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Mediation & ADR

Mediation and Scope of its Application

Mediation procedure is a means of dispute resolution with the assistance of mediator on the basis of voluntary consent of the parties with the purpose of reaching mutually acceptable solution (Art.2, Para.2 of the Law on Mediation). Mediation procedure is conducted on the basis of principles of voluntariness, confidentiality, cooperation, equal rights of the parties, impartiality and independence of mediator.

Mediation may apply to the disputes arising out of civil law relationships including those related to the business and other economic activity as well as to the disputes out of labor (exclusive of the disputes related to collective agreements) and family relationships. Mediation may not be used for settlement of the above disputes if they affect or may affect:

• rights and legal interests of the third parties who do not participate in the mediation procedure, or
• public interests.
Mediation Agreements.

The Law on Mediation distinguishes:

• agreement on application of mediation procedure – written agreement of the parties made prior to the moment when the dispute has arisen (mediation clause) or after it has arisen on settlement of the existing or future disputes between them by mediation; 
• agreement on the conduct of mediation procedure - agreement from the moment of signing of which the which mediation starts to apply to the disputes which have arisen between the parties, and

• mediative agreement - written agreement reached by the parties as a result of mediation procedure. Mediative agreement reached by the parties as a result of mediation procedure completed after the submission of the dispute to the court or arbitration court can be approved by the respective court as settlement agreement. Mediative agreement concluded by the parties without dispute being referred to the court or arbitration court is a civil law transaction to which the rules on settlement agreement, on novation, on compensation, on indemnification may apply.

Initiation, Term and Termination of Mediation Procedure

The parties may agree to recur to mediation either before submitting their dispute to the court or arbitration court or at any stage of the proceedings before the sentence/award is pronounced. Statute of limitations shall be saved from the moment when the parties have concluded the agreement on the conduct of mediation procedure till the moment of termination of mediation (see below). If the parties recur to mediation during the proceedings with State commercial (arbitration) or court of general jurisdiction, the court may adjourn the proceedings for 60 days maximum.

Mediation starts from the moment when the parties have concluded the agreement on the conduct of mediation procedure. This agreement must be made in writing and contain 1) description of dispute; 2) information on mediator(s) or organization providing for mediation procedure (see below); 3) on the procedure of mediation; 4) on the participance of the parties in the costs of mediation (unless agreed otherwise, the cost of mediation is born by the parties in equal parts); 5) on the time-limits of mediation (the term of mediation may not exceed 60 days if mediation was started during the court or arbitration proceedings and 180 days in all other cases, unless extended upon agreement of the parties with the consent of mediator due to the complexity of the case or necessity to obtain additional documents or information). Agreement on the conduct of mediation procedure may be concluded by exchange of letters: one party may invite another to start mediation by sending her a written offer to this respect. The offer is deemed to be refused if no reply to this offer is received within 30 days from the day of dispatch or within another reasonable term specified in the offer.

Mediation terminates:

• From the date of signing of mediative agreement by the parties; or
• From the date of signing of the agreement on termination of mediation procedure by the parties without consent being reached on the controversies; or
• From the date of dispatch by the mediator to the parties of the written notice regarding termination of mediation due to its non-expediency, sent after consultation with the parties; or
• From the date of receipt by the mediator of the written notice of one, several or all parties on the refusal to continue mediation procedure; or
• Upon the elapse of the term of mediation (see above).
Mediators

Mediator is an independent individual engaged by the parties in the quality of intermediary for dispute resolution in order to assist the parties in working out of the decision on the subject.

Mediator(s) is/are elected by mutual agreement of the parties or recommended or appointed by the organization providing for mediation procedure if the parties have addressed such organization based on the agreement on conduct of mediation made between them.

The activity of mediators is not a business activity, and they are free to exercise any other activity not prohibited by the Russian legislation in force, except of the functions of public officers of all levels, from federal to the municipal, unless otherwise provided for by the federal law.

Mediators may either be professional or non-professional. Mediators may exercise their functions for free or for fee, organizations providing for mediation procedure always work against remuneration.

Any major person who has reached the age of 18, fully capable and with a clean record may act as non-professional mediator. In order to become professional mediator the individual must be at least 25 years old, have completed higher education and the mediation course with a non-commercial organization preparing mediators as approved by the Government of the Russian Federation (for the time being it is not clear which non-commercial organization(s) shall be charged with this task and the price of such training). Only professional mediators may handle disputes which have been referred to mediation in the course of court or arbitration proceedings.

