Some 6,500 viewers have tuned in to SIMC’s fireside chat hosted by Benchmark Chambers International & Benchmark International Mediation Centre (BCI & BIMC) last week.
During the livestream, SIMC Deputy CEO Teh Joo Lin and SIMC International Partnerships Lead Wenny Huang discussed the impact of the Singapore Convention on Mediation on China’s legal professionals. They also highlighted the key elements of mediation, as well as how it fits alongside alternative dispute resolution (ADR) processes such as litigation and arbitration. With the coming into force of the Convention in September, Joo Lin also addressed its significance for Chinese lawyers.
We thank our host, Andy See from BCI & BIMC, the Shenzhen Intermediate People’s Court and Justice Bureau of Shenzhen Municipality for the opportunity to connect with the viewers.
Judging by the flurry of questions, the 90-minute exchange suggests that the importance of mediation to legal practice is not lost on the audience.
We share some key points that are based on the original Q&A (edited for clarity and completeness). Do share your thoughts in the comments section! You may also view the full recording in Mandarin below, or here.
Qn: You were part of the Singapore team for the Singapore Convention on Mediation and participated in its implementation into Singapore’s domestic law. Could you share some key aspects of this Convention?
Joo Lin: While mediation has been recognised for its benefits in resolving commercial disputes, a key bugbear was the issue of enforceability of settlement agreements.
From 2015 to 2018, following a proposal from the United States, the members of UNCITRAL’s Working Group II worked on a draft of the Convention, which was eventually adopted by the UN General Assembly in December 2018 and subsequently signed by 46 countries on 7 Aug 2019. So far, 52 countries have signed. Earlier this year, Singapore, Fiji and Qatar ratified the Convention. We are looking forward to its coming into force on 12 September 2020.
The Convention is relatively short, with several key articles that delineate the scope of application (Art. 1), the definitions (Art. 2), the general principles (Art. 3), the requirements to be met for a party to be allowed to rely on a settlement agreement (Art. 4), the grounds for the refusal of relief (Art. 6), and reservations (Art. 8).
For example, Art. 3 makes it clear that a party can rely on a settlement agreement not just to enforce it against the other party, but also to invoke it as a defence.
Assume that parties had already settled their dispute. Despite this, one party later proceeds to sue the other party in a signatory state. In this scenario, the Convention allows the other party to raise – or “invoke” – the settlement agreement in the lawsuit, to prove that the dispute had already been resolved. Therefore, the Convention allows for the use of settlement agreements not only as a “sword”, but also as a “shield”.
Another key article is Art. 8, which provides for a signatory state to make two reservations. The first reservation, if entered into, carves out government and government-related entities from the scope of the Convention.
The second reservation, if entered into, will require the parties to a settlement agreement to “opt in” to the Convention, before the Convention can operate on their settlement agreement.
Qn: What has Singapore done to implement the Convention and what has been the reaction of the legal industry and business sector?
Joo Lin: Singapore implemented the Convention in the form of domestic law – the Singapore Convention on Mediation Act 2020 – that is likely to take effect from when the Convention comes into force. I had mentioned Article 8, on the reservations that a signatory state can make. The important point to note is that in implementing its obligations, Singapore has not made any reservations under the Convention.
We believe the Law Ministry and the Courts would be working on the rules that will operate alongside the new Act.
From our interactions with our friends in the business and legal fraternities, I can share that they are very much looking forward to the operation of the Convention – the consensus appears to be that the Convention, by filling the enforceability gap, provides the missing piece in the jigsaw puzzle. Henceforth, more disputants will look at mediation as a viable means to resolve their matters. We are also seeing an increasing number of legal professionals who express interest in mediation, and in understanding the theories and trends in this field.
In relation to the Convention’s impact on SIMC, the treaty definitely provides a window of opportunity – but it also presents a challenge. At SIMC, we need to build on our foundations to serve parties even better, and to raise our game.
Qn: How does mediation fit into other dispute resolution processes? How does one select the best for the present dispute?
Wenny: Mediation can, of course stand alone, but it can also be combined with other dispute resolution mechanisms, such as arbitration and litigation. For example, mediation can be introduced before, during or after arbitration or litigation proceedings. It really depends on the nature of the case. We need to consider the circumstances and select the best dispute resolution mechanism for it. We have found that mediation combined with arbitration combines the efficiency of mediation and enforceability of arbitration, which is very powerful. At SIMC, we offer a unique, one-stop “arb-med-arb” protocol in partnership with SIAC.
