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Comments made by lawyer Andrey Mikonin to an article entitled Perforce intermediary

16 March 2010

The president of Russia initiated adoption of a specific statute concerning mediation – an institute of intermediaries which should help conflicting parties to reconcile, for a fee. Moreover, he proposed to entrust intermediaries with judicial competence to settle both commercial and family disputes. Mediation procedures, now widely applied in Western countries, are very uncommon in Russia. And the bill which was tabled last week can hardly make them more popular.

Nobody has ever banned conciliation procedures– they are already applied now, without no law to sanction them. Nobody prevents the parties from making peace, and, should they already submit a claim, from settling amicably. However, the law makes intermediaries a high caste which is equalized in rights with the priests - even the court is not entitled to demand and obtain information stored by intermediaries or to examine them as witnesses.

Competent arbitrator

As early as in 1947 the US Congress initiated establishment of the Federal Mediation and Conciliation Service. In Europe alternative procedures of dispute settlement, also called “methods of constructive conflict arrangement”, were widely adopted since the 70s of the last century. And when Russia settled down to a course of the law-governed state, and much emphasis was on necessity to resolve all the issues through court action, in many Western countries people began to shift from time and money consuming legal procedures to mediation. It can be applied to settle as civil, family, labour disputes, as well as conflicts which fall beyond the scope of purely legal collisions (political and social conflicts, for instance, the so-called neighbour conflicts).

The draft law introduced on March, 11 establishes legal base for practice of intermediaries, though almost all the issues (who, how, when, for what fee, etc.) shall be decided by conflicting parties. They are entitled to choose the intermediary (mediator), to negotiate the scheme of payment for his services of its work etc. There are only a few obligatory rules. First, an intermediary is obliged to hold confidential any information gathered in the course of negotiations. Second, requirements to professional intermediaries were established: they should be not younger than 25 years, have higher education and undergo a specific training course. While one-time mediators should have no record of conviction, even persistent offenders may be professional conciliators.

Unlike the arbitration courts, which deliver obligatory judgments, the verdict of mediators is advisory and confidential one. Should the parties fail to compromise, they shall forget everything they said and heard – in court they shall not be entitled to make references to information or conditions, etc. communicated to them during conciliatory negotiations.

Declaration with no intent

Supporters of such procedures approve adoption of the special law. “The tabled draft law stipulates only a right, rather than liability of the parties to resort to an intermediary when they need to resolve disputes,” said Sergey Osutin, the head of “OSV” consulting group and a member of Mediator league. “For the moment, such law is enough to us. However, in many countries, including the USA, Japan, Finland and others, parties to some categories of disputes are obliged to resort to mediators. In the USA intermediaries resolve up to 80 % of disputes. There is a popular saying: “You shall lose as many friends as you shall win cases,” believes Sergey Osutin.

But the majority of the interviewed lawyers are skeptical about idea of specific law to be adopted: “One should not expect significant “deloading” of judicial agencies when this law shall become effective,” believes Victor Gutov, the partner in the Pen&Paper law company. “At the moment the out-of-court settlement of disputes is not uncommon and is practiced by inside and outside lawyers of parties in the absence of mediation institution. Numerous agreements on re-structuring of defaulted loans made by banks may serve an example. In this sense you should not to expect a huge flow of clients resorting to specialised mediators. Though some disputes, in particular those in the context of strong personal hostility and mistrust of the parties, perhaps, will necessitate a qualified independent intermediary.”

Mikhail Bojtsov, managing partner in the law firm Rightmark group gave an even more pessimistic characteristic of the draft law, “I don’t perceive it as a significant event in the contemporary Russian law, or in the legal market. Currently nothing prevents the conflicting parties to examine their dispute, and to find some mutually acceptable solution. However, my experience of communication with conflicting parties (opponents) engaged in business activity shows that Russian businessmen consider attempts to conciliate as signs of weakness.”

The new business

The current Arbitration Procedure Code of the Russian Federation provides that a judge should recommend the parties to settle amicably or to resort to an intermediary. However, according to Sergey Osutin, currently even judges do not know whom should the parties refer for help.

Upon the adoption of this law, a certain repartition of the market is possible – specialised mediation companies can partly divest the lawyers of their job. “Introduction of such procedure at legislative level shall create a new niche for paid legal services,” believes Natalia Sibgatulina, the director of "АSN" law firm. “However, the services of such level will only be affordable for highly professional lawyers, trusted by both parties. The level of conflict resolution proved to be simply unaffordable for the fly-by-night “legal” companies engaged in rendering of quasi-legal registration services. Nevertheless, currently such procedure is very poorly mastered – there are no firms or lawyer associations able to professionally deal with this issue.”

According to Andrey Mikonin, the lawyer of S&K Vertikal law firm, the proposed bill (though declarative) establishes only one provision of law, “Mediator should be certified using procedure established by the government of Russia at the proceeding stage. Literal interpretation of the concepts specified in the draft law means that at a judicial stage any persons, except for certified mediators, shall be entitled to promote conciliation of the parties. Such function traditionally pertains to lawyers.”

However, it looks like lawyers are still cooking a hare before catching him. After all, the conflicting parties should at least agree upon the necessity to use mediator’s services, to choose an intermediary and to agree to pay for his services (and the fee to be paid to a skilful intermediary makes up some thousand roubles per hour). Given that at present less than one percent of judicial disputes is resolved by amicable settlement,, and about a half of arbitration awards are performed, the overwhelming majority of businessmen prefer to resort to the arm of law rather than to an arrangement or compromise. According to Michael Bojtsov, there hardly shall be great demand for intermediary services in commercial disputes, “Chances are, the most part of market players will use such procedure (along with, for instance, mandatory presentation of a claim to a debtor before instituting an action in the court) only to delay settlement of a dispute and, consequently, to delay discharge of their obligations.”

Let's remind that over the past five years three draft laws “On conciliation procedure involving intermediary (mediator)”were introduced into the State Duma, and any of them was adopted till now. However, there was an earlier attempt to introduce obligatory conciliation procedures on the model of American legislation – when lawmakers examined the draft Arbitration Procedure Code of the Russian Federation. This attempt was opposed by St- Petersburg lawyer Dmitry Kozak then the Head of Administration of the President of Russia. Today the head of the state has himself advanced an idea of the law on intermediaries and hardly anyone shall protest against it.

Anton Ivanov, the Chairman of Supreme Arbitration Court of the Russian Federation and the former groupmate of Dmitry Medvedev in the law department of the St.-Petersburg State University also favours an idea of extrajudicial mediation. He believes that development of mediators institution is hindered by “low cost” of arbitration cases, while the parties should find some benefit in making peace outside the court. In the end of this January the law charges in many categories of cases examined by arbitration courts have doubled, however, there is still no demand for the intermediary services.

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