Банкеръ Weekly

Briefs

TRADE MEDIATION REMAINS SOMETHING EXOTIC

Although the Mediation Act has been in force for about two years now (since December 2004), the very popular in Europe and the US way for settling
trade arguments outside court
cannot be acknowledged formally by Bulgarian dealers yet. For most of them settling conflicts via a special intermediary (mediator) seems an imported legal exotic. Practice shows that despite the advantages of mediation, such as the quick process and saved money for lawyer's services, Bulgarian firms continue to rely on the traditional legal or arbitration battles. According to Justice Ministry data, a little more than 5,000 cases were decided by end-2005 at the currently operating 25 mediation centres in Bulgaria. However, the amounts of claimed money and the complexity of these cases cannot be compared with those heard by magistrates in the same period.
The reasons for the difficult debut of mediation in Bulgaria could be sought in several directions. The main hindrance seems to be the State's passive attitude to the popularisation of the alternative method. The US Agency for International Development (USAID) had undertaken that activity over the last few years. But its project in Bulgaria will be completed in end-2006 and it's not known whom the baton will be passed on to after its experts quit. The purely financial issue is not to be underestimated either. There is no special item in the judiciary's budget for assisting mediation centres. That is one of the reasons for them to be set up with organisations such as the Bulgarian Chamber of Commerce and Industry, the Bulgarian Industrial Association, etc., and not with the various courts as is the case in the EU and the USA.
Hopes for
a positive stir-up
are connected with the forthcoming discussions in the National Assembly of drafts for amending the Mediation Act and of an entirely new Civil Procedure Code. The recently approved amendments by the Cabinet has at last changed the order by which legislation will approve the organisations that will be authorised to train mediators and issue valid certificates for qualification. Under the currently effective rules, any non-government or branch organisation can practically set up its own mediation centre and train mediators in trade arguments against a BGN60 fee. This too liberal regime caused lawyers' and judges' doubts that mediators (who are not required education in law) could be a real alternative to classic jurisdiction. A total of 246 persons were entered in the national register of mediators by end-October. However, there are ten times more who are being educated in various centres. That's why the State should intervene and set restrictions for the registration of trade mediators.
Proposals for special provisions in the Civil Procedure Code, relied on to boost trade mediation, sound much more curious. The draft clauses have been prepared by lawyers of USAID and the National Association of Mediators. The most radical proposal perhaps is that agreements reached through mediation, regarding receivables in cash or delivery of stuff
shall be liable to forcible execution
In other words, if two firms agree before the mediator on a specific payment but the debtor does not fulfil his commitment, the creditor could demand from court to directly issue a writ of execution for the amount in question. According to jurists, that would resemble to the maximum agreements reached through mediation and arbitration and court decisions. Some experts are still more extreme, proposing that the agreement reached via mediation should be made equal with court decisions. Presently, an agreement via mediation is regarded as an ordinary contract under the Obligations and Contracts Act. For that reason, some of the corporate lawyers regard it as a quite uncertain outcome of a corporate argument.
One of the proposals for new regulations to the future Civil Procedure Code is connected with the so-called order to payment when creditors will get a writ of execution against their debtors without going through a court trial. The idea is that in case of a refusal to issue such an order the court will inform the claimant that he could settle his argument with the debtor through mediation as well. That procedure will probably concern mostly banks (mortgage credits), water and sewage and electricity distribution companies and their clients.
The Association of Mediators insists as well that the Civil Procedure Code should include
financial incentives to traders
who use the services of mediators. For example, the claimant will be paying just 50% of the due State fee when filing the claim to the court. In case an agreement through mediation is reached before the second hearing of the case, the second half of the fee will be remitted. However, it's not very clear how such a preference would be viewed by the Supreme Judicial Court, which is the main distributor of the judiciary's budget. According to incumbent mediators the BGN150 fee for a session is extremely insufficient and can hardly cover the necessary expenses for mediation. Obviously, the Justice Ministry should think about a special tariff for mediators' services.
A certain consolation for them might be the fact that the new Civil Procedure Code will probably allow them decline to give evidence in court about circumstances which have become known to them in the course of work. That will guarantee to the maximum extent the requirement for confidence, stipulated in the Mediation Act. Currently, mediators do not formally have the right to make public data about the traders who have sought their services, but that restriction is not effective if they are called as witnesses in a court trial. Voting such a provision in the Civil Procedure Code will be quite opportune as the EU is now drafting a special directive on the confidentiality of trade information in civil lawsuits.
The package of new provisions in the Civil Procedure Code will also include several ordinances, stipulating in detail the direction of traders from court to reconciliation though a mediator. The effective Mediation Act stipulates such a possibility, but the Civil Procedure Code does not specify the order for accepting it. Therefore, the National Association of Mediators proposes the possibility for settling the argument between traders though mediation still on sending the when the subpoena. That is the current practice of courts in Veliko Tarnovo, Vratsa and Plovdiv.

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