What do you do if you run a small business in Southeast Europe and a client does not pay you for goods or services delivered?
Well, until about three years ago you only had two legal options—either you took your debtor to a local court and braced yourself for a long wait, or you simply wrote off the debt if you did not like waiting.
Thanks to IFC’s Alternative Dispute Resolution Program, which was launched in 2003, small businesses in Southeast Europe now have a third option: mediation centers, which offer a quicker, cheaper alternative for dispute resolution with mutually agreeable outcomes for both parties.
What is Mediation?
Mediation is a process whereby a neutral third party assists in an effort to reach a mutually acceptable solution to a dispute. The mediator uses a variety of skills and techniques to help the parties reach an agreement, but has no power to make a decision. Because the agreement is negotiated, it can often be more creative than a judgment imposed by the court, allowing a greater probability of a “win-win” resolution.
The Alternative Dispute Resolution Program, which includes several methods other than lawsuits to resolve disputes, focuses on mediation.
A Solution That Works
In the past two years over 1,600 cases have been successfully mediated, freeing up about €12 million in commercial funds. The pilot projects, which were set up during 2004-2005, show an average success rate of 81 percent. The speed of the process is one of the main advantages of mediation.
Key Results from the Mediation Pilot Projects |
|  |
| Cases mediated | 1,920 |
| Successful mediations | 1,561 |
| Success rate | 81% |
Average time in court
(source: Doing Business 2006 report) | 466 days |
| Average time in mediation | 2.4 hours |
| |
IFC’s Role and Impact
Since the program’s launch, IFC has worked to develop two mediation models suited to the legal framework and the court administration processes of specific countries. In Bosnia and Herzegovina and in Macedonia, IFC helped create a “court referred model,” which means that independent mediation centers are allied to, but separate from, the courts. In Serbia, mediation takes place within the court itself
—this arrangement is the “court annexed model.”
IFC is working closely with justice ministries, state institutions, courts, associations, chambers of commerce, bar associations, developmental agencies, international organizations, and individuals. Each of these stakeholder groups has strongly supported IFC’s efforts to introduce mediation. Some 46 presentations have been held to date, with attendance by over 1,400 participants. More than 500 individuals have been trained, and IFC has also helped to establish a law on mediation in Bosnia and Herzegovina, Macedonia, and Serbia.
“We are very keen to promote this efficient way of resolving business disputes in Southeast Europe. This is an important part of our strategy of promoting a vibrant private sector and of improving the overall business climate in the countries through both investment and technical assistance activities,” remarked Edward Nassim, IFC’s incoming Vice President for Europe, Africa, and the Middle East.
IFC intends to: |
- Support improvement of the legal and regulatory framework to enable a broad introduction of mediation,
- Develop a network of independent and sustainable civil society institutions that can drive the development of mediation as a complement to the formal judicial system,
- Develop a cadre of world-class mediators,
- Establish a regional network of a 10 mediation centers, and
- Facilitate a comprehensive awareness campaign in Albania, Bosnia and Herzegovina, Macedonia, Montenegro, and Serbia.
|
Success Stories
A businessman who attended an IFC focus group discussion told how four disputes involving his companies were resolved in just three hours through mediation: “The mediation process resulted in nearly $1.88 million being freed up for my business - in my case, this quick turnaround time … literally translated into millions of dollars, which I am now able to reinvest in my business.”
Another successful mediation involved a commercial dispute that had been stuck in court litigation for over three years. Although the amount in question was substantial, it was the costs of the procedure and its long duration that threatened to disrupt permanently any prospect of future cooperation between the two companies.
According to Miroslav Jaslar, manager of Autoservis Centar, one of the parties that benefited from this mediation, “In addition to court fees and litigation expenses … we previously suffered losses as a result of constant engagement of our employees in collecting evidence to substantiate our claims. Mediation has radically shortened the procedure and saved us a lot of money.”
By developing courts that utilize mediation, particularly in the city centers where most commercial activity is taking place, this program is expected to spark the establishment of mediation throughout the region. For businesses this means quicker access to blocked capital, fewer wasted resources, and a speedier return to business as usual.
For additional information contact:
Thoko Moyo
Communications Officer
Tel: (202) 458-8517
E-mail: TMoyo@ifc.org
or
Ajla Dizdarevic Mostarac
Communications Analyst
Tel: (387 33) 251-555
E-mail: adizdarevic@ifc.org