Mediator may, if allowed by the parties in the agreement on conduct of mediation and unless otherwise provided for by federal law or by agreement of the parties, at his/her discretion determine the procedure of mediation taking into account the circumstances of the case, wishes of the parties and the necessity to solve the dispute in the best delays; he/she may also meet all the parties together and each of them and communicate with them during the mediation procedure. Mediator may not put either party in a privileged position or impair rights and interests of either party; he/she may not represent either party; render legal, consultancy or other assistance to either party; be personally (directly or indirectly) interested in the results of the procedure, in particular, be relative of one of the parties; make public declarations on the substance of the dispute without consent of the parties.

Mediator may not be questioned as witness in the proceedings with State commercial or general jurisdiction court with respect to the circumstances which have become known to him/her in connection with the performance of his/her duties. Without the consent of the parties mediator is not entitled to disclose information related to the mediation procedure or which has become known to him/her during this procedure.

Mediators and organizations providing for the conduct of mediation procedure are liable for damage caused to the parties as a result of performance of their activities.

The mediators are not entitled to advertise their activities unless they have completed the respective professional training course and are in possession of a certificate attesting the completion of such training issued by competent non-commercial organization. Publicity may not contain the statement affirming that the procedure of mediation as a means of dispute resolution has advantages with respect to the settlement of dispute in court, State commercial court or arbitration court.

Self-Governing Organizations of Mediators

Professional mediators (at least 100 individuals) or organizations (at least 20) exercising mediation activities on the professional basis may create self-governing organizations in the form of associations (unions) or non-commercial partnerships. Self-governing orgainsation of mediators can also be set up by individuals and organizations together, their total number may not be less than one hundred.

One and a same professional mediator or organization providing for the mediation procedure may be member of only one self-governing organization. Self-governing organization of mediators may not be member of another self-governing organization of mediators.

Self-governing organization of mediators acts in accordance with the Federal law On Self-Governing Organizations and, in particular, holds a register of its members, works out the conditions of membership, represents the interests of its members with public and municipal authorities and with international professional organizations of mediators, controls compliance of its members with the laws, standards and rules of the organization.

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The Law on Mediation covers disputes arising out of various civil law activities, family and labor relationship. Since the meditative agreement is to be performed on the basis of voluntariness and good faith of the parties (see Art.12, Para.3 of the Law on Mediation), one may expect that it will be used mostly in order to handle disputes involving individuals rather than businesses who for various reasons (sparing on time and costs of additional dispute resolution procedures, requirements of tax authorities) prefer to recur to “traditional” court or arbitration proceedings.

 

he first event was organized by the Center for promotion of mediation and alternative dispute resolution (SOMEDIARS) of the Institute of Legislation and Comparative Law with the Government of Russia. The seminar on “Introduction to Conciliation Procedures, Confilct management, Negotiations, Mediation, Conciliation” designed for the judges of courts of general jurisdiction and for the judges of commercial (arbitrazh) courts was held on November 21 and 22, 2012 respectively. The participants stressed the importance of using ADR tools in their activities and showed interest in further training.


