The promise of mediation practice in corporate governance

Presented by: Lada Busevac, Operations Officer, IFC SarajevoParis, February 13, 2007

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Commercial mediation project in Southeast Europe - highlights

• Law on Mediation enacted in all SEE countries

• 8 Court-referred mediation pilot projects currently running – Belgrade (3), Subotica, Sarajevo and Banja Luka

• Close to 2000 mediations completed successfully (of which 45% commercial)

• 42 million EUR released

• Over 90% of participants in mediation procedure stated willingness to use mediation again* *Comprehensive evaluation report on PEP SE

ADR program to be completed and published soon

August 2006 – opening of the Belgrade National Mediation Center

Banja Luka Mediation Center – mediator in session with parties

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• 50 trainings events, 700 people trained in basic and/or advanced mediation techniques

• 34 active mediators in pilot projects (Serbia and Bosnia)

• 60 people obtained Mediator’s certificate from MoJ in Macedonia in July 2006

• In Bosnia as of February 2007 a first generation of formally licensed mediators (expected up to 50 candidates to apply)

Commercial mediation project in Southeast Europe - highlights

October 2006 – Sarajevo, Advanced Commercial Mediation Training with CEDR UK

December 2006 – Tirana, Round Table on Mediation Prospects

November 2006 – 20 judges/stakeholders from Serbia visiting the Netherlands

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Commercial mediation project in Southeast Europe - highlights

• 100 presentation/seminar/events, 4000 participants

• 38 PR materials developed

• 3 books and 2 manuals published

• 17 issues of newsletters, 500 press mentions

• 1 web site

• 3 study trips organized

Macedonian PR material

DISPUTE.MEDIATOR.AGREEMENT

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Commercial mediation project in Southeast Europe - highlights

Program Indicators Target BiH Macedonia Serbia Total

2005-2008 (start-up)No. active mediation centers 10 2 1 4 7

No. courts referring 16 2 1 3 6No. cases referred 6,300 3,861 0 1,742 5,953No. referrals accepted 2,450 536 0 1,742 2,585No. successfully mediated disputes 1,490 300 0 1,551 1,985Funds released (mn. Euros) 19.0 9.3 0.0 33.1 42.4

---------Results 2005-2006 (Sept.)-------------Key Targets and Results: 2005-2008

IFC Alternative Dispute Resolution Program

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Better business performance Better business performance - data on Bosnia - - data on Bosnia -

• Of all cases referred 75% commercial

• Approximately three years in court

• In 87% of cases financial transaction completed within two weeks after signing a mediation agreement

• Total funds released EUR 9,5 million

• Funds released earmarked for the following purposes:

– 72% to cover current overhead and liabilities

– 8% reinvested

– 20% other

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Fostering CG mediation practice in Fostering CG mediation practice in BosniaBosnia- WB’s CG Country Assessment data - - WB’s CG Country Assessment data - App. 1 million shareholders, 1500 investment funds

Poorly developed CG practice overall

Ownership structure (above 50%): 23% state

18% FDI’s

9% individuals

High potential for conflict (already 6% in litigation)

Inadequate protection of shareholders’ rights detected as one of the main weaknesses

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Fostering CG mediation practice in Fostering CG mediation practice in BosniaBosnia - pilot project results -- pilot project results -

220 mediation agreements signed where a shareholder company and/or individual shareholder were involved

Total funds released EUR 4.2 million

Good example of enunciating pro ADR practices

Central shareholders register

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Fostering CG mediation practice in Fostering CG mediation practice in BosniaBosniaPreconditions for successPreconditions for success

Legal framework necessary Example - over 50% of surveyed parties in the pilot projects state a

problem of non-enforceability of mediation agreement

Judges as catalysts of change Example – anecdotal use of mediation before the court;

Pro-ADR corporate policies Until now ad hoc decisions to engage in mediation

Targeted and continuous public awareness campaign a MUST

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Thank you.

Lada Busevaclbusevac@ifc.org