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Dispute Resolution in Poland Issues and new developments in dispute resolution in Poland.

FIDIC CEE Users’ Conference And Bad Wolf

maciej Posted in Commercial Arbitration

On April 26-27, a regional FIDIC Users conference was held in Warsaw under the patronage of K&L Gates. I do not feel entitled to judge whether it was successful or not, but the participants turned up in large numbers. I was especially pleased with the numerous representations from our region, i.e. Central and Eastern Europe. The speakers were selected in such a way that the FIDIC users from our region could meet the persons hidden under the anonymous FIDIC acronym. The participants of the conference, such as Axel Jeager, Aisha Nadar, Siobhan Fahey or Zoltán Záhonyi are the key people in the world FIDIC organization. You could meet them, talk to them, ask a question and discuss the issues that may be encountered in practice. The Polish side was equally good. The speech of Mr. Lech Witecki, Director of the General Directorate of National Roads and Motorways (GDDKiA) or Dr. Marcin Dziurda, President of the State Treasury Solicitor’s Office, was a good occasion to ask questions, compare perspectives and attempt to find a key to understand the other party.

But what is left after the conference? Has any value been established? Certainly, the mere fact of meeting the various parties and having the possibility of exchanging opinions is valuable. However, this is not enough. Have we managed to change the manner of thinking about FIDIC conditions at least a little? Have we managed to influence the relations in the construction industry?

We know from the newspapers (as well as from elsewhere) that at least three contractors of the main sections of the motorways filed bankruptcy petitions. The press continues to report about quality problems and cracking of the bituminous layer of newly built roads. A majority of deadlines for delivery of roads before Euro 2012 will not be met. In these circumstances, the question about road procurement and construction in Poland is justified. Of course, one may say that unreliable and greedy contractors are to blame – contractors who were fighting for the award of contracts while being aware that they operated below the costs. One may also say that the number of construction projects exceeded the capabilities of the construction sector, and finally, that there are lawyers who generate hundreds of claims out of which only 10-20 percent are justified. It will probably be mostly true. But this is not the whole truth. Director Lech Witecki confirmed during the conference that the State Treasury will have to face court proceedings with the contractors for the total value of 3 billion zloty. The contractors, as early as at the beginning of projects, employ claim management specialists who deal with nothing else but the preparation of claims against the procuring parties. Contractors save money on everything but lawyers.

According to an Indian legend, the world is managed by two wolves: one is responsible for goodness, respecting others, the ability to sacrifice and cooperation; and the other wolf bites when it encounters any obstacles on its way and does not care about anything but itself. A young Indian asked: which of these wolves will win? The old Indian replied: the one which we feed better.

The FIDIC contracts present a balanced model of construction agreements. Its implementation for dozens of years in the construction industry worldwide show that this model of agreement is most effective. As early as before Mr. Witecki’s joining the GDDKiA, the provisions regarding balancing of the parties’ interests started to disappear from the agreements concluded by GDDKiA. These agreements do not include indexation, Dispute Resolution Boards, or arbitration. The engineer, out of necessity to obtain the procuring party’s (GDDKiA’s) approval of most of his decisions, became a caricature of the engineer referred to in FIDIC. Research shows that dispute avoidance techniques are successful – more than 90 percent of disputes never emerge. Why, then, do we have more than 3 billion zloty of claims in Poland against the State Treasury? Why does road construction in Poland mean battling lawyers from the very beginning? Is it because we are wild and greedier than all others around the world? No. It is because the court is the only place where the contractor can get real decisions and be heard. Therefore, one must prepare thousands of documents regarding the claim from the first day of the construction and must hire hundreds of lawyers. If we have deliberately fed the wolf of disputes for many years, let’s not be surprised when it bares its fangs. Has our conference fed the good wolf? No, but naming the problem itself can be the beginning of improvement. The information received from the GDDKiA in this respect is ambiguous.