Practice Areas Review: Mediation

Mediation

Arthur TRETIAKOV

Arthur TRETIAKOV

Partner, TCM Group Ukraine. He practices in such spheres as international commercial debt collection, restructuring and mediation, international litigation and arbitration processes, recognition and enforcement of foreign judgments and arbitral awards, bankruptcy

Sergii MELNYK

Sergii MELNYK

His areas of expertise include international arbitration and litigation, recognition and enforcement of arbitral awards, international trade law, international commercial law and procedure, international contract law, and bankruptcy

Bohdan IVASHCHUK

Bohdan IVASHCHUK

Senior Associate, TCM Group Ukraine. Mr. Ivashchuk focuses on international commercial debt collection, mediation, international commercial litigation and arbitration

Yevhenii SHAMRAIENKO

Yevhenii SHAMRAIENKO

Associate, TCM Group Ukraine. He practices in the field of international commercial dispute resolution, in particular mediation, as well as in the areas of banking and financing

PROfile

TCM Group Ukraine

Address:
10A Vozdvyzhenska Street,
Kiev, 04071, Ukraine
Tel.:
+38 044 228 1338

TCM Group Ukraine is a Ukrainian office of TCM Group International Ltd., which is a unique alliance of 35 law offices and 110 agencies, practicing international commercial dispute resolution in a total of 145 countries.

TCM Group International was established in 1987, when a small group of globally minded credit management law firms and debt collection agencies, primarily located in the Pacific Rim, banded together to combat the rising tide of outstanding receivables and collection costs in international trade.

While creating a one-stop shop for international companies, organizations, and individuals in need of global credit management solutions, international commercial dispute resolution and international commercial debt recovery services, TCM’s founding members aimed to give their clients access to the combined experience and expertise of a cross-border, cross-jurisdictional network.

Over that time, the Group has acquired a first-class record in enhancing the cash flow for the vast majority of its clients by delivering sound credit management services and, above all, the successful recovery of international accounts receivables and delinquent debts, both amicably and through court settlement.

With over 25 years of experience in global credit management and debt recovery, the offices of TCM Group International have developed an understanding of complex legislative, cultural and logistical challenges their clients face in recovering outstanding receivables across multiple boarders, languages, cultures, time zones, and currencies.

Since 2014, TCM Group International has been represented in Ukraine through its office in Kiev, providing Ukrainian clients with a unique opportunity to access its offices worldwide.

At the same time, TCM Group Ukraine represents all foreign offices of TCM Group International in international dispute resolution in Ukraine, building on the Group’s knowledge and expertise in the following areas: international commercial litigation and arbitration, negotiations and mediations, international commercial debt collection, recognition and enforcement of foreign judgments and arbitral awards, and bankruptcy proceedings.

 

TCM Group offices: Argentina, Australia, Austria, Belgium, Bolivia, Brazil, Canada, Chile, China, Colombia, Cyprus, Czech Republic, Denmark, Dominican Republic, Ecuador, Egypt, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, India, Ireland, Israel, Italy, Japan, Netherlands, Norway, Poland, Russian Federation, South Africa, South Korea, Sweden, Switzerland, Ukraine, UAE, United States of America.

 

While doing business, companies often get involved in commercial disputes with their business partners. If negotiations fail, companies are left with three standard ways of resolving their disagreements: litigation, arbitration, and mediation. In fact, litigation is still considered in many jurisdictions, including Ukraine, to be the most popular option for settlement of commercial disputes.

However, litigation has several disadvantages when compared to methods of alternative dispute resolution. First, companies may expect to incur significant costs, related to litigation. If a case is litigated in appellate and cassation instances, legal fees and court expenses can be extremely high. Second, it can take several years to resolve a dispute in courts, especially if there is a lot of money at stake. Often, the outcome of a dispute is not worth the time and money spent on litigation.

If a case is tried in foreign courts, additional complications arise, such as reliance of courts on foreign substantive and procedural law or conduct of proceedings in a foreign language. Often, companies are forced to hire a local counsel, which significantly increases the overall costs of litigation. Moreover, in certain jurisdictions companies may have to deal with bias of courts in favor of defendants or even with corruption.