Program “Introduction to conciliation procedures. Conflict management tools. Negotiations, mediation, conciliation” was the same for the two days, but the training took into account the specific features of the disputes and the character of the courts’ activities. Judges of peace and the federal judges of the courts of Moscow and Ivanovo region took part in the seminar of November 21, judges of Commercial (Arbitrazh) court of the city of Moscow and of the Moscow region, judges of the courts of appeal No 9 and No 10 and of the Federal commercial court of the Moscow area participated in the training of November 22. 
The goal of the seminar was to familiarize its participants with the procedure, areas of application and mediation tools, advantages of mediation for private persons and for commercial entities respectively. During the practical sessions the participants together with the professional trainers worked on the methods of attraction of the parties to the dispute to mediation acting in turn as parties in dispute, judge and mediator. 
Judges of the courts of general jurisdiction as well as the judges of commercial courts have taken notice of the necessity to expand information on the procedure of mediation and its advantages among the population and have pronounced themselves in favor of introduction of mandatory pre-court attempt of conciliation of the parties, including, but not limited to, by way of mediation. On the opinion of the participants to the seminar, should pre-trial conciliation attempt be introduced, 60% of the disputes shall be settled out of court. The participants were interested to learn more about the positive use of mediation in Moscow (and such information as well as such experience are quasi non-existing in the capital today). The judges specially mentioned the importance of the role of the literate representatives of the parties in the procedure, it was stressed that with the assistance of the attorneys oriented to the dialog the parties are often lead to the amicable settlement and able to reach it. 
The judges of commercial courts actively discussed the issue of mandatory attempt of pre-court conciliation, asked about the foreign experience of using conciliation procedures for settlement of commercial disputes, showed interest in getting recommendations for application of mediator’s tools in the work of judge and wanted to know how they could be used in the court of appeal and in the court of review. Participants to the seminar stressed that the parties do not have sufficient information on the procedure of mediation, its conduct, role of mediator, perspectives for the dispute settlement, and the duty of the judge was to have a detailed understanding of the procedure since the law obliged the judge to explain it to the parties. Mrs Alla Bolshova, Chief scientific fellow of the Institute, former President of the Commercial court of Moscow shared her views on the possibilities and limits of use of mediator’s tools in the practice of the commercial judges, leading consultant of the Supreme Commercial Court of Russia Mr A. Solokhin has informed the audience on the plans of legislative introduction of the institute of court conciliators. 
The feed-back form was distributed among the participants to the seminar.
Upon the results of November 21 seminar (28 participants – judges of the courts of general jurisdiction) :
• The seminar was appreciated as useful by 100% of the participants;
• The majority (26 participants) intends to apply the tools they were familiarized with; 
• 23 participants deem necessary to learn the basics of mediation and ADR to the judges as well as to the court secretaries (assistant judges).
The attendees stressed the necessity to create the program on the efficient information the private persons on the procedure of mediation and explained their concern about the lack of information on the professional mediators. 
21 judge of commercial courts answered the feed-back form on November 22, 2012 :
• 100% of the attendees deemed the seminar was useful;
• 100% of the attendees intended to use the mediation tools in their activities;
• The majority of the attendees believed that it was necessary to teach the basics of mediation and ADR to the judges, however, 12 attendees were against the training of the assistants judges: they motivated their answer with the following arguments: “the training shall distract them from their main job (they have enough to do without mediation and with low wages”, “ it makes sense to train the assistants who intend to become judges and use the mediation in practice”.
The majority of the attendees expressed their willingness to continue their training and detailed their expectations regarding its program. SOMEDIARS will continue its program for the judges.

 

Panel of Mediators at the Russian Chamber of Commerce and Industry: new Rules and Regulations

 

Introduction

Panel of Mediators in Conciliation Proceedings at the Chamber of Commerce and Industry of Russia (Panel of Mediators, or Panel of Mediators at the Russian CCI) created in 2006  was not very active due to lack of legislative base for the activities of mediators, mediation procedure and status of mediators. Following the enactment of the Federal law No 193-FZ on the alternative dispute resolution procedure with the participance of mediator (procedure of mediation) (Law on mediation) in 2011 the situation started changing. In several regions of Russia like Kaliningrad, Rostov-on-Don, Nizhnyi Novgorod local Chambers of Commerce and Industry have created mediation services which successfully assist the parties with the commercial disputes, including trans-border. Time has come to bring amendments to the regulations and new life to the activities of the Panel of Mediators at the Russian CCI, and the new set of documents including Regulation, Rules, Schedule of Fees and Expenses and the List of mediators was approved by the Order of the Russian CCI No 45 of June 27, 2013.  Overview of these documents follows.

Regulation on the Panel of Mediators

According to the Regulation, the Panel of Mediators is a permanent body for extrajudicial resolution of disputes with the participance of mediator (mediation).

The Panel settles the conflicts, controversies and disputes arising from civil law relationship including those arising in connection with entrepreneurial, investment and other economic activity as well as from other relations connected therewith. The scope of Panel’s activities is formulated much broader than in the previous version of the Regulation and reproduces the provisions of the Law on mediation.

Panel assists the parties in choosing the mediator or appoints him/her at their request, keeps the list of members and supervises the compliance of the members of Panel with the ethical rules during the mediation procedure.

List of mediators includes 29 specialists able to conduct extrajudicial mediations and mediations on the disputes submitted for settlement during their hearing by State court or arbitration as well as at the stage of enforcement proceedings.

Rules of the Panel of Mediators

Rules of the Panel of Mediators describe the procedure of mediation and its principles. Mediation is voluntary, confidential, based on cooperation between the parties and the equality of their rights, independence and neutrality of the mediator.

