

It is also worth emphasising that pursuant to Article 183(15) of the Code of Civil Procedure, once a settlement concluded before a mediator is approved by the court, it has the legal effect of a court settlement. This means that the legal effect of the settlement made before a mediator is the same as that of a court settlement, and that, in turn, means that once certain conditions are met, it can be subject to enforcement. If one of the parties fails to comply with the settlement provisions, each of them can seek the payment of the agreed sums, without difficulties and without having to take other legal steps.

A settlement concluded before a mediator can be worded as the parties see fit, which gives them a lot of options as to how to settle their mutual liabilities (for example by deferring the payment/service provision/changing the subject of the performance). Unfortunately, court ruling does not give the parties such options – it can either award the claim or dismiss it.

Mediation at the time of COVID-19 pandemic

In this difficult time, every one of us should focus on their health and on protecting themselves and their families. However, now is also a good time to think about the future and how the virus will affect your company and your work. In case of a dispute over non-performance of a contract, it is worth starting a discussion to renegotiate its terms before one of the parties terminates it, using contractual or statutory clauses.
However, if the parties fail to reach an agreement as to amending the contractual terms, both arbitration and mediation make it possible for the parties to resolve the dispute out of court and to close the case quicker than in court proceedings. A settlement before a mediator saves the parties “going to court”, and now even leaving their homes. Practice shows that successful mediation give the parties a chance for further, successful collaboration in the future.