2. Implementation of EC Directive 52/2008 in Germany Workshop on Mediation for Business Operators Dr. Antje Baumann, LL.M. (Berkeley), OrtChamber of Commerce and Industry of Serbia, Beograd Datum4 December 2012

3. Implementation of EC Directive 52/2008 in Germany Overview 01The German Mediation Act 02Mediation in Business Context – When, why and how?

4. Implementation of EC Directive 52/2008 in Germany 01 The German Mediation Act  In July 2012, the German legislator implemented the EC Directive in the Act to Promote Mediation and Other Methods of Out-of-court Dispute Resolution.  Core elements are (i) the amendment of the procedural codes and (ii) the Mediation Act, consisting of 9 articles on inter alia basic principles, procedural rules and minimum duties of arbitrators.  Mediation Act does not only refer to cross- border but also to domestic mediation.  Amended provisions in procedural codes are also open to other methods of dispute resolution such as ombudsman, adjudication, mini-trial or early neutral evaluation.

5. Implementation of EC Directive 52/2008 in Germany 01 The German Mediation Act Art. 1 § 1 Definition: (1)Mediation is a confidential and structured proceeding in which the parties, voluntarily and on their own responsibility, seek an amicable settlement of their dispute with the assistance of one or several mediators. (2)The mediator is an independent and neutral person leading the parties through mediation without authority to impose a decision. General aim of mediation:  seek a future-oriented solution to the dispute and  enable value-added cooperative approaches.

6. Implementation of EC Directive 52/2008 in Germany 01 The German Mediation Act Art. 1 § 2 Procedure, Duties of mediator:  Mediator is chosen by the parties.  Basic duty of mediator to adequately inform the parties and ensure that they are aware of the principles and the course of the mediation (sec. 2 par. 2 Mediation Act).  The mediator is equally committed to all parties. His major tasks are to promote communication between the parties and ensure the adequate and fair participation of each party (sec. 2 par. 3 MediationsG).  The parties are at no time obliged to continue the process (sec. 2 par. 5 sentence 1 MediationsG).  If the parties intend to enter into a settlement agreement, the MediationsG requires that the mediator also ensure that such agreement is reached based on the parties’ full understanding of the circumstances and content of the agreement (sec. 2 par. 6 MediationsG).

7. Implementation of EC Directive 52/2008 in Germany 01 The German Mediation Act Art. 1 § 3 Duty to disclose  Mediator must disclose to the parties all facts that may impair its impartiality and independance.  A person cannot act as mediator if he or she or if any other person from his or her firm has acted for one of the parties to the dispute. Neither the mediator nor his or her firm may act during or after the mediation for one of the parties. Art. 1 § 4 Confidentiality :  Strict confidentiality obligations imposed on the mediator and on those involved in the administration of the case.  Right of refusal to testify in civil court proceedings.

8. Implementation of EC Directive 52/2008 in Germany 01 The German Mediation Act Art. 1 § 5 Certified Mediator  It is in the mediator’s own responsibility to ensure by way of suitable training that he or she has the necessary theoretical knowledge and practical experience.  In any case, the title ‘certified mediator’ (zertifizierter Mediator) may be used only by persons who have completed specific training pursuant to the rules set forth by the German Department of Justice; continuing education is mandatory (Art. 1 Sec. 5 and Sec. 6 MediationsG).

9. Implementation of EC Directive 52/2008 in Germany 01 The German Mediation Act Major controversial issue in Germany: Whether or not to include a separate concept of in-trial mediation in the Mediation Act? Three types of mediation:  out-of-court mediation,  the out-of-court mediation upon proposal by the court and  mediation in judicial conciliatory proceedings. Difference as to  how mediation proceedings are commenced and  who the mediator is.

10. Implementation of EC Directive 52/2008 in Germany 01 The German Mediation Act What is really new?  For the first time, financial incentives are being created to encourage mediation.  The individual German states (Bundesländer) are granted authority to create these cost incentives.  The states can reduce or even waive court fees, if matters are settled through mediation or other means of ADR.

11. Implementation of EC Directive 52/2008 in Germany 01 The German Mediation Act What is really new?

12. Implementation of EC Directive 52/2008 in Germany 01 The German Mediation Act What is really new?  Sec. 253 para. 3 no. 1 German Code of Civil Procedure Statement of Claim shall contain a statement as to whether a mediation has been conducted before the initation of legal proceedings or whether there are reasons why mediation should not be conducted. Is this provision problematic?  Confidentiality?  Factual coercion towards mediation?

