Cross Border ADR: Opportunities and Challenges
Gasim Shaliyev
Director of Baku Mediation Organization No. 15, mediator
Baku, Azerbaijan, 26th November 2024
Dear gentlemen and kind ladies,
First of all, I would like to deeply thank You for taking the time to join us today. It is also an honor for me to be here with You.
It is a fact that throughout the history, the people of Azerbaijan and Pakistan have shared mutual respect and affection. Over 100 years ago, our philanthropist businessman, Haji Zeynalabdin Taghiyev, sent 300.000 vaccine doses to Pakistan, during a major pandemic that spread among the local population. He played an important role in helping Pakistan to prevent that large-scale disease. If I am not mistaken, this fact is now reflected in Pakistan’s history books.
It is no secret that in 1991, Pakistan was one of the first countries to recognize Azerbaijan's independence. To this day, the deep historical friendship between our two nations continues at a high level.
In this regard, it is no surprise that relations between mediators from Pakistan and Azerbaijan will also develop and lead to increased collaboration in ADR and knowledge sharing.
Not long ago, when we met with the delegation led by Mr. Sanaullah Aman in our office located in the Old City of Baku, we discussed future plans. They included organizing seminars, sharing experiences, conducting joint mediation sessions for commercial disputes, and coordinating efforts in international trade disputes.
Even though a short time has passed and both sides have busy schedules, it is truly a pleasure that we are now here together in this webinar to discuss ADR.
I want to start with my final point: ADR is the demand of the present time. The use of ADR is a historical necessity for ensuring that people receive quality justice services.
From the earliest days of humanity, safety has been important for society to function well. Regardless of one's status, feeling safe in a society is key to its development. A person living in a safe environment can plan for the future, create new things, and work more productively for these goals. In the history of human development, whether in tribal or modern societies, safety has always been a core element.
When we talk about safety in society, it means protection from external threats, such as enemy attacks, and from unfair treatment within the society itself. In the past, security was provided by tribal leaders and strong representatives. But since the rise of nation-states, this role has shifted to special agencies and institutions. Societies have always tried to find solutions to internal conflicts by creating mechanisms that fit the needs of their time.
In the past, these solutions were often provided by government institutions representing state power.
However, starting in the 20th century, things began to change dramatically. The global population has grown rapidly, and technology, especially the internet, has connected the world. People now communicate more easily across borders, travel more, create new business relationships, and form international families. This has led to an increase in conflicts.
In this regard, resolving disputes through traditional court systems has become less practical. Therefore, the use of alternative dispute resolution methods has become a necessity.
Let me share a real-life case I worked on as a mediator. A woman from Azerbaijan (A) and a man from Russia (B) were married. They had two children: a son in the United States and a daughter in the UAE. Although they lived in Baku, they owned property in four countries: Azerbaijan, Turkey, the UAE, and Austria. Their children attended private schools in Azerbaijan. The husband had no official income in Azerbaijan, but his earnings came from dividends of companies registered in China, Switzerland, and the UAE.
After their divorce, there would be property disputes across multiple countries. How many courts or lawyers would be needed to resolve these issues? How can such a complicated family dispute be resolved quickly in the best interest of both sides, especially the children?
Here is another example from my experience in commercial mediation. Company A from Azerbaijan and Company B from a European country entered a contract. B won a state tender in Azerbaijan and subcontracted part of the work to A. A received a bank guarantee from a bank in another European country, based on B's recommendation. However, B did not make timely payments, causing A to delay payments to the bank. As a result, the bank withdrew the guarantee. B, according to the contract, wanted to cancel it. Meanwhile, the client was demanding completion of the work. If this dispute went to court, it would take too long, and the project would be delayed.
This shows that traditional court procedures may not be the best solution for these complex disputes. People today want their disputes resolved quickly, fairly, and without high costs. Traditional methods often can’t meet these needs.
As I mentioned, ADR tools help reduce the burden on courts and resolve disputes more efficiently. Despite the word “alternative,” ADR represents a new approach. In today’s world, we need faster, more effective solutions that provide optimal outcomes for both sides.
