The New Italian Mediation Law: Experimenting with a “Soft” Approach to Mandatory Mediation

By Giulio Zanolla, LL.M., Esq., CPR Speaks Contributor

GiulioMediation was first introduced as a prerequisite to litigation in the Italian legal system in 2011, when the government issued a decree to implement the EU Mediation Directive of 2008. This legislative measure sparked a mix of enthusiastic reactions and harsh criticisms that culminated with lawyer strikes against its implementation. In 2012, the mandatory provision of the mediation regulation was declared unconstitutional, but the Constitutional Court’s decision was based on the government’s lack of legislative legitimacy to impose the mandatory requirement, rather than on the illegitimacy of the mandatory requirement itself.

The heated debate on the mediation regulation continued inside and outside the rooms of policymakers and led the Italian Parliament to enact a law in 2013 re-introducing mandatory mediation for certain civil and commercial actions in a mitigated form. The new mediation law, which is not affected by the constitutionality issue of the previous regulation, aims to address the concerns brought by a sector of the legal community claiming that the prerequisite of participating in mediation prior to bringing a legal action unjustly burdens and restricts disputants’ rights to access to justice. Unlike the previous regulation, the new Italian mediation law mandates that parties in certain civil and commercial disputes attend only an initial information session with the mediator; it does not require parties to participate in an actual mediation process as a prerequisite to litigation. The parties remain free to opt out of the mediation before the actual process starts and without any consequence for refraining to continue in mediation.

Through the initial information session, the parties have an opportunity to learn about the mediation process and make an informed decision regarding whether to attempt an out-ofcourt resolution through mediation or to initiate litigation. The information session is free of charge, and parties who refuse to attend the session are subject to sanctions in the subsequent trial. Only if all the parties agree to proceed with mediation will the mediator formally commence the procedure and begin to facilitate discussions of the disputed issues. With the new Italian mediation law, the parties’ participation in the actual mediation process is fully voluntary. The parties’ only mandatory requirement is to educate themselves about the option of mediation through the initial information session.

Recent statistical data available from the Ministry of Justice regarding the first six months of 2014 demonstrates that more than 22 percent of all disputes for which the initial information meeting is mandatory and more than 50 percent of disputes mediated by deliberate initiative of the parties are resolved without recourse to court litigation. In a little over a year since enactment of the law, the benefits of the new law are tangible, not only for those parties who resolved their disputes without litigation, but also—and especially—for the overwhelmed Italian judicial system as a whole, and ultimately for all taxpayers.

Most important, each of the numerous information sessions and mediations that took place but did not result in settlement created a concrete opportunity for parties and attorneys to familiarize themselves with the mediation process and educate users about mediation, thus contributing to the development of the culture of mediation throughout the country.

If we believe that the principle of voluntariness is of fundamental value to the mediation process and if we agree that the need for user education is a critical element in the development of a culture of mediation, the Italian mediation law could represent a balanced solution to the question of how to promote the use of mediation through legislation. The next few years’ statistics will reveal whether the number of parties who choose to continue in mediation past the initial information session, and the concomitant overall settlement percentage, will grow thanks to an increased level of awareness and sophistication among mediation users.

Giulio Zanolla is an attorney, a mediator, an ADR instructor, and the author of the blog The Case for Mediation: An ADR Blog by Giulio Zanolla. This article was first published in the The Weinstein JAMS International Fellow Newsletter, Fall 2015. Mr. Zanolla can be reached at giulio@zanollamediation.com.

2016 Copyright of Giulio Zanolla, Esq. – All Rights Reserved

ADR Around the World: Turkey

This article is the fourth in a four-part CPR summer series that examines ADR in a number of rapidly changing locales around the world. If you missed it, you can find the first post, about Colombia, here, the second about Mexico here, and the third about Taiwan, here.

Turkey: Political Conflict Makes ADR an Essential Tool

By Boaz Cohon and Ngutjiua Hijarunguru, CPR Student Interns

On June 3rd, 2015 the World Justice Project released an updated version of their Rule of Law Index.  In this iteration, the Rule of Law Index dropped Turkey from 59th to 80th out of the 102 countries surveyed.  This fall no doubt was impacted by recent developments involving interference by Turkey’s executive branch in the judiciary.

