Mediation and arbitration - forms of conflict resolution in business

Relations between entrepreneurs are often quite turbulent and conflicts often arise between them. More serious or significant sums often end in court, but for some, court proceedings are a last resort. The reasons for reluctance to court may be high costs and a long waiting period for a ruling, and time is of the essence in business. For many entrepreneurs it is also important to maintain at least correct relations with contractors, which cannot be counted on in the case of a trial. That is why you can choose another method of conflict resolution - mediation or arbitration.

Mediation - we discuss and reach a consensus

The essence of mediation is to resolve the dispute through a discussion moderated by a third party - the mediator. Its role in resolving the conflict is not to impose ready-made solutions on the parties, but to create favorable conditions for conducting talks, getting to know the other party's motives and arguments, calmly considering disputes and reaching a consensus.

It is the privilege of the parties to choose a mediator. They can do this both at the time of the conflict and in good time, for example when concluding an agreement regulating the economic relationship between the parties. The parties may include in such an agreement a provision indicating the person who will conduct the mediation in the event of a dispute. Depending on how they decide, the mediator may be a friend (for example, a representative of a company with whom both parties have a common interest) or a complete stranger (for example, a court mediator or mediation psychologist). It is not an easy decision, as each choice carries some risk. Someone who is well acquainted with the parties' relations, knows what is the basis of the dispute and what is their priority, could direct the mediation process in such a way that its participants are satisfied. However, it can be somewhat biased and, being best intent, breach the principle of impartiality - especially important when it comes to mediation.

This is why entrepreneurs often choose a court mediator.Such a solution is promoted by legislation - campaigns promoting mediation are carried out in almost every court, and the provisions regarding its role in the civil trial are included in the Code of Civil Procedure.

These provisions define precisely the manner of conducting mediation, selecting a mediator, as well as the impact of the result of conciliation on pending or just initiated civil proceedings. As already mentioned, the participants of the dispute may start mediation immediately after the dispute has arisen or during the trial. The court then suspends the proceedings and the result of the mediation affects its conclusion. The mediator is obliged to draw up a detailed mediation report and present it to the court. The latter, in turn, approves them and gives an enforcement clause, if this is due to the nature of the arrangements. The only condition that must be met by the parties' arrangements is compliance with the applicable legal system and the principles of social coexistence. If what the parties have agreed is to circumvent the law, contains contradictions or is incomprehensible, the court will not consent to approval.

In the case of using the services of a court mediator, the parties include in the mediation agreement all arrangements as to the manner of conducting the conciliation procedure, the person of the mediator, and the intended results.

Arbitration - a specialist resolves the dispute

Arbitration is an equally popular method of out-of-court dispute resolution. It is not, however, about conducting discussions and persuading the parties to resolve the conflict by reaching an agreement. The parties delegate the power to settle the dispute to the person or persons chosen by them. They are often specialists in the field in which the conflict relates, which guarantees professionalism and a good understanding of the dispute grounds and the interests of the parties.

Arbitration is otherwise known as an arbitration court. It takes the form of a non-permanent arbitration court, i.e. one that does not have a separate seat or administrative staff, and is dissolved immediately after fulfilling its task, i.e. issuing an award. In the case of a non-permanent arbitration court, the parties will independently choose the composition of the arbitration court, the place of its adjudication and determine the number of its members only for the purpose of resolving a specific dispute. It is also possible to apply to a permanent arbitration court, i.e. institutions adjudicating in all areas of civil law and commercial law. The latter is especially important in the context of disputes between entrepreneurs.

The largest arbitration court is the Court of Arbitration at the Polish Chamber of Commerce in Warsaw, but permanent arbitration courts operate in every major city. Their advantage is the speed of proceedings - arbitrators selected by the parties are more flexible and can adjust the dates to the companies' calendar, which significantly streamlines the proceedings. As in the case of mediation, the most important issues, i.e. the choice of this form of conflict resolution, the appointment of the arbitrator or arbitrators, as well as all arrangements regarding the manner of conducting arbitration, are included in the arbitration agreement or clause contained in the contract regulating the economic relationship between them - the record on arbitration court.

Other Alternative Dispute Resolution

Mediation and arbitration are not the only alternatives to judicial resolution of disputes between entrepreneurs. It is true that the law only regulates arbitration and mediation, but for entrepreneurs, the most important thing should be the end of the dispute.

The aforementioned alternative is negotiation, which is a process based primarily on communication between the parties. The interlocutors present to each other their suggestions for resolving the conflict and arguments, and then conduct conversations until they achieve a result that satisfies both parties. The place of negotiations may be the seat of one of the entrepreneurs or a neutral place. A third party may assist in conducting the negotiations, and the result of the negotiations may be expressed in the form of an agreement or a joint declaration by the parties.

Facilitation is a good method of dispute resolution if more than two entrepreneurs are parties to it. Facilitation can be briefly defined as multilateral negotiations conducted by a moderator, called a facilitator, aimed at finding a solution that would satisfy all participants or prepare the ground for resolving a dispute between individual parties. As in the case of negotiations, the arrangements resulting from facilitation should be included in the contract or declaration of the parties.