EBRD and USAID help introduce mediation as an alternative to the courts
There are few things that businesses dread more than litigation. Even small lawsuits have a way of damaging relationships, tarnishing reputations and eating up enormous amounts of money and time.
And in the throes of the coronavirus pandemic, courts have had to function at lower capacity and most non-essential cases –– most of which are commercial and civil –– have been postponed.
But in countries such as Moldova, where the court process can be unpredictable and slow, coming to a mutually acceptable solution while simultaneously saving time and money is now a reality.
The EBRD, through its Legal Transition Programme (LTP), has implemented a number of projects to establish a robust alternative dispute resolution (ADR) framework and practice in the country.
ADR allows parties to a dispute to settle their differences without the laborious intervention of the courts. However, ensuring that the ADR system works smoothly requires a lot of hard work from country to country.
The ADR system that works best for Serbia may look very different from one that works for Moldova.
This is why EBRD’s LTP works closely with governments to craft the best solution for their context, often with the assistance of international donors.In Moldova, the initiative has been supported by the United Kingdom’s Good Governance Fund (GGF), and more recently by the United States Agency for International Development (USAID). The Project has been implemented in close partnership with the Ministry of Justice and the Mediation Council, and with the assistance of the Centre for Effective Dispute Resolution (CEDR) and the International Development Law Organization IDLO.
The win-win attitude
Consider this: Mr X’s business caught fire last summer. According to him, the fire caused nearly €200,000 worth of damage, as the disruptions caused by the event resulted in further losses. Mr X’s insurance company, however, refused to pay as it claimed that the contractual policy did not cover fire-related damages.
Mr X felt like he had no other option but to sue.
After 10 long months of legal dispute, thousands of euros in court fees and no satisfactory outcome, both parties decided to try something different: they contacted a mediator.
“Mediation is a voluntary and confidential process where the parties, aided by a trained mediator without any powers to make decisions, try to resolve the dispute on their own. The role of the mediator is to communicate with the parties jointly and separately, as needed, and to help them explore options for solutions that are based on their most important interests,” explains Dumitru Lefter, the mediator who worked on the case.
“In this particular case, the policy wording on exclusions was very ambiguous. The parties also had a long-standing relationship so we had to steer the process very cautiously to make sure everyone was ultimately satisfied with the outcome,” Mr Lefter adds.
The ‘verdict’? The case was resolved in just one day, with a deal that served both sides’ interests: Mr X got 70 per cent of what he asked for and a freeze of reduced insurance rates for three years. Together, the parties redrafted new policies to avoid the same mistake in the future.
The deal was cheaper too, with a total of €450 each in fees, compared to the thousands they had already spent and even more that they would have had to spend if they continued with appeals.
“Since parties involved in mediation do not need to resolve the dispute according to a point of law, they may find an ‘out of the box’ solution that suits them better, while also saving a lot of money on court fees,” Mr Lefter concludes.
Better for the people… and the courts
In 2020 alone, there have been about 8,000 commercial cases filed in Moldova. An enormous backlog poses a significant challenge to an already stretched justice system.
“By using mediation as a first line approach in commercial disputes, we alleviate the burden on the court system while preserving business relationships,” says Mr Lefter.
“On average, cases solved through mediation take less than 1/10 of the time and can save 3/4 of the equivalent expense in court fees.”
Increasing the use of mediation is an aspiration for EU countries, as well as for the economies where the EBRD invests.
The EBRD has been helping the government of Moldova to strengthen its legal and institutional framework related to mediation and arbitration since 2013. Since the instrument was launched in 2013, the numbers of businesses turning to ADR solutions in Moldova has increased significantly, from 169 cases of commercial mediation in 2017 to approximately 400 cases in 2019.
With funding from USAID, the Bank is undertaking an extensive reform programme to help the Ministry of Justice, the Mediation Council and country’s mediators implement reforms and introduce mediation as a reliable alternative to the courts.
Part of the efforts include capacity-building activities such as the training of mediators and public awareness campaigns promoting mediation amongst the business community. This has resulted in a high-profile pool of trained mediators that have been deployed nationwide.
The objective now is to assist the government of Moldova with promoting and facilitating the use of commercial mediation on a national scale and improving the framework for arbitration, making alternative ways of dispute resolution the new normal in Moldova.