The Turkish economy has, to a lesser extent, also struggled.  Notwithstanding that Turkey attracted over $12.5 billion dollars of Foreign Direct investment (FDI) in 2014, its gross domestic product (GDP) growth rate was just 2.9% for that year, down from 9.2% in 2010.

Currently litigation that relies on Turkey’s judicial system is the primary mode of commercial dispute resolution in Turkey, but complex commercial litigation can take over six years to complete.  The primacy of litigation is due in part to technological innovations such as electronic proceedings and increased courthouse construction that have enhanced the effectiveness of the Turkish court system, but is mostly due to the fact that Turkish businessmen are still quite reluctant to initiate arbitral proceedings at distant venues that utilize unfamiliar rules and procedures.

That being said, the legal framework exists in Turkey for both foreign and domestic companies looking to avoid a legal system mired in political conflict by using impartial, independent forms of ADR to resolve commercial disputes.  The primary law governing international arbitral proceedings that could be used by multinational enterprises (MNEs) is the Turkish International Arbitration Law (IAL), which is based on the UNCITRAL Model Law and the Swiss Federal Statute on Private International Law  Domestic disputes are regulated under the Turkish Civil Procedure Law, which also draws heavily from the UNCITRAL Model Law.

In 2012 Turkey added a modern mediation law—the Law on Mediation for Civil Disputes—to its legal code.  This law, which was opposed by the Istanbul Bar Association, took to heart the most cherished principles of mediation, such as insuring equal treatment of both parties by the mediator, confidentiality, and a duty to inform parties about the process of mediation.  Although most disputes resolved thus far have been employment related, commercial disputes can certainly use mediation as a dispute resolution strategy as well.

Organizations like the Istanbul Chamber of Commerce and the Turkish Union of Chambers and Commodity Exchanges (TOBB) generally administer arbitrations, and a newly established institution, the Istanbul Arbitration Centre, was founded by the government effective January 1, 2015, to facilitate the settlement of domestic and international disputes through arbitration.

In sum, ADR processes in Turkey are slowly advancing toward becoming common practice, making Turkey both a potentially promising ADR marketplace and an ADR destination to watch.  It may well be that government interventions in the judicial system will push the business community in Turkey towards more thoroughly utilizing ADR options at their disposal.

The CPR Institute would like to thank Boaz Cohon and Ngutjiua Hijarunguru for this contribution. Boaz, a summer public policy/legal intern at CPR, is majoring in Political Science and History at Vanderbilt. Ngutjiua is a LLM graduate from the Center of the Study of Dispute Resolution at the University of Missouri-Columbia.

ADR Around the World: Taiwan

This article is the third in a four-part CPR summer series that examines ADR in a number of rapidly changing locales around the world. If you missed it, you can find the first post, about Colombia, here, and the second about Mexico here.

ADR in Taiwan: Strong Foundations and a Chance to Build

By Gideon Hanft, CPR Research Assistant and Ngutjiua Hijarunguru, CPR Student Intern

In 2013, research institute Business Environment Risk Intelligence S.A. (BERI) ranked Taiwan as the fourth-best investment environment globally. Taiwan’s largest trading partners are the world’s three largest economies, Japan, China and the United States, and, as a leader in technology production, Taiwan has a dynamic and expanding role in the global economy. Taiwan’s economic growth has corresponded with a growth in commercial litigation, but Taiwan’s government and cultural legacy has also built a strong ADR foundation and offers opportunities for further expansion.

Confucianism has historically cultivated an “anti-lawsuit” attitude, and this heritage has served as “fertile soil for the development of mediation.” However, Taiwan’s strong history of societally promoted mediation has not prevented a rapid expansion of civil litigation. Professor Yun-Hsien Diana Lin of National Tsing Hua University, Taiwan ascribes this development to the “increase in judicial staff…, the progress of economic development and the growing prevalence of education among Taiwanese people.” Despite this expansion of litigation, Taiwan’s government has continued to promote mediation as an alternative through two main avenues.

