New Public Procurement Law: Mediation and conciliation at the Court of Arbitration at the General Counsel to the Republic of Poland—good or bad solution?
Under the proposed new Public Procurement Law, in the event of a dispute involving performance of a public contract, amicable resolution of the dispute would be handled by the Court of Arbitration at the General Counsel to the Republic of Poland. But the proposal generates legal doubts.
Legislation work nears an end
The legislative process on adoption of a new act to regulate public procurement in Poland starting from 2020 is now in the final stages. According to the projections of the Ministry of Entrepreneurship and Technology, the bill is certain to be adopted during the current term of the Sejm.
During consultations on the bill, much emotion was stirred by the proposed new institution of conciliation proceedings. The drafters’ aim is for this to be a type of alternative dispute resolution, in which the parties present their positions and an independent expert—the conciliator—presents to them a proposal for resolution of the dispute. The parties can then accept or reject the proposal.
Originally, conciliation proceedings were to be conducted by a conciliation chamber at the National Appeal Chamber (KIO), and would be mandatory. But this approach stirred controversy during consultations on the draft. In particular, it was argued that KIO is vested with authority to rule on the consistency with the Public Procurement Law of the actions taken by participants in the market for public contracts. But because conciliation would cover all disputes arising out of the civil relationship under the parties’ contract, knowledge and experience of public procurement law might prove insufficient.
It appears that the drafters have taken heed and changed their conception accordingly. The latest draft concerns not only conciliation, but all alternative methods of dispute resolution. They are to be optional, conducted at the Court of Arbitration at the General Counsel to the Republic of Poland (PGRP), and last no longer than two months.
Court of Arbitration at PGRP
The office of General Counsel to the Republic of Poland was established to protect the legal interests of the State Treasury and legal entities in which the State Treasury holds a stake. The tasks of PGRP include representation of the State Treasury, state legal persons other than the State Treasury, and subsidiaries of such entities in civil disputes.
The Act on the General Counsel to the Republic of Poland also provides that the president of PGRP shall establish the Court of Arbitration at PGRP, which may resolve disputes “between state legal persons, other than the State Treasury, and legal persons in which the State Treasury or state legal persons participate” (Art. 26(1)). This wording suggests that only entities with state-owned capital may be parties to proceedings before the Court of Arbitration at PGRP.
The president of PGRP establishes rules for the Court of Arbitration, including rules for organisation of the institution and the method for conducting arbitration, mediation and conciliation proceedings. The rules themselves state that the court has jurisdiction to consider cases between state legal persons, other than the State Treasury, and legal persons in which the State Treasury or state legal persons participate. The exclusion of the State Treasury as such from this group seems understandable, considering that the fees of arbitrators, mediators and conciliators operating at the court are paid on the basis of a contract with the State Treasury.
Given this background, two questions arise: firstly, whether under the act and the rules, a private-sector entity can be a party to proceedings before the Court of Arbitration at PGRP. A linguistic interpretation of the regulations cited above seem to deny this possibility, but the draft provisions of the new Public Procurement Law suggest otherwise.
But even assuming that the court could hear cases involving private businesses, it must be wondered whether the exclusion from the court’s jurisdiction of cases involving the State Treasury would render this provision practically useless. It would be impossible to conduct ADR proceedings involving, for example, public contracts awarded by a ministry, or by the General Director of National Roads and Motorways. And it is precisely in the largest cases involving such entities that ADR would be particularly useful.
Specifics of procedure before the Court of Arbitration at PGRP
In analysing the rules of the court, in many respects they seem similar to the rules in force at other permanent arbitration courts in Poland and abroad. A key difference is the introduction at this institution of permanent arbitrators (up to 20), permanent mediators (up to 10), and permanent conciliators (up to 10).
These persons are appointed by the president of PGRP, and as a rule only they may perform key functions in proceedings before the court. For example, if the arbitration agreement calls for resolution of disputes by a panel of three arbitrators, each of the parties may appoint one arbitrator, including from outside the list of permanent arbitrators, but the third arbitrator, presiding over the panel, must be one of the permanent arbitrators.
