Mediation: a Decision without the Court

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The Russian legislation provides for different mechanisms of the commercial court participation in consideration of a dispute. Until recently this list contained a pre-trial procedure of dispute consideration, amicable agreements and arbitration courts. Last July the system was supplemented by enactment of the law on mediation. Its draft law was suggested by a group of deputies of the political party United Russia in November 2008. Thus, the state made one more step towards regulation of relations in the entrepreneurial domain.

 

However, the legislator has worked out the procedure of pre-trial consideration of a dispute least of all, and it depends heavily on the provisions of the contract the parties to a transaction have and on customary business practices.

 

The Article 138 of the APC RF (the Arbitration Procedural Code of the Russian Federation) underlies the legislation concerning other, pre-trial mechanisms of dispute consideration. According to it parties can settle a dispute by concluding an amicable agreement or by using other conciliating procedures, if it does not contradict the federal law. Only the notion of an amicable agreement becomes clear in this case. The APC RF does not expand definitions of other conciliating procedures, moreover, it does not even contain them.

 

An amicable agreement is a transaction between the parties to a dispute which contains certain obligations aimed at final settlement of a disputable situation. An amicable agreement can be concluded by parties at any stage of the arbitraion process and in the course of execution of a judicial act, and to come into force it requires to be approved by the court in jurisdiction of which the dispute is considered.

 

By the decree of the Federal Commercial Court of the North Caucasus District of October 17, 2007 № F08-6861/2007 the appeal against a court decision, which dismissed approval of the amicable agreement, was considered. According to the amicable agreement the debitor was to repay a debt to the creditor by transfer of material values owned by the debitor and the third party with the consent of the third party.

In the appellant’s opinion the Arbitration Procedural Code contains a full list of circumstances precluding approval of an amicable agreement. An amicable agreement concluded with the participation of citizens who are parties to two other civil cases does not violate the rights and legal interests of the named citizens, as it leads to the amicable settlement of the dispute between all the participants of legal relations.

The court decided to uphold the primary decision as in the course of approval of an amicable agreement the commercial court must verify if its participants are parties to the case, if the agreement is reached by them in connection to those material rights and obligations of parties which were the subject of the court proceeding. The persons nonparticipating in the case do not have a procedural right to conclude an amicable agreement. An amicable agreement is always aimed at settlement of a particular dispute and must be related to the subject of the dispute. At the same time the parties to an obligation can voluntarily conclude an agreement on discharge of reciprocal claims which follow from other civil dipsutes, however, such an agreement is not an amicable one according to the Chapter 15 of the Code and it does not require to be  approved by the court.

                                                                                                                                                                        

Mistakes:

Thus, the parties to the amicable agreement made several mistakes:

·          They involved the third party, who is not a  participant of the dispute, into participation in the agreement.

·          In one and the same agreement they settled several disputes which should be considered by different courts and not just by the court which approved this amicable agreement.

·          The solution to this situation could have been a conclusion of a framework contract on repayment of the debt among the creditor, the debitor and the third party. And a reference to obligations of the parties to this contract should have been placed in the amicable agreements on each of the disputes.

 

Also the requirement for court examination on compliance of the amicable agreement is rather disputable, nevertherless obligatory. According to the article 49 of the APC RF the commercial court must examine an amicable agreement on accordance with two criteria: the amicable agreement presented by the parties must not contradict the law, it must not violate the rights of other persons. When we say “other persons” we mean any other persons apart from those who take part in the conclusion of the amicable agreement. Such persons may either become involved in the case or not.

It is quite difficult to Identify persons whose rights and legal interests may be potentially violated by conclusion of an amicable agreement because the number of such persons may not be evident when the amicable agreement is being approved.

As a solution to this problem the law theory suggests to exempt the court from this obligation and to give such persons the rights to challenge the concluded amicable agreement themselves, if they think that conclusion of the amicable agreement really violates their rights and legal interests. 

The arbitration court is one more mechanism of a dispute consideration. The specific feature of the arbitration court is that it does not belong to the system of judicial bodies and it is formed on a permanent basis by chambers of commerce, exchanges, public association of entrepreneurs and consumers, other organisations – legal persons, established in compliance with the legislation of the Russian Federation, and their corporations (associations, unions) and acting under these organisations – legal persons. Also an arbitration court may be constituted for consideration of a particular dispute. Thus decisions of arbitration courts have force only on the ground of parties’ agreement and their goodwill. The questions concerning the number of arbitrators and the procedure of their appointment are also submitted at the parties’ discretion.

The parties may refer the dispute for consideration of the arbitration court in two ways: to include a special note on the implementation of this method into the commerical contract or to conclude a separate arbitration agreement on transfer of the dispute for consideration by the arbitration court. The abritration agreement can also be concluded in relation to the dispute which is already being considered by the commercial court. 

The moment the decision of the arbitration court is enforced is the day following the date of the decision delivery.

From January 1, 2011 the procedure of mediation will be in operation – it is the way of dispute settlement with the participation of an independent person (“mediator”) as an intermediary.

For the mediation procedure to be used there is a need for arrangement of the parties concerning its use before the dispute appears – an agreement on the use of the mediation procedure, indicating the period during which the parties undertake not to apply to the court but to use the mediation procedure. Such an agreement is possible either in the form of a separate document or in the form of a mediative reservation within the framework of the transaction. The obligatory condition of realisation of such an agreement is its recording in writing.

The mediation procedure can be applied neither for collective labour disputes, nor for disputes arising from civil, labour and family legal relations, in case if such disputes affect or can affect rights and legal interests of the third persons who do not participate in the mediation procedure, as well as public interests.

The mediation procedure is implemented by one or several mediators. These persons are chosen by the parties to the dispute or are appointed by the organisation carrying out this activity, in case such an arrangement exists between the parties. The period of implementation of this procedure must not exceed 180 days.

The result of the mediation procedure is “a mediative agreement” which is an agreement of the parties aimed at establishment, alteration or termination of the parties’ rights and obligations. A mediative agreement is concluded in writing and must have information concerning the parties, the subject of a dispute, the implemented mediation procedure, a mediator, and obligations, their terms and periods of fulfilment agreed by the parties.

A mediator’s activity can be carried out either on a professional or non-professional basis, either at some charge or for free. However, only a natural person can carry out mediation activity at no charge. On the ground of everything stated above, it can be said that the mediation procedure is a natural continuation of legislative policy in the domain of regulation of procedures alternative to court proceedings, and their integral element.

11 January 2011
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