The parties may agree to recur to mediation in order to work out mutually advantageous and mutually acceptable terms of contracts at the stage of their negotiation, performance or amendment as well as in other cases when they deem it necessary.  Pursuant to the exemptions set by the Law on mediation, mediation procedure may not apply to collective labor disputes and disputes affecting the rights of the third parties who are not involved in the mediation procedure.

Before starting mediation procedure, the parties must already have an agreement (mediation clause in the contract or a separate agreement) on application of mediation procedure pursuant to the Rules of Panel. To start mediation procedure, either party to the dispute or both parties jointly pay the  registration fee and address written application to the Panel (application can be submitted by any means which allows to identify the applicant). The application should contain in particular names, addresses and contact details of the parties; summary of the dispute (if court or arbitration proceedings on the dispute have already started - name and details of the court or arbitration tribunal where the case is examined); demand to settle the dispute, name of the mediator or request to appoint the mediator. Within 5 days from the receipt of application the President of the Panel accepts the application for consideration by issuing the respective ruling.

If the procedure is initiated by one party to the dispute, Panel coordinates with it the procedure of involving the other party in mediation. Either the initiating party or the Panel upon its request may invite the other party to settle the dispute by mediation.

The other party has 30 days from the date of dispatch of the invitation to accept it.  If no consent is received by the Panel within this period, invitation to mediate is deemed declined and the procedure is terminated by the ruling of the President of the Panel. However, the President of the Panel may decide to accept the consent received upon the elapse of this term taking into account the opinion of the initiator.

Mediator(s)

Unless otherwise agreed by the parties, mediation shall be conducted by one mediator. Mediator is either chosen by the parties from the List of the Panel or outside this List or appointed by the President of the Panel.

During the mediation procedure either party may claim replacement of mediator or appointment of one or several additional mediators. Mediator shall inform the parties and the President of the Panel of any circumstances which have arisen during the mediation procedure and can affect his/her independence or neutrality.

He/she organizes the procedure of mediation taking into account the circumstances of the dispute, requirements of the parties and the need to settle the dispute promptly. The mediator strives to ensure that the parties to the dispute or their authorized representatives participate in the mediation procedure in person.

Mediator may meet and maintain connection with all parties together and with each of them separately. Mediator may neither put either party in more advantageous position nor neglect its rights and legal interests. If the parties agree, mediator may make suggestions regarding settlement of dispute and conclusion of mediative agreement.

Mediation procedure and its stages

Before mediation starts, parties and mediator sign the agreement on the conduct of mediation procedure as required by the Law on mediation. This agreement is drafted by the mediator(s). The agreement contains information on the dispute, mediator, specifies that the dispute shall be settled by the Panel within the terms specified by the Rules, sets the amount of fees and expenses, the way of their payment and distribution between the parties.

Mediation starts upon the payment of mediative fee (see below) by the parties.

Procedure of mediation develops in several stages: preliminary consultations with the parties; joint sessions with the participance of the parties and their representatives (if needed) or separate meeting with each of the parties of with its representative (if needed); preparation and signing of mediative agreement.

Rules describe aims and purposes of each of the mediation stages.

Preliminary meeting is held in order to clear up the circumstances of the dispute and the positions of the parties and decide on the organizational issues of mediation procedure. The parties together with mediator find out which documents related to the dispute are needed; what are the requirements of the parties towards the procedure and its results; assess the time required for the procedure; fix the place and the date of the procedure. The mediator explains the procedure and the principles of mediation to the parties. The mediation may terminate upon the results of the preliminary meeting if either party refuses to participate in the mediation or the mediator has revealed the circumstances which prevent from continuing the mediation. The mediator issues a ruling on termination of mediation accordingly.

Separate meetings with parties or their representatives (caucuses) (if needed) are held in order to reveal the interests and the intents of the parties, to allow the parties to formulate their proposals as to settlement of the dispute; to consider proposals of each of the parties.

During the joint session the positions of the parties are ascertained, common interests of the parties revealed, possible suggestions and concessions discussed; mutually acceptable solutions explored; agreements checked for reality; the text of mediative agreement coordinated. The mediator may decide to abstain from joint sessions and hold caucuses only if he/she deems it necessary for efficient and expediate solution of the dispute.

Parties may reach an agreement (mediative agreement) on the entire dispute or on one or several differences related to it. Mediative agreement sets the terms of dispute resolution and must provide for the obligations of the parties to execute it voluntarily within the time-limits specified in the agreement. The parties may wish to introduce in their agreement provisions on the additional sanctions for failure to perform the mediative agreement.