In practice this means that PGRP has established an arbitration court that ensures the state far-reaching control over who will exercise key roles in the proceedings. This type of influence of the state party over the panel or the individual arbitrator or conciliator would not be permissible in proceedings before a private arbitration institution.
This solution raises few doubts when the ADR is conducted between two entities both controlled by the State Treasury. But if this occurred in a case involving a private party, the additional entitlements of the state party would appear to offer an unwarranted advantage.
The list of permanent arbitrators, mediators and conciliators currently maintained by the court contains the names of many experienced lawyers of impeccable reputation. Nonetheless, the standard observed around the world is to avoid placing arbitrators, mediators or conciliators in situations giving rise to a conflict of interest.
Meanwhile, permanent arbitrators, mediators and conciliators are appointed for a renewable four-year term. If they participate in ADR between state parties and private parties, they must expect that at the end of their term, their work will be assessed by the appointing authority, i.e. the president of PGRP. In the case of proceedings involving private parties, this may exert pressure on them to handle the matter in a matter regarded as “correct” by the president of PGRP.
Another doubtful aspect is involvement by the same arbitrators, mediators and conciliators in multiple proceedings with the same state-affiliated parties. The standard in international arbitration is that if a given arbitrator is appointed to a panel by a party or its affiliate more than once in a three-year period, this should be disclosed to the participants as a circumstances that could impact the person’s impartiality and independence (Rule 3.1.3 of the IBA Guidelines on Conflicts of Interest in International Arbitration).
What methods of ADR will be available?
Including arbitration in discussions of the proposed new Public Procurement Law seems justified, as the draft refers to “mediation and other amicable resolution of disputes.” Arbitration is undoubtedly regarded as a type of amicable dispute resolution, and thus it would appear to be covered by the operation of the bill.
But that does not seem to be the intention of the drafters. This conclusion flows from the fact that only two months is provided for conducting ADR proceedings. In the case of arbitration, where each party must have a right to present its position fully, such a timeline would be entirely unrealistic. Moreover, in matters not addressed by the bill, it applies by reference “section II chapter 1 division 1 of the Civil Procedure Code” (presumably this means part one, book one, title VI, section II, chapter 1, division 1: “mediation”), ignoring part five of the Civil Procedure Code, governing arbitration proceedings (referred to there simply as “amicable proceedings”).
Nonetheless, the wording in the bill is unambiguous, and in practice could result in excluding arbitration in disputes arising in public procurement. This would be detrimental also to contracting authorities, because due to its flexibility, arbitration could work well in disputes arising during the course of performance of public contracts.
If the bill is also intended to cover arbitration, an additional doubt may be raised by the fact that according to the rules, in certain instances the function of president of the Court of Arbitration at PGRP may also be exercised by the president of PGRP. He may act, for example, as an emergency arbitrator ruling on an application for interim relief. This is another solution that may discourage contractors from using this form of dispute resolution.
Nor does there appear to be any justification for limiting the possibility of conducting ADR proceedings before any forum other than the Court of Arbitration at PGRP. If this institution is going to conduct any cases involving private enterprises, it should compete with other permanent arbitration courts first and foremost in the quality of its practice, and not by being given a state monopoly on cases of this type.
The Court of Arbitration at the General Counsel to the Republic of Poland was conceived as an institution resolving disputes exclusively between entities with state-owned capital. Bringing cases also involving private parties under its umbrella would require amendment of the PGRP Act as well as drafting of new rules for this institution ensuring equal rights for private parties. Similarly, enabling this court to hear cases where the State Treasury is a party, for example in the case of some of the largest contracting authorities, such as the General Directorate for National Roads and Motorways, would also require changes.
While the intention of promoting amicable methods of resolving disputes appears laudable, an assessment of the effectiveness of the solutions presented in the draft of the new Public Procurement Law will depend on the changes introduced to the PGRP Act and the rules of the Court of Arbitration at PGRP. If would be detrimental to all entities involved in performance of public contracts if amendments to these documents were not introduced effectively eliminating the advantage the public side enjoys in ADR proceedings before a state institution.
Piotr Golędzinowski, attorney-at-law, Dispute Resolution & Arbitration practice, Wardyński & Partners
Mirella Lechna, attorney-at-law, Infrastructure, Transport, Public Procurement & PPP practice, Wardyński & Partners