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MEDIATION, AS A MEANS FOR SETTLING DISPUTES. DOES IT WORK IN UKRAINE?
Mediation is a process where a neutral third party assists disputing parties in resolving conflict through the use of specialized communication and negotiation techniques. First of all, it is necessary to understand that general terms, methods and world experience do not always use on the territory of Ukraine.
In western countries, mediation is more effective and is used more often than in Ukraine, for the following reasons:
- In many countries mediation is legally regulated;
- Dispute settlement through the mediation requires less time compared to settlement of the dispute in the court;
- It is much cheaper to involve mediator than to pay the court costs and to pay for a lawyer;
- Developed business culture in western companies, allows two parties to the conflict to move in one direction.
Taken into consideration the above circumstances, we are often requested by foreign companies to be a mediator in resolving a dispute that arose with their Ukrainian counterpart. It should be clearly understood, that in Ukraine this is not a practice regulated by legislation, and the principles of conducting business in Ukraine are differ significantly from those set in western countries.
The foreign company’s owners have quite another vision of doing business in Ukraine. For example, most recently we had a client – company from Italy, which had a dispute with Ukrainian counterparty. The dispute arose out of the improper performance of the contract by the Ukrainian party. The Italian company transferred about $ 700,000 of prepayment for future deliveries of the goods, and was confident that the Ukrainian company will necessarily deliver the goods or return the money. Their confidence was based on the customs and experience of conducting business in Italy, but not in Ukraine at all.
THE FIRST CONCLUSION “CONDUCT OF BUSINESS IN UKRAINE IS RATHER DIFFERENT FROM CONDUCT OF BUSINESS IN MOST COUNTRIES”
Immediately after the call of the Italian company, we checked its Ukrainian counterparty, which had not carried out their obligations for more than a month. And we were not surprised at all when this company turned out to be like a white sheet of paper: it was registered two weeks before the conclusion of the contract, without any tangible assets, with one employee who is a director and also the owner of this company. The Italian company began to understand that something was going wrong.
After further analysis of the counterparty, we checked its owner, and discovered about 10 other legal entities that were associated with him. Our lawyers immediately checked these legal entities and realized that they do not often fulfill their obligations because the court register was overflowed with decisions that they have to recover money due to default on obligations. Accounts and property in these ten companies were arrested in various executive proceedings. And our “Italian friends” came under the spell of the expensive office of Ukrainian company and stories about the major contracts of our compatriot.
THE SECOND CONCLUSION “YOUR COUNTERPARTY HAS TO BE CAREFULLY CHECKED BEFORE SIGNING A CONTRACT, BECAUSE SOMETIMES “DECENCY” IS VISIBLE WITH THE NAKED EYE”
So, we have a quite logical question: is there any sense in carrying out mediation in its general sense? My personal opinion is no! This process must take place in the mutual desire of the two parties to solve the problem situation. But in the realities of Ukrainian business, the situation when one party intends to resolve the conflict, and the other party is disinterested in it – occur in one of two cases.
So, on the basis of case between Italian and Ukrainian firms, mediation could be held at the stage of signing the contract, because at that time, both parties had the goal to sign a contract.
When the client came to us, of course he was very interested in resolving the problem, because his money was in the account of the counterparty, who was in no haste to return this money, or maybe not was about to do it at all!
THE THIRD CONCLUSION “IT IS ALWAYS POSSIBLE TO CHOOSE THE MOST SUITABLE TIME FOR CONVERSATIONS”
As for Italian clients, conflict had been exhausted, but in order to create the conditions for the settlement of this dispute, in other words to force the owner of Ukrainian company to sit down at the negotiating table, it took a considerable time and a lot of efforts. But main idea is that it is impossible to negotiate, if the other party does not need it. And the only way to create such necessity is to make problems for the other party.
Unfortunately, “mediation” in Ukraine is just a beautiful name for the negotiations, because it is not regulated by legislation and does not carry new methods of solving the problem. I hope that in nearest future everything will change.