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Comment

Falko Sellner

The author could not agree more. Mediation allows you to get on with business and to isolate a problem 'amicably' by a Mediation Board; whereas as soon as an issue is subject to the courts, we are officially opponents and the lawyers not only take over but stir the pot. They want to make money out of this: it is their legitimate business. Their primary interest is not an early settlement; to ensure that this (early settlement) does not happen and in order to enhance their business chances, they will give you comfort on even impossible cases and create as hostile as possible atmosphere.

There is one more element why mediation is not yet clearly established.

With the fall of the Iron Curtain and all these attractive new markets in the former Soviet Union, companies investing feel extremely uncomfortable in exposing themselves to permanently changing laws and constitutions etc. Hence, everybody tries to avoid these national jurisdictions. This would be an argument for quick establishment of arbitration in former SU countries, would it not?

However, the main reasons, as I see it, are as follows:

First, there is a uniform reluctance of the former apparatschniks, now Government officials, to expose themselves to anything other than their own sphere. They have been in that system and influenced by politics for decades and it worked well, in their view, even if was not ideal.

Secondly, they do not see the difference between public and private laws as understood in the West. Central and Eastern European Goverrnments are reluctant to let 'somebody' else tell them how to do their job, especially not somebody from the West. They do not see that arbitration will not interfere in their day-to-day business, but deal with questions concerning direct investments for example, which they have chosen to let somebody else do in the first place. Arbitration is not going to tell them how 'high' a room has to be in order to comply with norms, or how experienced a manager needs to be to qualify as General Director, etc.

Thirdly, many have been ill advised (on their way to adapt the acquis communitaire) by expensive consultants. (I could name them and actually do that at every Conference in Eastern Europe where I am invited to talk.) They wrote reports which the locals do not appreciate, but the funding agency does. This, in my view, is the worst part of it, because they have simply lost trust in Western bodies by receiving a product that they never ordered and have to pay for it. This is what they associate with Western arbitration, thanks to some UK-based and ridiculously expensive consultants. Sometimes it's a nightmare.

The way around this is to find out who it is they do trust to an extent and to explain that investment is dependent on independent 'judges'. They could chose who and, before a matter is in fact referred to arbitration, we establish a mediation procedure, where we sit down and try to solve it together. Only in the unlikely event that we cannot solve it, arbitration kicks in. In almost all countries where I am active (Moldova, Ukraine, Romania, Russia, Kazakhstan, Kyrgistan, Azerbaijan, etc the Swedes are highly regarded and the English are out! Normal association with UK: expensive, biased and unable to understand local circumstances).

Basically what our friends forgot to do is to look at institutions, to look whether all these famous Privatisation models could actually fit into and work in the local context etc. The best example is Rail Track trying to privatise rail networks in Estonia. A massive failure. Or the Power Generator in India, or Severn Trent trying to establish a country strategy for the water sector in Ukraine, forgetting that there is no OFWAT in Ukraine, and no legal framework for anything like it. But they, the local Governments are paying for something they cannot use, did not want and are not going to implement. There are truck loads of reports that are not worth the paper they are written on.

We try to incorporate an incentive system for the mediators to solve matter quickly and efficiently: (1) they get a lump sum (if possible), (2) a success fee if the matter is solved (indication either by time, or by declaration of parties to comply with finding / solution / decision).