Mediating Disputes Between Chinese and American Businesses: Chapter 1 - Process Overview

Process Overview

1.1 Introduction
1.2 Role of Mediator
1.3 Procedures and Levels of Administration
1.4 Mediation Law and Guidelines


1.1 Introduction

Mediation is a flexible, nonbinding dispute resolution process that uses a mediator (also known as a “neutral third party”) to facilitate negotiation and resolution between parties. Unlike a judge or arbitrator, a mediator has no power to impose a solution on the parties. Rather, a mediator assists the parties to reach a party-controlled resolution on their own terms.

A distinguishing feature of mediation is its flexibility. It can take many forms – evaluative, facilitative, private and court-connected. It can be part of a multi-tiered process where parties attempt to mediate their dispute before using arbitration or litigation. Each region is generating its own requirements regarding mediation. Nonetheless, mediation’s basic hallmarks remain the same: confidentiality, control of outcome by the parties, low direct and indirect costs, and neutrality of the mediator.

No matter what form it takes, mediation provides a framework for parties to:

  • speak directly to each other with the assistance of the mediator;
  • exercise complete control over the resolution of the dispute;
  • achieve remedies that may be outside the scope of the judicial or arbitration process;
  • maintain privacy and avoid publicity about the dispute;
  • reveal to the mediator alone, in private meetings during the mediation called “caucuses,” sensitive interests or business objectives that may assist
  • the mediator to facilitate solutions that both parties can accept;
  • preserve or minimize damage to relationships in the course of resolving a dispute; and
  • reduce the costs and delay of other forms of dispute resolution.

Mediation can occur at any time during a dispute. For example, mediation can be agreed to by the parties before a dispute even arises, by including in a business contract an agreement to use mediation if a dispute does arise between the parties. Mediation can also occur before arbitration or litigation has begun, or while it is in progress if parties agree to use it at that time. In many countries (including China), courts have adopted mediation programs for cases filed in court. Mediation yields greater benefits when used early in the dispute. However, it can be commenced at any stage of a dispute, including the appellate stage.


1.2 Role of Mediator

The attitude and skills of the mediator greatly affect the outcome of a mediation. The role of a mediator is multifaceted.

It includes:

  • Managing the mediation process for the parties;
  • Improving communications between the parties;
  • Keeping the negotiation process moving forward productively;
  • Probing the facts, interests and positions of parties to uncover their real needs and concerns to find solutions that both will accept;
  • Actively keeping the parties focused on problem solving;
  • Assisting the parties in creating and refining settlement options;
  • Helping the parties to understand the consequences of failing to reach a settlement;
  • Bringing an end to the dispute by encouraging a written settlement agreement by the parties; and
  • Facilitating or monitoring execution of settlement agreements (if the parties wish).


1.3 Procedures and Levels of Administration

Mediation provides an environment in which the parties can explore a consensual resolution. That is, the resolution is decided and agreed by the parties themselves, and not by an arbitrator or a judge. The mediator assists the parties to come to agreement but never decides issues or disputes the way an arbitrator or a judge would. The applicable mediation procedure, mediator selection process and administration typically depend upon either the desires of the parties reflected in their private contract to use mediation, or the requirements and written procedures of a court program, arbitration center or mediation center (also called an “ADR Provider organization”) that the parties have decided to use.

In the United States, parties can select a mediator by agreement, select a mediator from a mediation center list or have an ADR Provider assist them in their selection. Similarly, they can have the mediator or the mediation center administer the process. Arrangements
regarding mediator fees and whether the mediator shares such fees with the ADR Provider organization vary from one ADR Provider to another.

¤ U.S.-CHINA Business Mediation Procedure

CPR and CCPIT have developed a Mediation Procedure for mediations conducted through the auspices of the U.S.-China Business Mediation Center. This Procedure appears at Appendix 1 of this volume and contains the following key features:

  • Parties can use the procedure as is or adapt it by mutual agreement;
  • Mediation is non-binding unless parties authorize the mediator to issue an enforceable judgment or award;
  • Mediators must be impartial and neutral;
  • A party can initiate the procedure and the Center will propose mediation to the other party when no contract to use mediation exists;
  • Mediator fees are split and each party pays 50%;
  • The Procedure contemplates use of a single mediator or joint team of one Chinese and one American mediator at parties’ option;
  • The Center assists parties in mediator selection and initially assesses mediator impartiality;
  • Fees are determined by the Center; and
  • A party may permissibly withdraw from the mediation only after attending the first session once they have agreed to use the process.
  • During the proceeding, mediators control the procedural aspects of the process and require submission of written statements regarding the dispute.
  • They can encourage party settlement proposals and make settlement recommendations only with the consent by both parties.
  • Confidentiality issues and privileges are addressed in the Procedure.

Appendices to the Procedure include:

1A. The submission forms by which parties can agree to use mediation at the Center;
1B. Schedule of Fees;
1C. Form of Engagement specifying mediator disclosure, compensation and other requirements; and
1D. Professional Ethics provisions applicable to all mediators serving the Center.


1.4 Mediation Law and Guidelines

The law regarding mediation, including statutes and case law, is evolving and presently lacks uniformity, both within the United States and in other countries. In the United States alone, there are more than 2,000 state and federal mediation statutes and court rules. To address this issue in the United States, in 2001 the National Conference of Commissioners on Uniform State Laws (located at www.uniformlaws.org) issued a model uniform mediation law, known as the Uniform Mediation Act, which deals with confidentiality and privilege issues. The Uniform Act is offered to each state legislature as a model for adoption, and thus encourages all American states to approach mediation confidentiality in a consistent way so that expectations on confidentiality are uniform across state lines.

Similarly, ethical guidelines for mediators are not centralized and many organizations have issued such provisions. Typically, such guidelines address impartiality and independence, confidentiality, disclosure of potential conflicts of interest, and party self determination.

¤ U.S.-CHINA Business Mediation Procedure

The U.S.-China Business Mediation Center has adopted the ethical guidelines originally promulgated by the Mediation Forum of the Union International des Avocats (www.uianet.org). (See Appendix 1D.) The European Commission has also promulgated a set of ethical guidelines, known as the European Code of Conduct for Mediators, which is included as Appendix 2 for reference. In order to assist American lawyers serving as mediators, the CPR-Georgetown Commission on Ethics and Standards in ADR, a joint public-policy initiative of the CPR Institute for Dispute Resolution and Georgetown University Law Center in Washington, D. C. has promulgated a Model Rule of Professional Conduct for the Lawyer as Third Party Neutral. It provides guidance to lawyers serving in these new roles since traditional ethical codes for lawyers only address requirements when lawyers serve in advocacy roles. Since the lawyer-mediator does not represent any party in the process, attorney ethics code provisions that deal with advocacy roles are of limited utility. The full text of the CPR/Georgetown Model Rule and comments are available on the CPR web site (www.cpradr.org).

The relevant law and guidelines governing mediation can encompass a variety of sources, including the statutes and case law of the jurisdiction where the mediation is being held; court program rules when the mediation is conducted under court auspices; and relevant ADR provider organization guidelines. If mediation is likely to be used while arbitration or litigation is pending, the law of the jurisdiction where such other proceedings may be held may be relevant. A mediator should know the ethical guidelines adopted by the Center in which the mediator is participating and check applicable mediation statutes, ethics rules and case law, if any, in the jurisdiction where they practice because of their evolving and diverse natures.

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