The promise of mediation practice in corporate governance

The promise of mediation practice in corporate governance Presented by: Lada Busevac, Operations Officer, IFC Sarajevo Paris, February 13, 2007

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 Mediation Center – mediator in session with parties • 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 2

Commercial mediation project in Southeast Europe - highlights • 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 Mo. J 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) 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 3

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 4

Commercial mediation project in Southeast Europe - highlights IFC Alternative Dispute Resolution Program Key Targets and Results: 2005 -2008 Program -----Results 2005 -2006 (Sept. )------Indicators Target Bi. H Macedonia Serbia Total 2005 -2008 (start-up) No. active mediation centers 10 2 1 4 7 No. courts referring No. cases referred No. referrals accepted No. successfully mediated disputes Funds released (mn. Euros) 16 6, 300 2 3, 861 1 0 3 1, 742 6 5, 953 2, 450 536 0 1, 742 2, 585 1, 490 300 0 1, 551 1, 985 19. 0 9. 3 0. 0 33. 1 42. 4 5

Better business performance - 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 6

Fostering CG mediation practice in Bosnia - WB’s CG Country Assessment data ü App. 1 million shareholders, 1500 investment funds ü Poorly developed CG practice overall ü Ownership structure (above 50%): § 23% state § 18% FDI’s § 9% individuals ü High potential for conflict (already 6% in litigation) ü Inadequate protection of shareholders’ rights detected as one of the main weaknesses 7

Fostering CG mediation practice in Bosnia - pilot project results ü 220 mediation agreements signed where a shareholder company and/or individual shareholder were involved ü Total funds released EUR 4. 2 million ü Good example of enunciating pro ADR practices § Central shareholders register 8

Fostering CG mediation practice in Bosnia Preconditions for success ü Legal framework necessary § Example - over 50% of surveyed parties in the pilot projects state a problem of non-enforceability of mediation agreement ü Judges as catalysts of change § Example – anecdotal use of mediation before the court; ü Pro-ADR corporate policies § Until now ad hoc decisions to engage in mediation § Targeted and continuous public awareness campaign a MUST 9

Thank you. Lada Busevac lbusevac@ifc. org 10