The time-limits for mediation procedure are set by the agreement of the parties on the conduct of mediation procedure. The parties and mediator should strive to complete the procedure in 60 days from the moment when the agreement on the conduct of mediation procedure was signed but may not exceed 180 days. For mediation of court- or arbitration-connected disputes 60 days term runs from the moment when the dispute was submitted to the Panel.

Procedure of mediation is terminated by signing of mediative agreement; by elapse of the term agreed by the parties for settlement of the dispute; by refusal of either or both parties to continue mediation; by failure of the parties to pay the mediation fee within 30 days; in cases provided for by the agreement on conduct of mediation procedure; if either party or mediator consider further mediation unpromising or it becomes impossible for other reasons.

Fees and Expenses

Unless otherwise agreed or provided for by Schedule of Fees and Expenses, parties bear expenses related to mediation procedure in equal parts. The party which has accepted the invitation to mediate shall reimburse the initiating party for the expenses related to the payment of the registration fee.

Registration fee is payable upon submission of application for mediation, mediative fee is due after signing of the agreement on the conduct of mediation procedure between the parties and mediator. Registration and mediative fees are subject to Russian 18% VAT.

Schedule of Fees and Expenses provides for non-refundable registration fee of RUR 6.000 (approx. USD 215, VAT included)[1].

Mediative fee is due after signing of the agreement on the conduct of mediation procedure between the parties and mediator within the term specified in this agreement. It is calculated in RUR based on the fair total assessment of mutual claims and varies from RUR 5,000+1.25% of the amount exceeding RUR 100,000 for the claims not exceeding RUR 500.000  the amount of claim of RUR 500,000 mediative fee shall be equal to RUR 10,000) till the maximum of  RUR 300,000  for claims exceeding RUR 30,000,000.

 It the mediation turns out to be excessively complex or time-consuming the amount of mediation fee may be increased for up to 50%.

50% of the mediative fee are refunded if mediation is terminated without mediative agreement.

 

New Rules: Prospective for domestic and international dispute resolution

The new Rules and Regulations expressly specify that in its activities the Panel is governed by the Constitution of Russian Federation, international treaties of Russia and the Law on mediation. The Rules do not contain any specific provisions of the language of the procedure or choice of its place, the Schedule of Fees and Expenses is in RUR only. Procedure of mediation under the Rules shall always be governed by the Russian law, Rules and Regulations.

The new Rules are designed mostly to serve domestic needs and in particular to make mediative agreements reached in court-annexed mediation enforceable in Russia.

 

Arbitration, Mediation, Conciliation: Prospective for Hybrids in Business Dispute Resolution?

Despite of the fact that the Rules do not expressly mention international arbitration, reference to international treaties encompasses New-York Convention on the mutual recognition and enforcement of foreign arbitral awards (1958) ratified by Russia. One may expect that in the long-term prospective the new Rules may encourage the parties to arbitration proceedings with International Commercial Arbitration Court  (ICAC) with the Russian CCI to recur to hybrid procedures such as ARB-MED-ARB in particular in order to give their agreement the force of executive document and to allow its enforcement abroad. Article 30 of the Russian Law on International Commercial Arbitration and § 41 of the ICAC Rules allow to fix the results of dispute settlement in the form of arbitration award on the agreed terms. It does not matter which kind of procedure lead the parties to the settlement.  In fact, in addition to traditional negotiations they may recur to conciliation (Conciliation Rules of the International Commercial Arbitration Court with the Russian CCI are in force since June 1, 2001) or mediation.

However, there is a long way to go to make this procedure a routine. As a rule, representatives of the parties in the ICAC are formally authorized to make settlement agreements. These powers are rarely used during the proceedings since in practice the representatives of the parties (mostly external attorneys and in-house lawyers) need to obtain prior approval of the terms of settlement from decision-makers (clients or superiors). For these reason the education of both businesspeople and lawyers in dispute management and ADR becomes the issue of primary importance: it is vital for the company that the lawyer understands that one-size fits all approach in dispute resolution is rarely good for business. 

 

Volunteer Members of the Panel of Mediators have recently started to make shifts in the Conciliation Room opened in the premises of the State Commercial Court of Moscow upon the agreement between this court and the Russian Chamber of Commerce and Industry.  They consult the parties to the dispute on the dispute resolution methods adequate to meet their needs in each particular case.  Advice is provided free of charge. The members of the panel see their mission in educating the parties in exercising a realistic collaborative approach to their dispute.

[1] Calculated at the rate of 1 USD = approx. 33 RUR.