Will high court fees for conciliation be cut? | In Principle

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Will high court fees for conciliation be cut?

Increased court fees for an application for a summons to conciliation have been in effect since August 2019. They were intended to prevent the use of settlement proceedings solely to interrupt the running of the limitations period. Has this effect been achieved?

Summons for conciliation and the limitations period

Before the changes were introduced by the Act of 4 July 2019 Amending the Civil Procedure Code and Certain Other Acts, the fee for an application for conciliation was not high, at PLN 40 in cases where the amount in dispute was up to PLN 10,000 or PLN 300 in cases exceeding PLN 10,000. The Polish parliament chose to significantly increase this fee to limit the number of applications and eliminate situations where they are filed solely for the purpose of interrupting the running of limitations period—a relatively cheap and easy instrument for a claimant to extend the time to make its claim. And in practice, conciliation proceedings were often initiated despite a slim chance of reaching a settlement.

Sharp increase in fees

This trend was recognised by lawmakers, who decided to revolutionise the fees in these proceedings. Since the amendment, the fee for applying for a summons for conciliation is now one-fifth of the court filing fee on the principal claim, and thus at the maximum fee for a claim (PLN 200,000) it is PLN 40,000, rather than the previous PLN 300. This is a massive increase. The effect of the amendment is that many people are abandoning conciliation and electing to file claims on the merits from the onset.

Indeed, the number of applications for conciliation has decreased. The lawmakers have achieved this goal. However, it is still uncertain whether the applications are filed with the intention of bringing the parties to the negotiating table or merely to interrupt the limitations period. This cannot be determined from the court statistics, as they do not document the claimant’s individual intent. It could happen that the claimant sincerely hoped for a settlement and there was a real chance to reach one, but that did not happen because the defendant refused.

Has the purpose of the amendment been achieved?

The effectiveness of the amendment as to the actual purpose of conciliation proceedings cannot be easily determined, as no instrument exists for examining the motivation of the claimant in conciliation proceedings. The mere reduction in the number of applications filed does not prove that the amendment has entirely succeeded in eliminating the phenomenon at issue. This seems to have been noticed by the Supreme Court of Poland, which in a recent case drew attention to the limited possibility of courts to assess the claimant’s intentions (order of 16 October 2020, case no. IV CSK 107/20). Also, it is uncertain whether the decrease in the number of applications relates only to situations where the limitations period was interrupted. Instead, many claimants may have given up on initiating conciliation proceedings despite real chances and willingness to reach a settlement, because they are deterred by the high court fees.

Creditor protection

On the other hand, equity considerations support the need to enhance creditor protection and provide claimants an easily accessible instrument allowing them to negotiate in circumstances where the limitations period is secured, regardless of the defendant’s attitude and decision. This purpose will not always be achieved by initiating mediation, as it requires the defendant’s consent, and a disloyal attitude on the defendant’s part may lead to expiration of the limitations period. This will be the case if, in bad faith, the defendant seeks for example to prolong conclusion of a settlement agreement, which the claimant has no control over.

Also, making expiration of the limitations period independent of the defendant changes the negotiating position of the parties and encourages settlement, as defendants lose a significant defence, which may persuade them to make concessions. Thus there is no principled justification for attempts by lawmakers to limit the number of conciliation proceedings. Also, an application for conciliation must include specific conciliation proposals, forcing the applicant to make concessions from the beginning. Such a solution encourages the commencement of settlement discussions, even if in practice these proposals are limited to waiving statutory interest.

Up to PLN 40,000 for a few minutes of the judge’s time

In addition, the high fees (running to tens of thousands of zlotys) in conciliation proceedings do not correspond with the level of involvement of the court in conducting these proceedings and the work involved. An application for conciliation should include a brief presentation of the case (Civil Procedure Code Art. 185 §11). Most often, this is a very generalised description, including the main axes of the dispute, without citing extensive documentary evidence. Thus, an application for conciliation is very different from a statement of claim on the merits, and reviewing it does not require as much work as analysing a statement of claim. In addition, the role of the court in conciliation proceedings is quite different from a proceeding on the merits. The court does not analyse or evaluate the applicant’s claims, but only participates in the parties’ achievement of a settlement. But this role is not as active as a mediator’s. In practice, the court is not involved in the parties’ negotiations, which take place outside the courtroom, and often the parties come to court with a draft settlement already worked out and ready to go. The court only examines its admissibility under general principles such as legality, public policy, and non-collusion.

Therefore, if a settlement agreement is not concluded, the conciliation session typically lasts just a few minutes and amounts to the court noting in the record that a settlement has not been reached. If a settlement agreement has been worked out and the parties want to conclude it, the session takes longer. But when the parties have the text of the settlement agreement ready (which is the most common situation), it may still take just a quarter of an hour. In conciliation proceedings, the workload of the court does not justify a court fee of several thousand zlotys (even PLN 40,000). It is hard to imagine that kind of a fee in the private sector (in any industry) for working such short hours. It is also incomparable to the fees in arbitration.

These fees are grossly out of proportion to the scope of activities required of the court in these proceedings, and the public role of the judiciary. The fees in conciliation proceedings as they currently stand make conciliation grossly expensive, and out of reach of all but the richest litigants (in practice, it is very difficult for companies to obtain an exemption from court fees).

Proposed changes

For these reasons, the fees in conciliation proceedings should be modified either by reducing them or by applying solutions analogous to proceedings for interim relief. Under certain conditions, the fee for the application for interim relief to secure claims is credited against the fee on the statement of claim (Art. 69(2) of the Act on Court Costs in Civil Cases). In the case of conciliation proceedings, the parliament has not decided on such a solution, although there are no reasonable grounds for different rules for bearing the fees in the two types of proceedings. If a claimant who has previously initiated conciliation proceedings decides to pursue the claims in court, it should not pay, in part, a double fee for resorting to the courts. Considerations of equity and the need to protect the creditor’s interest outweigh the occasional practical use of conciliation proceedings contrary to their primary purpose—especially as the fee increase has not entirely eliminated this phenomenon and the decreasing number of applications may be at least partially due to situations in which actual settlement attempts were abandoned solely due to the high fees.

Agata Jóźwiak, attorney-at-law, Dispute Resolution & Arbitration practice, Wardyński & Partners