Qn: Is mediation a bane or boon for lawyers? Why should lawyers recommend and adopt mediation?
Wenny: I think it is important to consider your clients’ needs from their perspective. What is it that they need most? In our experience, clients are keen to try mediation because it is time- and cost-efficient. There are over 10 million civil and commercial disputes in the Chinese courts every year, which means that it could take some time for your case to be heard before a judge. The courts in China are keen to encourage the parties to resolve disputes via mediation to relieve the burden on the courts.
As a lawyer, if you have your clients’ best interests at heart, you are likely to get repeat business. Clients are looking for problem solvers, which means that a good lawyer today is not only about being a good litigator; it is also about being a mediation lawyer, or one who is, at the very least, able to attend a mediation as a mediation advocate. In times of crisis such as the global pandemic situation we are in right now, a good lawyer must also be IT savvy and know how to manage online dispute resolution effectively.
Qn: What does the Singapore Convention mean for Chinese lawyers who mainly deal with domestic contracts?
Wenny: Only international commercial cases are recognised by the Convention. Still, the Convention has boosted the stature of mediation, and the awareness of mediation is on an upward trajectory. This will naturally encourage local parties to adopt mediation in domestic cases as well. Take, for instance, the growth of arbitration in China: In 1985, China signed the New York Convention; the China Arbitration Law came into force in 1995; now, according to 2018 statistics, China has over 200 arbitration centres administering over 540,000 cases. It is difficult to predict how mediation will perform in 20 years’ time, but I am confident that it will see robust growth.
Qn: Can you share about SIMC’s presence in China?
Wenny: Our partners in China are one of SIMC’s most valued stakeholders. In fact, Chinese parties are among the top three users of SIMC. Last year, we signed MOUs with Beijing Arbitration Commission/ Beijing International Arbitration Center (BAC/BIAC), the Permanent Forum of China Construction Law (PFCCL), and the China Council for the Promotion of International Trade (CCPIT)/ China Chamber of International Commerce (CCOIC) Mediation Centre.
The one with CCPIT/CCOIC Mediation Centre involves an agreement to set up a mediator panel for Belt-and-Road Initiative (BRI)-related projects. We have also conducted specialist mediator trainings in Shanghai, Beijing and Shenzhen together with our valued partners such as CCPIT, BAC/BIAC and BCI/BIMC.
Qn: Can you explain the time and financial cost of the mediation process vis-a-vis litigation and arbitration?
Joo Lin: After a case has been filed, a mediation can generally be arranged within a month, sometimes faster, when required. Parties may reach settlement in 1-2 days. In comparison, you may take around a year to receive an arbitral award or a court judgment, depending on various factors. Where a matter proceeds to a full hearing, we are talking about six-digit figures in terms of the cost of dispute resolution. Mediation is much less costly.
However, I would caveat that it is really about fitting the forum to the fuss. Some disputes are better suited for amicable resolution, while others lend themselves more to adjudicative methods. On this note, one strength of mediation is its versatility – not only can it be used on its own, it can be used in combination with either arbitration or litigation; these hybrid modes can be very effective.
Qn: Can you discuss mediation in the context of the COVID-19 pandemic?
Wenny: Mediation is definitely a suitable means to resolve disputes during this period, with parties studying if the force majeure clauses in their contracts can be triggered to avoid liability, given their inability to perform the contractual obligations. However, there is an element of uncertainty in relying on such clauses as, depending on the jurisdiction, the court may interpret the clause very strictly (i.e. parties must have specified clearly what can be considered as a force majeure event in the clause).
However, in China’s Contract Law, there are some provisions on force majeure, which means that even if parties do not have a force majeure clause in their contract, the court may still consider if force majeure applies in accordance with China’s Contract Law. However, now that COVID-19 has become the “new normal”, the question is whether non-performance now can still be considered a force majeure event.
If parties opt for arbitration or litigation to answer this question, they will not have certainty of the outcome until the judgment or award is made. Mediation eliminates this uncertainty, and allows both parties to negotiate and come to an agreed outcome very quickly.