First, Taiwan has legislation that creates mandatory mediation through Article 403 of Taiwan’s Code of Civil Practice. As Salvatore Casabona, ‎Associate Professor of Comparative Law & International Trade Law at University of Palermo, describes, “Originally provided only for small value claims, the range of civil dispute subjected to mandatory mediation were gradually broadened, including a variety of cases from neighbourhood and real property controversies to traffic accident and medical treatment ones.” This type of mediation is conducted in the courtroom by mediators appointed by the presiding judge. A settlement is legally enforced by the judge, but if mediation does not result in settlement litigation follows. Casabona’s analysis suggests Taiwanese litigants have been resistant to this mandatory mediation; for example, less than 1% of debt discharge cases that provoked mandatory mediation have seen mediation sustained. Nevertheless, the number of successfully sustained mediations has risen over time and this act’s expansion points to recognition of the value of ADR procedures.

The second type of mediation in Taiwan is not conducted through the court but, rather, similarly to mediations abroad, is conducted by outside institutions under mutually agreed upon procedures. For example, mediation under the Chinese Arbitration Association, Tapei (CAA) is regulated under the institution’s rules, passed October 2008, which parties may choose to use unless they mutually agree to other rules. Article 45 of Taiwan’s arbitration law specifies that an arbitrator can propose and accept a mediated settlement with legal enforceability.

Beyond these two main avenues, Taiwan has an additional type of out of court mediation that is more unique. This is called Town Mediation, and many see it as an outgrowth of the Confucian tradition. Regulated by the Town Mediation Act, Town Mediation was first passed in 1955 and this local process has been amended frequently since. Townships and administrative divisions maintain mediation committees of seven to fifteen to mediate civil disputes and minor criminal cases. This act specifies “Mediators are appointed by the mayor of township and county–administered city ‘from the men of eminent fairness, within the administrative district, who have legal knowledge or other expertise and good reputation.’” Mediators are often local elders and are not always lawyers.  In recent years, amendments to the Town Mediation Act have increased the role of local courts in overseeing the committees and passed rules to reduce the appearance of bias.

Town mediation retains a distinctly local identity, with traditional mores playing a vital role in the local mediators’ attempts to resolve disputes. As Yun-Hsien Diana Lin, Associate Professor at the Institute of Law for Science & Technology, National Tsing Hua University, Taiwan, writes, “Fairness must be judged in the context of…social relations instead of according to strict justice under the law.” Unlike court mediation, town mediation can only be entered into at the request of both parties, decisions are non-binding until certified by a local court, and the process is free of charge to both parties. Town mediation’s popularity has grown in recent years, especially in the context of minor criminal cases. The number of approved town mediation cases exceeded the number of sustained in-court mediations in 2010 and 96 percent of town mediation settlements brought before courts were approved in that year.

In addition to mediation, arbitration has become a more common method of dispute resolution in Taiwan. The leading arbitration institution is the CAA, founded in 1955. The CAA’s main services are arbitration and mediation conducted in Chinese and English. The CAA specializes in civil, commercial, international banking, construction, distribution, financial/investment, maritime, securities and transportation disputes. The arbitration act and rules governing CAA proceedings are the Republic of China Arbitration Act of 2002, modeled after the UNCITRAL Model Law of 1985, and the CAA Arbitration Rules.

While most arbitral proceeding in Taiwan are conducted under the auspices of the CAA, specialized bodies performing arbitrations include the Taiwan Construction Arbitration Association, the Labour Dispute Arbitration Association and the Chinese Engineering Arbitration Association.

Despite the expanded use of both town and court mediation, it is hard to say that they have kept up with the expansion of civil litigation. In 2008, the number of civil disputes filed with the Taiwanese District Court increased to 2.81 million from 1.37 million in 1998. While this litigious trend may be a concern, it also means there will likely be a greater market for ADR providers and educators in years to come.

In all, the ADR environment in Taiwan is promising. The growth of civil litigation has been met with governmental expansion of mandatory mediation, suggesting that Taiwan’s leaders are eager for an expansion of ADR.  Town Mediation offers an interesting example of local receptiveness to ADR procedures, and judicial willingness to certify proceedings shows a recognition by judges that outside processes can effectively resolve disputes. With these strong foundations, there is room to build an ever stronger ADR culture. As Taiwan’s growing economy and increasingly strong economic ties have made it one of most important and dynamic markets in the world, expanding ADR there could lead to the more effective resolution of disputes in the rest of Asia and beyond.

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Gideon Hanft, a research assistant at CPR, is entering his first year at Columbia Law School.
Ngutjiua Hijarunguru is a LLM graduate from the Center of the Study of Dispute Resolution at the University of Missouri-Columbia.

