In comparison to the Western world, business culture in Russia is more often than not one of confrontation and of mutual tests of strength, especially in the construction sector. Hence the important volumes of court decisions carrying the authority of res judicata to settle a dispute, while alternative dispute resolution (ADR) methods such as mediation relying on the parties’ bona fide have been much less used so far.

In this regard, the recent adoption on July 27, 2010 of Federal Laws 193-FZ and 194-FZ improving the legal regime of Mediation (the Mediation Laws) can be seen as a bold and satisfying legislative move to complete the legal framework of ADR in Russia and stimulate the use of these methods (the arbitration legal regime has indeed been settled for long already by Federal Laws of July 7, 1993 and July 24, 2002). These Mediation Laws will come into force on January 1, 2011.

Initiated several years ago by the Chamber of Commerce and Industry of the Russian Federation (CCIRF – http://www.tpprf-arb.ru/en/2010-01-13-20-37-26en/centerabouten) on the basis of the United Nations Commission on International Trade Law (UNCITRAL) 2002 model, the original mediation bill has been revamped earlier this year under the authority of the Russian President Dmitri Medvedev himself, bringing further enhancements (http://wolterskluwerblogs.com/blog/2010/03/19/russian-president%E2%80%99s-bill-draft-law-on-mediation-%E2%80%93-is-a-new-epoch-of-adr-beginning-in-russia/comment-page-1/).

The most critical improvements of the Mediation Laws to the existing state of legislation are the following:

– anything said by a party during the mediation process cannot be used in litigation or arbitration at a later stage. This fundamental principle of mediation is now clearly provided for by the Mediation Laws;

– a framework for mediation proceedings is defined, with inter alia a tight maximum timeframe of 60 days for such proceedings (with certain exceptions);

– in order to insure their independence, neutrality and competence, the Mediation Laws provide for specific qualification requirements for mediators (whilst that kind of formal requirements does not exist yet in jurisdictions such as France). There are no provisions for licensing of mediators but they will have to get affiliated to self-regulated organizations (SROs) to be created.

In addition, the Mediation Laws consolidate the current state of legislation on a number of issues. Mediation can thus be initiated before or after a dispute has been submitted to a court or arbitral tribunal. Further, the settlement agreement reached as a result of the mediation can be confirmed by a court or arbitral tribunal, allowing compulsory execution orders. Failing such confirmation, the settlement agreement is considered as a simple civil contract.

Interestingly, ADR methods were imported to Russia earlier in the construction sector than in most other industries. Indeed, the growing involvement of international lenders in large construction projects has triggered the increasing use of international models of contracts such as FIDIC. Such models being structured to avoid disputes to a maximum largely rely on a panel of ADR methods encompassing mediation, dispute boards and arbitration. While dispute boards have rarely been set up in practice to date, independent experts have occasionally been called as mediators on specific construction projects, fulfilling to a certain extent the role of the Engineer under the FIDIC Books prior to 1995.

Although a clear legal framework is now set for mediation in Russia, there is still a strong need for additional factors and catalysers to make mediation become a common practice in Russian business culture, such as:

– a strong network of qualified mediators to allow successful mediation to take place. It is worth noting that many experienced professionals are already present in the Russian construction sector;

– a lobbying from institutions such as the CCIRF to promote mediation in Russia through a proven track record of successful precedents and statistics demonstrating that mediation brings tremendous added value to dispute resolution, such as rapidity, cost effectiveness, and last but not least a chance to pursue business relations – an attractive point for contractors when employers constitute a scarce commodity as in the current context.

It will be therefore interesting to follow the development of mediation in Russia in the next few years. And as the saying goes, an ideal situation in the field of dispute resolution will be achieved only when litigation itself will be considered as an alternative to mediation. Not necessarily a happy perspective for litigation lawyers – but this is still far from sight in Russia!

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