In general, it should be noted that in traditional dispute resolution through the court system, when a dispute is resolved, the final decision of the judge is based on the requirements of the law and his own inner conviction. The parties have the right to appeal the decision to higher courts. In the higher courts, the judges decide whether the complaint is justified or not, based on the requirements of the law and their own inner belief, and that final decision is binding on the parties.
Commercial dispute cases (if certain conditions are met) can be considered in arbitration, where the arbitrator is a third party. The arbitrator makes a decision based on the requirements of the law and their own internal belief, and this decision is binding on the parties. In some countries, there is another method where parties involve a neutral third-party expert in the field to resolve disputes. The parties agree that the expert’s opinion will be binding and considered an authentic document. After the expert reviews the circumstances of the case, the expert provides their opinion clearly in response to the questions posed. The third-party expert’s opinion, as voluntarily agreed upon by the parties, is binding on them.
Unlike the methods briefly analyzed earlier, mediation uses a different approach and perspective in resolving disputes. In mediation, a neutral third-party mediator participates in the process, guides how the process should proceed, and helps form the negotiations. The mediator plays an important role in addressing the interests of the parties and managing emotions. However, ultimately, how and on what basis the dispute is resolved is decided by the parties themselves.
One of the key features that distinguishes mediation from other alternative dispute resolution methods is that control remains with the parties. With the development of technology in the modern world, the rise of artificial intelligence, and the easier accessibility of information, people now actively participate in resolving disputes and seek terms that satisfy them. Mediation offers this opportunity, presenting all its principles and philosophy. In this regard, the institution of mediation is a field with growth potential and is adapting to meet the needs of people around the world who expect justice. Effective mediation is increasingly seen as a path toward resolving disputes in a way that satisfies the parties involved.
Today, I want to talk about mediation.
According to the International Mediation Institute, Mediation can be defined as a process of negotiations based on interests, with the help of a mediator, to manage a dispute.
In Germany's Mediation Law, mediation is described as a process where parties resolve disputes voluntarily and with trust, making decisions based on their free will considering the responsibility it takes, with the help of one or more mediators.
In the Azerbaijani law on mediation, it is defined as the process where disputes between parties are resolved through mutual agreement with the help of a mediator (or mediators).
Kazakhstan’s law on mediation states that it is a process where parties, with the mediator’s help, voluntarily resolve their disputes through mutual agreement.
As seen in these definitions, mediation is a structured negotiation process where a neutral third party helps manage a dispute based on the parties' interests.
However, it is important to highlight the key principles that differentiate mediation from other types of discussions and negotiations. Based on communication with mediators in countries that I have visited, like the Netherlands, France, Turkey, Latvia, Georgia, Hungary, Czech Republic, as well as business relationships I’ve developed with mediators in Italy, Romania, Ukraine, and Russia, I have found that these core principles are the same across all countries.
Voluntariness.
It should be noted that the principle of voluntariness contains several elements. First, parties are free to choose whether to resolve their dispute through mediation or go to court. Even in legal systems where mediation is mandatory for certain cases, the only mandatory part is attending an informational session. The decision to continue the mediation process belongs to the parties. The European Court of Justice stated that "the voluntary nature of mediation allows the parties to decide whether to use the process, organize it as they wish, and conclude it when they wish."
Even in cases where mediation is required, parties can still decide voluntarily whether to resolve the dispute through mediation. This principle also allows the parties to pause or withdraw from the process at any time, providing psychological comfort and security, which encourages active participation in the process. Another important aspect of voluntariness is the choice of mediator. Parties have the freedom to select a mediator or mediators they feel comfortable with to manage their dispute. Furthermore, unlike the court system, many procedural rules in mediation can be agreed upon by the parties themselves. In court, procedural rules are generally set by law and the judge’s instructions. In mediation, the parties have the flexibility to determine how they want to conduct the process with the mediator’s assistance.
Finally, the execution of the settlement agreement is another key feature of the voluntariness principle. In mediation, the agreement reached (often called the Settlement Agreement) is typically executed voluntarily, without needing involvement from government authorities.