13. Implementation of EC Directive 52/2008 in Germany 01 The German Mediation Act What is not explicitly covered by the Mediation Act?  Section on the suspension of the statute of limitations  Covered by prior law (Sec. 203 German Civil Code): Statute of limitations is tolled as long as serious negotiations pertaining to the dispute continue.  However: significant uncertainty may arise regarding the exact time frame of the suspension of the statute of limitations.  In order to avoid any such uncertainties, the parties should make additional arrangements or refer e.g. to the DIS Mediation Rules that contain provisions specifying the commencement and termination of suspension.

14. Implementation of EC Directive 52/2008 in Germany 01 The German Mediation Act What is not explicitly covered by the Mediation Act? – Enforcement of Mediated Agreements  Although no direct way to execute mediated settlements, law provides for various mechanism to ensure enforceability:  Enforcement by court  Claims for specific performance  Settlement in court or concluded before a mediator acting as conciliatory body; § 794 para. 1 no. 1 Code of Civil Procedure  Settlement concluded by counsels: § 796a, Code of Civil Procedure („Anwaltsvergleich“)  Parties represented by attorneys  Court decision on enforcement (§ 796 b Code of Civil Procedure)  Notarized document, §§ 794 para. 1 no. 5, 796c Code of Civil Procedure  Judgement by confession, §§ 704 ss. Code of Civil Procedure

15. Implementation of EC Directive 52/2008 in Germany 01 The German Mediation Act What is not explicitly covered by the Mediation Act? – Enforcement of Mediated Agreements → Enforceable within Europe according to the Council Regulation (EC) No. 44/2001 on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters  Arbitration Award on Agreed Terms  Appoint the Mediator as Arbitrator  (P) Requirement of dispute  Only possible in proceedings starting out as arbitrations → Enforceable internationally according to the New York Convention

16. Implementation of EC Directive 52/2008 in Germany 02 Mediation in Business Context Case Study Haidlmair GmbH, Austria MEA-Group, Germany MEA AG, France holding company sale of special tools 500.000 EUR lawsuit 20 Mio EUR

17. Implementation of EC Directive 52/2008 in Germany 02 Mediation in Business Context – When, why and how? What are the relevant criteria for business operators when solving commercial disputes?  Private autonomy  Costs  Rapidity of dispute resolution  Interest oriented result

18. Implementation of EC Directive 52/2008 in Germany 02 Mediation in Business Context – When, why and how? Which factors must management take into account ? Corporate management must decide on appropriate dispute resolution mechanism. → entrepreneurial decision. Choice of dispute resolution method governed by business judgment rule (Sec. 93 par. 1 German Stock Corporations Akt). Relevant factors:  expected outcome,  certainty and predictability,  time and cost efficiency and  collateral effects such as publicity, effect on relationship of the parties. Involvement of several corporate department (legal, finance, commercial, operative units) may be necessary.

19. Implementation of EC Directive 52/2008 in Germany 02 How ?- Steps in the Mediation Process Steps in the Mediation Process Phase 1Begins when the mediator opens negotiations by explaining the salient points of the procedure. Mediation rules are discussed and documented. Phase 2Here the parties present their perspectives on the conflict from a summary of which the mediator develops joint agreement on the items to be taken up. Phase 3Next rigid positions are left behind and the concrete interests behind them are uncovered. Bringing the parties‘ motives into the open intensifies mutual understanding. Phase 4Comprises development of a solution. The parties jointly work out and evaluate different possible solutions. The objective is to find a win-win solution that all parties can benefit from. Phase 5After agreement about a mutually acceptable solution mediation is concluded in Phase 5 by the precise definition of that agreement and, where relevant, its legal formulation.

20. Implementation of EC Directive 52/2008 in Germany 02 Mediation in business context – When, why and how Advantages to Mediation:  A solution pointing to the future where both sides win  Appropriate consideration of your own views, interests and objectives  Active protection of your company against losing its image  Sparing resources  Reducing your costs  Security in planning  Keeping control of negotiations and their results  Considerable savings in time spent  Continuation of personal and business relations  Opening up creative options  Achieving commercially meaningful results  Maintenance of confidentiality by all parties

21. Implementation of EC Directive 52/2008 in Germany Thank you for your attention. CORPORATE COMMERCIAL COMPETITION Corinius LLP Hohe Bleichen 11 20354 Hamburg T +49 (0)40 350 194-0 F +49 (0)40 350 194-100 office@corinius.com www.corinius.com