Business Conflict Blog by Peter Phillips
The China Council for Promotion of International Trade (CPPIT) in conjunction with its Hunan Province Sub-Council convened a dynamic Mediation Summit in Changcha, China, on 12-13 September 2018.
The first panel discussed implications of the Belt/Road Initiative, announced five years ago.
GAO Xiaoli, Deputy Chief Judge of the Civil Tribunal of the Supreme People’s Court, addressed how Chinese courts can provide assistance in international disputes, particularly international commercial mediation. She noted that increased engagement in international trade has challenged China’s capacity to resolve commercial trading disputes efficiently and in line with disputants’ interests. She rejected the model of mediation as a substitute for litigation, and suggested that there is no need to approach the challenge with an “either/or” attitude. It does require that mediated agreements be enforceable (either judicially or through the notary process), strengthening the effectiveness of the international mediation process. Enforcement proceedings should also be quick and not protracted, and sensitive to commercial demands. She proposed certain procedural administrative improvements to support the growth of mediated resolutions. Some of these – such as court-appointed mediation — were promulgated already by decree dated 27 June 2018. (A later panel, which I moderated, addressed enforcement of mediated settlement agreements through the newly promulgated Singapore Convention.)
Pasit ASAWAWATTANAPORN, Managing Director of the Thailand Arbitration Center, noted that his country is an important trade and investment partner with China. It has benefited from China’s aggressive investment activities in connection with Belt/Road, resulting in a 10% growth in Chinese trade. Thailand’s own infrastructure plans are heavily influenced by Belt/Road, for example the high-speed train from China through Laos to Thailand. These public and private investments amount to at least 1.5 trillion baht (USD 45 billion) in the past five years, including roads, airports, hospitals, ports and tourism. In acknowledgement of the critical nature of the success of these projects, the Thai government has eased restrictions on foreign workers, loosened regulations of procurement laws, and – in the case of the high-speed train project – taken actions to anticipate and forestall disputes. He noted that arbitration is not the ideal approach inasmuch as disputes in this area are best addressed early, inexpensively, and with the goal of a consensual outcome.
CHEN Fuyong, Deputy Secretary General of the Beijing Arbitration Commission, offered several case studies of disputes that have arisen from activities associated with Belt/Road. One was a construction dispute between a Hong Kong and Beijing corporations to complete a construction located in Russia, featuring an arbitration clause before the Beijing Arbitration Center. Claimant initiated such an action, but Respondent sought to enforce the requirement of mediation prior to arbitration. The arbitral tribunal interpreted the Russian “Development Project General Contract” to be too general to enforce, and permitted the arbitration to go ahead. In another case involved a purchase agreement providing for payment by the acquired company of contingent debt or outcomes of lending legal proceedings. Dispute resolution proceedings were sufficiently vague as to be commercially ineffective. The lesson is a general one – clarity matters when drafting dispute resolution agreements and when transferring risk through contracts of insurance.
Prachant KUMAR, of the Bar Association of India, noted you can choose friends and enemies but not neighbors, and the close regional reliance with China has dictated consensual, non-confrontational dispute resolution processes between Chinese and Indian businesses. Cultural traditions such as frugality, efficiency, and attention to elders inform the use of consensual resolution processes in the region; it is simpler and more cost-effective than alternatives. He warned of the risk that, as happened with international arbitration, the simple features of mediation may be made obscure, legalistic and expensive if appropriated by the legal community. He used an iPhone as an example of something that contains much expertise, but is designed to be very simple for the user of the device. He urged that companies engaging in cross-border deals opt for simple agreement language, close monitoring of local advisors, and early attention to operational issues that, if left unattended, could develop into formal, disruptive disputes. He reported on a 2018 initiative in Indian courts that commercial disputes be mandatorily referred to mediation – an effort that, if successful, could have a substantial and welcome impact on the state of civil justice in India.
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