For example, in the Baku Mediation Center No. 15, from May 2022 to October 2024, a total of 164 settlement agreements were reached across 89 family, 32 commercial, 19 labor, and 24 other types of disputes. Only 3 of these agreements were not voluntarily executed and had to be enforced through the courts. This high execution rate of 98.17% reflects the effectiveness of the voluntariness principle in mediation.
Impartiality and neutrality of the mediator.
As a logical consequence of the voluntary selection of the mediator, the mediator creates equal conditions for both parties, treats both sides equally, and does not represent the interests of any of the parties. Even if the mediator is a lawyer, they do not establish a lawyer-client relationship with the parties, do not provide legal assistance, and do not engage in legal discussions. The role of the mediator is to uncover different perspectives on the dispute, bring out the real underlying interests of the parties, and propose solutions for resolving the dispute. The mediator does not have an interest in how the dispute is resolved, which allows the parties to reassess their needs.
At the start of the process, the mediator declares their impartiality and ensures that the confidence built with the parties is maintained throughout the process through their conduct. As stated in Germany’s Mediation Law, mediators are independent and impartial, without decision-making authority, and guide the parties through the mediation process. This principle allows the mediator to facilitate the process without pressure or judgment, playing a key role in moving towards the resolution of the dispute.
Confidentiality.
The last fundamental principle of mediation is confidentiality. While there may be differences in its application and national legislation across countries, the general approach is to keep the information disclosed by the parties during mediation confidential. Confidentiality builds trust in the process and allows the parties to engage more productively in the mediation. If, for any reason, the mediation process is interrupted, this principle ensures that there is no legal liability for the statements made during mediation, which fosters a more open and constructive participation from the parties. In short, confidentiality is an indispensable component for creating trust in the mediation process.
To ensure strict adherence to the confidentiality principle, many countries have specific legal provisions. For example, under Azerbaijani law, violations of confidentiality result in fines: 800 manats for individuals, 1.500 manats for officials, and 3.000 manats for legal entities. Furthermore, according to the "Law on Mediation" of Azerbaijan, except for certain cases, information disclosed during mediation cannot be used to summon participants or others involved in the process as witnesses. This obligation extends not only to the mediator but also to the employees of the mediation organization and the participants themselves. The term "participants" includes not only the disputing parties but also any third parties involved, such as translators, experts, and specialists.
In many countries' legislations, confidentiality applies not only to the mediator but to everyone involved in the mediation process. Another critical aspect is the scope of information covered by confidentiality. From the moment mediation begins until its conclusion, the information disclosed during the mediation process is confidential, as clearly defined in Article 8.2 of the Azerbaijani Law on Mediation. This includes, among other things, information about the party’s initiative to start mediation, agreement to mediation, views or suggestions regarding the possible resolution of the dispute, any statements made or confessions offered by the parties during mediation, and documents created for the purpose of the mediation.
The fundamental principle in Azerbaijani law is that all information remains confidential unless certain exceptions apply, including:
a) where the parties have agreed to a different condition,
b) when disclosure is necessary for the approval or enforcement of a settlement agreement,
c) when information about severe or particularly severe crimes is disclosed,
d) when information related to mediation must be disclosed in criminal proceedings based on a court decision,
e) when there is a threat to the child's development and well-being in family-related disputes.
These exceptions are primarily due to public order and imperative legal norms. These aim to protect individuals' physical and psychological integrity, prevent crime, and ensure the welfare of children. Secondly, some exceptions concern the settlement and enforcement of agreements made during mediation.
Another critical aspect of confidentiality in mediation is that the mediator is obliged not to disclose information shared by one party during a private session to the other party without permission. In private sessions, parties often reveal their fundamental interests and needs or their limits for making concessions in resolving the dispute. Typically, these details are not shared in joint sessions with the other party to avoid appearing weak or losing bargaining power. This confidentiality is central to the essence of mediation and provides productive support to resolving the dispute.