In mediation, you can also be creative about arriving at commercially-driven solutions beyond the payment of monetary damages. For example, parties could agree to vary their contractual obligations during this period before resuming their original obligations when the situation improves.
Qn: What if parties have not included a mediation clause in their contract, and they decide to go for mediation when a dispute arises? How do you ensure parties have an intention to mediate?
Wenny: Firstly, as long as parties agree, they can proceed to mediation at any time. We have had several cases in which parties originally had an arbitration or litigation clause but agreed to try mediation before proceedings began. In such cases, we would discuss the case with both sides to confirm their intention to mediate. It is essential that both parties are sincere about resolving the dispute via mediation. Both parties would also have to sign an agreement to mediate before the mediation commences.
Qn: What types of cases are suitable for mediation?
Joo Lin: In theory, there is no impediment to the type of cases that can be mediated. That said, our experience matches the research that has been conducted into this area, in suggesting that certain factors affect the success of a mediation. For example, the timing of the mediation and how contentious the dispute is.
I know of a matter involving two parties that refused to mediate early on in their court dispute. This was a shareholder dispute between friends. They would not even speak to each other. However, after more than a year of litigation, they eventually agreed to mediate their dispute. Some things had changed since then – the passage of time had taken the edge off the emotions, and it became clear that there were other priorities. For example, both parties had new projects to pursue but the lawsuit was taking up significant bandwidth. They settled the dispute before an experienced mediator and succeeded in putting the conflict behind them. Last I heard, they were even discussing business opportunities!
Qn: Is it necessary for parties to engage a mediation institution in order to rely on the Convention?
Wenny: I refer to Article 4 of the Convention. Article 4 provides that a party that intends to rely on the settlement agreement must produce the settlement agreement, as well as evidence that the agreement resulted from mediation. One form of evidence is an “attestation by the institution that administered the mediation”. However, the forms of evidence are not exhaustive. Other forms of evidence are accepted as well, such as the mediator’s signature on the mediated settlement agreement, a document signed by the mediator indicating that the mediation had been carried out, or other evidence acceptable to the court.
Joo Lin: It is fine for parties to settle their disputes through “ad hoc” mediation. However, I would add that there are certain advantages of going to a mediation centre. For example, at SIMC, we help parties with an end-to-end management of their case. We are a third-party check. We evaluate every mediator who is engaged to ascertain that he/she has credible credentials. Every mediator must adhere to a code of ethics. We also ensure that all relevant parties agree to preserve confidentiality – which is extremely important. However, as long as there is acceptable evidence to the relevant court that the mediated settlement agreement resulted from mediation, you may still rely on it whether you have engaged an institution or not.
Qn: Given the global scale of the Convention and the disparities between the different jurisdictions that have signed the Convention, how do we ensure that there is no enforcement of “fake” settlement agreements arising from staged mediations?
Wenny: On top of SIMC’s own checks and balances, SIMC’s panel of mediators are professional and experienced. They are able to assess whether a dispute is “real” based on their experience. As SIMC’s cases are mainly international commercial cases, parties are most often represented by lawyers – mediation advocates. The lawyers themselves are bound by rules of professional conduct.
Joo Lin: One point to note is that the Convention only addresses commercial disputes. In the commercial context, parties tend to be savvy and sophisticated, are represented by lawyers and are able to look out for their own interests. Unless both parties collude, one party is unlikely to be able to get away with a “fake mediation”.
Ultimately, the courts play an essential part in determining whether a mediated settlement agreement is of a quality that is deserving of enforcement. If an agreement does not meet the conditions prescribed by the Convention, the court will not enforce it – for example, if the court is not satisfied that the agreement indeed resulted from mediation, which is also defined.
The “industry standards” of mediation are also important to promote the sanctity and professionalism of mediation, to minimise abuse of mediation. While we are currently at the infancy stages of the Convention, I believe that with the Convention, there will be greater professionalisation of the entire eco-system over time.
Qn: What do you do if you feel a mediator had been partial or unprofessional?
Joo Lin: During enforcement proceedings, the relevant party can ask the court to refuse enforcement of the mediated settlement agreement. This can be on the ground that the mediator had breached serious standards, or that he or she had failed to disclose a position of conflict, which had led the party to enter into the agreement (Article 5 of the Convention). However, you will have to submit sufficient evidence that will satisfy the relevant court.