However, over the past 20 years, other forms of dispute resolution have become more and more popular. In fact, mediation has proven to be one of the most reliable methods. It is an informal and confidential way for companies to resolve disputes with the help of a neutral mediator, who is trained to assist parties in the resolution of their differences. Importantly, a mediator neither decides who is right or wrong, nor issues a binding decision. Instead, he or she helps parties to work out a compromise solution themselves. Despite the fact that mediation is still not widespread, big companies have already started to use it regularly instead of referring disputes to courts.

Certainly, mediation allows costs borne by the parties to be cut significantly. Compared to conventional litigation in state courts, it is also much quicker. Parties are often able to resolve a dispute in the first or second hearing. Another advantage of mediation is its confidentiality: anything said by the counter-parties cannot be disclosed or later used in a court of law. It should be noted that agreements, reached through mediation are more likely to be carried out than those imposed by a judge. When companies resort to litigation, the losing party is almost always unwilling to comply with a judgement voluntarily. Mediation can also be an effective means to restore damaged business relationships between business partners. Unlike litigation, where a court issues a one-sided judgment, favoring the winning party, the final goal of mediation is to reach a win-win situation acceptable by both partners.

Although mediation is generally subject to less control than other types of dispute resolution, certain issues should be regulated by law in order to establish reliable rules for the mediators and users of the system. Thus, the majority of developed states have already adopted their own legal acts regulating the conduct of mediation. In this regard, Ukrainian legislation currently awaits significant changes. On 17 December 2015 the Draft Act On Mediation (No.3665) was registered in Ukraine’s Parliament. The alternative Draft Act On Mediation (No.3665-1) was registered on 29 December 2015. These Acts are expected to solve problems arising from the uncertain status of mediation under Ukrainian legislation.

Both Acts define mediation as an alternative dispute resolution method aimed at settling disputes through negotiations, assisted by an independent mediator. Moreover, both of the Acts regulate mediation in civil, commercial, labor, family and criminal disputes. However, some drastic differences between the Acts exist. Act No.3665 provides for a complex system of mediation-related institutions that would include educational facilities for future mediators, a register of mediators, and institutions that would sanction mediators who violate internal codes of conduct. In turn, the alternative Act provides for a simplified procedure, whereby the register would be kept by educational institutions.

The significant disadvantage of both Acts is the non-binding character of mediation clause in a contract. Thus, even if the parties agree to mediation in case of any disputes, they can easily avoid this clause and file a claim to a court without any pre-trial negotiations. Surely, nothing shall restrict the parties’ right to refer a dispute to a court, according to the Constitution of Ukraine. However, a mandatory mediation clause that would act as a precondition before litigation, should contribute to quicker and more peaceful settlement of disputes. Adoption of a specialized legislative act will definitely speed up the evolution of alternative dispute resolution in Ukraine.

It is worth noting that mediation is already used broadly in Ukraine. As no regulatory mechanisms have yet been established with regard to mediation on a national level, the issue of quality control for mediation services remains especially important in Ukraine. As the majority of mediators are lawyers, such control is conducted, in one way or another, by various professional organizations, law firms and by mediators themselves. The key qualities that must be acquired by professionals in this area are developed communication skills, diplomacy, ability to conduct legal analysis, and preservation of impartiality by mediators vis-à-vis the parties.

A good example of a successful mediation can be a mediation proceeding, conducted by lawyers of TCM Group Ukraine in a commercial dispute regarding an unpaid delivery of goods. The original debtor was liquidated through a bankruptcy proceeding and its payment obligation was transferred to an affiliated company. However, no assignment agreement was concluded between the creditor, the original debtor and the new debtor. Through a successful mediation proceeding, associates of TCM Group Ukraine have assisted the parties to reach an agreement regarding the payment of the outstanding debt.

Following the mediation, the debt was paid in full and the parties have restored their fruitful business relationship. Notably, chances for the creditor to prevail in a conventional litigation before state courts in this dispute were minimal, as the creditor had no sufficient documentary evidence to support its claim. The debtor has also benefited from the mediation, as it was able to secure important deals with the creditor.

To sum up the above, mediation, which was introduced not so long ago, has become one of the most popular methods of dispute resolution in Ukraine. Its efficiency and broad acceptance by Ukrainian business are evident due to its key advantages, namely, confidentiality, relative cheapness and speed of the process. Based on existing trends, even greater use of mediation in Ukraine is expected in the near future.