The mediator uses the confidential information shared in private sessions to facilitate negotiations and align the parties’ interests. After each private session, the mediator must clarify which confidential information must remain secret and which must be shared with the other party. By doing so, the mediator ensures that the negotiations continue based on the parties' will, fostering the belief that, regardless of the outcome, the result reflects their collective agreement. This enhances the participants' confidence in the process, increasing the likelihood of voluntarily complying with any settlement reached.
Principle of equality and cooperation of the parties.
This principle gives the parties the opportunity to use all tools at the same level during the entire mediation process, in other words, the parties have equal access to all opportunities. This equality is especially taken into account in choosing mediation as a solution to the dispute, in determining the mediator or mediators, in agreeing on the rules and agenda of the mediation process, and in determining the time of the mediation.
The participants of the mediation process try to resolve the dispute and reach an agreement by acting according to the agenda determined together on the basis of this principle in the initiated mediation process.
As a player with "equal rights" at all stages of mediation, each party accepts the conditions that are relevant to their own interests, specifies the terms of the agreement, negotiates and ensures the agreement of the content of the draft agreement based on this principle. They even have equal rights to refuse the mediation process or the mediator at any point of the mediation process (as explained in the principle of voluntariness).
In conclusion, this principle gives the parties the possibility that both parties take the fate of the Mediation process and the future of the dispute in their own hands. As a result, it is up to them whether the dispute is fully or partially resolved by settlement, or whether it remains unresolved at all. Regardless of the color of all these processes, the last word belongs to them in the result-oriented direction.
The determination of the businessmen we witnessed is particularly noteworthy: The commercial world creates "value" by correctly evaluating the "moment" and that "value" develops the business. In fact, legal problems and lawsuits actually drain the inner energy of businessmen and take away the chance to appreciate that "moment". We know from the literature that the business world does not want to swim in "dangerous waters", because it pays attention to the security of its money and wealth. Legal security is also an important element. In this regard, if we, as Azerbaijan-Pakistan mediators, present our product correctly, the business world will benefit from it, and as a result, we will sell mediation services correctly. This will contribute to the implementation of larger projects between the two countries in the future.
So, although the trade exchange between the two countries is not at the desired level, it has increased more than 2 times in the last year.
In 2022, the number of Pakistani companies operating in Azerbaijan was 2.238, and by the beginning of 2024, 3.706 companies with Pakistani capital were registered in Azerbaijan, and 3.304 of them are actively operating. Also, I have come across in the media that, the trade turnover between Azerbaijan and Pakistan in January-May 2022 amounted to 12 million 889 thousand US dollars. This is 2.7 times more than in 2021. In 2023, the trade turnover between Azerbaijan and Pakistan amounted to 27 million dollars. This shows that the trade between the countries is increasing with an increasing trend.
Also, there are direct flights between Azerbaijan and Pakistan. This will undoubtedly make a special contribution to the development of tourism relations in the near future. I will respond to the invitation of Mr. Sanaullah Aman and come to Pakistan at a convenient time very soon)
On the other hand, both Islamic traditions and modern science and technology achievements in the daily life of both countries create special opportunities for practical lawyers and mediators of the two countries.
Finally, let me mention one point. I want to talk about an advantage provided by the Azerbaijani legislation on mediation.
This may be of particular interest to countries that are not parties to the Singapore Convention. According to the legislation of Azerbaijan, if the settlement agreement concluded in mediation is not executed within the agreed time, that settlement agreement is approved by the court within 10 days without further investigation based on the application of the interested party and is referred to mandatory execution. This gives the possibility that the agreement was concluded in the usual manner or in the notarial manner, and then when it is not executed, it is traditionally appealed to the court, the court examines the circumstances of the case, etc. investigates and finally evaluates. This means that the first instance in Azerbaijan is 4 months, and if the second and last instance is taken into account, it means at least one year. However, the settlement agreement in mediation is approved in a short period of 10 days, and a court decision is issued. In this regard, it is possible to get a chance to take advantage of such a legal opportunity by using the services of Azerbaijani mediation organizations in international business deals. It will mean freedom from long court proceedings and the burden of proof.
I will repeat what I said earlier: ADR is a requirement of the present time. The application of ADR is a historical necessity.
27 Noyabr 2024