ADR Around the World: Mexico

This article is the second in a four-part CPR summer series that examines the state of dispute resolution in a number of rapidly changing locales around the world. 

Mexico: A Globally Integrated Economy Moving Towards Effective Commercial Dispute Resolution

By Boaz Cohon, CPR Student Intern

Notwithstanding meager economic growth in recent years, when looking at how Mexico is situated within the global economy it is clear why the country is slated to become the 8th largest economy in the world by 2050. Mexico is fortuitously located adjacent to the world’s largest economy in the United States, which its companies have relatively unfettered access to via the North American Free Trade Agreement (NAFTA). This proximity has made Mexico “an important node in the world trading system” and situated it well in a multitude of global value chains (GVCs). Furthermore, President Enrique Peña Nieto’s financial reforms have broken up telecom oligopolies and liberalized the energy sector, creating even more incentives for multinational enterprises (MNEs) to invest.

One strategy for insuring Mexico reaches its burgeoning economic potential is to improve the efficacy of mechanisms for resolving commercial disputes. Currently, commercial dispute resolution in Mexico offers a mix of problems and potential, with some encouraging, recent improvements but options that are still lacking by international standards. Absent these effective methods, Mexico can still be a challenging place to do business for both domestic firms and MNEs.

Procedural changes to commercial litigation have—auspiciously—already been passed and begun to be implemented. In 2011 the Mexican legislature passed a series of well-received reforms including an expedited process with oral hearings for smaller monetary claims, a reduction in procedural timeframes, and a decrease in the number of appeals (writs of amparo) a disputing party can make.

If implemented, these reforms, coupled with the much larger judicial reform of 2008, would undoubtedly have a positive impact on Mexico’s rule of law and judiciary. The World Justice Project ranked Mexico 79th out of 102 countries in the most recent iteration of its Rule of Law Index, and citizens continue to be skeptical of the judicial system as a whole with 54% of respondents in a recent survey saying that the court system has a bad influence on the Mexican state.

This apparent lack of trust in litigation, even in the face of reforms, has likely contributed to a rapid rise of arbitration as the go-to mechanism for resolving commercial disputes. Mexico has adopted the UNCITRAL model law for both domestic and international arbitrations with only minor modifications, and is a signatory of the New York Convention (1958). Over time the judiciary has also become increasingly accepting of arbitration and has remained appropriately aloof from outcomes, not intervening in decisions and enforcing awards unless a clear procedural issue has been demonstrated.

Interestingly, the same upbeat tone cannot be taken when describing other forms of alternative dispute resolution (ADR) in Mexico in the context of resolving commercial disputes. Even as the business population has warmly taken to arbitration, it has, at least comparatively speaking, shunned mediation — despite its cropping up in many other areas of disagreement, such as medical malpractice suits, juvenile justice cases, and labor dispute resolution. In commercial disputes a culture of Pyrrhic victory and notions of the need to ‘win’ legal battles may be obstructing widespread acceptance of mediation in the business community.

This has remained the case even in the face of powerful drivers of change. In 2001 the American Bar Association (ABA) and Freedom House in conjunction with the United States Agency for International Development in Mexico (USAID/Mexico) pursued a program establishing 28 mediation centers. The program increased use, but only to a limited degree.  A 2008 constitutional amendment that set out principles and procedures of mediation, obligations of participants and practitioners, and created Alternative Justice Centers across the country likewise did not immediately incentivize significantly more disputants to undertake mediation to resolve commercial disputes.

Perhaps change needs to come from inside the ADR community in Mexico, and, if so, two organizations look primed to help realize such a cultural shift. The Mediation and Arbitration Center of the National Chamber of Commerce of Mexico City (CANACO) has a broad focus including arbitration and mediation and is the most well-known mediation provider in the country, and The Arbitration Center of Mexico (CAM) primarily focuses on arbitration but is looking to expand into mediation.

In sum, as the complex economic machine that is Mexico continues to gain momentum, it would no doubt benefit from lubricating the gears with a diverse array of effective dispute resolution tools for domestic and international firms.

The CPR Institute would like to thank Boaz Cohon for this contribution. Boaz, a summer public policy/legal intern at CPR, is majoring in Political Science and History at Vanderbilt.