Банкеръ Weekly

Briefs

THE ART OF RECONCILING

To many Bulgarian companies, the commercial mediation as a possibility for settlement of business disputes is still a vague term. Maybe because the Mediation Act has only started operating in Bulgaria last December. It is written in the act that the mediation is a voluntary and extrajudicial procedure in which a third party (a mediator) supports the disputing parties in reaching an agreement. In fact, such kind of relations between traders are well known both in the US and the European Union member states mostly in the insurance branch and labour law. Probably that is one of the reasons why Brussels periodically repeats to Bulgaria that more efforts are needed for the practical application of the commercial meditation as part of the notorious judicial reform.
In short, the mediation is a kind of a trade arbitrage (since it is carried out out of the court), with the only difference that it does not seek a decision in favour of any of the disputing sides, but an agreement. The fact that in the case of mediation, unlike legal battles, there are neither winners nor losers is very helpful for the companies to continue their trade relations after the settlement of the disputable case, legal experts comment. Another important issue is that the need of reaching an agreement between the arguing traders practically eliminates the corruption premises which usually exist in traditional judicial debates.
Experts from the USAID project for reform of the Bulgarian commercial law claim that confidentiality is one of the greatest advantages of the commercial mediation. The procedure for reconciliation of two companies is confidential at any moment. Besides, both sides in the dispute remain able to control the result in any single moment by taking active part in the preparation of the final decision, which is an advantage, too. According to the rules of the Civil Procedure Code, for example, the decision and the motives of the court are only announced when they are published. Moreover, it should not be ignored that the mediation procedure usually ends within up to a week during which one to three sessions are held. According to a research by the World Bank on the business conditions in Bulgaria, the average length of legal cases on commercial disputes varies between four and five years.
Another advantage of the mediation over the so called claim proceedings are the much lower fees paid to the mediator compared to those due to the state courts. Although there is no single commercial mediation tariff operating in Bulgaria now, practice has proven that fees vary from BGN100 to BGN150 depending on the number of sessions held.
Those engaged with the practical application of commercial mediation in Bulgaria are unanimous that one of the merits of the Bulgarian act in the field is its article 11, paragraph 2. The regulation allows that Bulgarian courts reviewing commercial cases direct the arguing sides to mediation. In practice, that should help the judicial system free from some of the numerous cases that cover it up.
A breakthrough in that direction was already achieved in Sofia, Plovdiv, Varna and Veliko Tarnovo. The results are particularly indicative in Stara Zagora. Once the Mediation Act was published by the Official Gazette, the managers of the local Commercial and Industrial Chamber and the Regional Court shook hands and established two, instead of one, commercial intermediation centres. Probably that is why the USAID, through their Commercial Law Reform Project, chose Stara Zagora to play host to their campaign for popularisation of commercial mediation among the businesses.
The Commercial and Industrial Chamber Executive Director in Stara Zagora, Oleg Stoilov, who is among the most keen supporters of an expanded commercial mediation, told the BANKER weekly that since the first centre was opened in the town last spring claims amounting to BGN1.445MN have been reviewed. The total number of disputes sent to mediators in Stara Zagora has reached seventeen. Seven of them have been sent by the commercial unit of the local court and three - by the regional court. The consideration of seven cases has been initiated by the companies. However, the success of these cases is inconsistent as agreement has been reached on just four of them, while the rest are either pending or resent to court.
Anyway, there are already initial results in Stara Zagora. Other towns will probably follow the example. However, the Ministry of Justice should fulfil its engagement and create a national register of the mediators in Bulgaria. There is a similar requirement in the transitional and final regulations of the Mediation Act. So far, the department headed by Georgi Petkanov has prepared an ethical code which mediators must take into account as well as training standards. However, it is not clear yet what criteria will be used to choose the organisations that will be legally authorized to teach future mediators in the art of making peace. At present, courses of this kind are being organized by the Bulgarian Association for Extrajudicial Settlement, the USAID and the Bulgarian branch of the Partners foundation. It's curious that the right to act as mediators can be given not just to people with a legal degree. Practice shows that at this stage the new profession seems most attractive to notaries and psychologists. The representatives of the lawyers' guild do not look so enthusiastic, however. Some of them see commercial mediators as their competition, since the faster settlement of the disputes also means lower fees.
In fact, settling commercial disputes through mediation has some disadvantages as well. These are usually bilateral agreements (the law allows that they also be made orally). Even if they are certified by a notary, they are as valid as a contract under the Law on Obligations and Contracts, which means that a conflict on a contract already signed ends with another contract. However, this agreement does not have the force of a sentence which allows compulsory execution. Besides, under the currently operating regulation the signing of an agreement between two companies is also admissible within the case in court, and its content is written in the final decision.

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