Mediating Disputes Between Chinese and American Businesses: Chapter 2 - Retention Issues

2.1 Introduction
2.2 Background Information
2.3 Substantive Expertise
2.4 Mediator’s Styles
2.5 Impartiality and Conflicts of Interest Check
2.6 Mediation Fees
2.7 Mediator Liability and Immunity
2.8 Other Retention-Related Issues

2.1 Introduction

Ordinarily, when the parties are considering choice of a mediator, they should consider the mediator’s background, substantive expertise, mediation style, impartiality and conflicts of interest, fees, and issues concerning the process of the mediation itself. When parties select their own mediator, they ordinarily conduct discussions with the mediator about these topics. This gives the mediator and parties an excellent opportunity to understand each other’s expectations as well as their duties and obligations (e.g., confidentiality, candor). The discussion will also enable the parties to enter the process more fully informed. In a mediation required by an arbitration body or a court, some of these issues may be handled by the arbitral body or court (e.g., selection process) and others may not be relevant (e.g., mediator fees may not exist in a court program where the judges mediate as part of their judicial obligations).

When using a mediation center, the parties will typically discuss choice of a mediator with the center’s staff so the staff can propose an appropriate group of potential mediator candidates. Parties either agree to a specific candidate or, if they cannot agree, rank the candidates proposed by such center. The best ranked candidate is then appointed as the mediator. ADR Centers will usually have guidelines for background information that mediators in their program must provide and update routinely.

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The U.S. China Business Mediation Center Mediation Procedure (Appendix 1A) allows parties to indicate whether they wish to use a single mediator or a joint team of one Chinese and one American mediator. After assessing the type of background required and confirming potential mediators’ impartiality, the Center proposes six candidates to the parties for selection and assists in a ranking procedure if the parties cannot agree on selection.

2.2 Background Information

Comments: Background information includes a professional résumé, as well as experience and training in mediation. A mediator should furnish as a matter of course a written professional resume or curriculum vitae that provides general information, including training, experience, general mediation style and substantive expertise. See Section 2.3 (Substantive Expertise) and Section 2.4 (Mediation Styles).

In addition, parties may want information about a mediator’s prior success rates in mediation, as well as references from others who have used this particular mediator. Providing parties with information on prior success rates is a controversial subject. Mere numbers will not reflect the degree of difficulty of particular mediations, or the beneficial results that were obtained in mediations that did not completely settle – or that settled, but after the formal mediation ended.

Practice Tips: In the interests of proceeding forward with all parties fully informed, mediators who are consulted by parties directly for potential retention should provide information on their particular mediation style and practices, including (if possible) how facilitative or evaluative their style may be (see Section 2.4 on Mediation Styles) and what practices they follow in private sessions (“caucuses”) and joint meetings.

To satisfy requests for references, mediators may consider providing the names of counsel for whom they have served as a mediator in the past. Mediators must take care to avoid identifying the parties in those mediations. Identifying parties might be considered a breach of mediation confidentiality. For that same reason, mediators should not provide the names of counsel who previously appeared before them without first obtaining permission.

2.3 Substantive Expertise

Comments: Skills in conducting the mediation process are crucial to its success. Whether a mediator should also possess substantive expertise, particularly if a dispute involves a specialized subject matter (for example, a patent or technology dispute) is an actively debated issue in mediation, and is a decision that the parties themselves are in the best position to make.

Some people contend that mastery of specialized areas of business and law should be a prerequisite for a mediator to serve in a dispute involving those areas. Others maintain that experience as a mediator can, by itself, compensate for any lack of substantive expertise.

Substantive expertise also overlaps in part with issues concerning the regulation of mediators and the ethical obligations of lawyers serving as mediators. For American lawyers, the CPR-Georgetown Commission Model Rules of Professional Conduct for the Lawyer as Third Party Neutral (see Section 1.4 (Mediation Law and Guidelines) addresses the lawyer- mediator’s assurances to the parties or counsel of substantive and procedural competence in the following Model Rule and comment:

CPR/Georgetown Model Rule 4.5.1 Diligence and Competence – The Model Rule provides that “[a] lawyer serving as a third party neutral should act diligently, efficiently and promptly, subject to the standard of care owed the parties as required by applicable law or contract” and “should decline to serve in those matters in which the lawyer is not competent to serve.”

In its comments, the Model Rule suggests that, in considering whether it is appropriate to serve as a mediator, the lawyer consider the following factors:

  • The parties’ reasonable expectations regarding the conduct of the mediation and the mediator’s expected role;
  • The relative procedural and substantive complexity of the matter and process;
  • The mediator’s general legal and mediation experience and training, and his or her training and experience in the process and subject matter involved;
  • The amount of preparation that the lawyer is able to give to the matter; and
  • Whether it is feasible to employ experts or co-mediators with required substantive or process expertise.

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The U.S. China Business Mediation Center Procedure is equally applicable to mediators who are lawyers and those who are not. It requires mediators to be properly trained and to maintain and update their mediation process skills, and also to refuse assignment to mediations for which they are not qualified. (See Appendix 1D, Para. 1).

Practice Tips: One option for a mediator who does not have a particular substantive expertise is the possibility of co-mediating the dispute with a mediator who does have it. See Section 4.10.4 (Co-Mediation).

2.4 Mediator Styles

Comments: To ensure a match between the parties’ expectations and the mediator’s style, mediators should identify and articulate their mediation style and technique. Mediation styles range from “facilitative” to “evaluative” and from a “narrow” or legalistic focus to a “broad” or interest-based focus, including gradations between the styles.

Although the definitions are not precise, a “facilitative” mediator avoids giving advice to the parties or opinions or predictions of likely litigation or arbitration outcome. By
contrast, an “evaluative” mediator may analyze the facts, the law and the parties’ positions, and offer a non-binding opinion on how the dispute might be resolved – or even what the mediator believes the outcome might be if the case were to be decided in arbitration or litigation.

A mediator’s opinion is just that: an opinion, and it is not binding. Its aim is to educate the parties and allow them to consider settlement more realistically. It is typically not used until late in the mediation process when parties might be stuck or at an impasse. Applicable laws, court provisions or ADR Center procedures may require an alteration to a mediator’s style in either allowing an evaluation under specific circumstances or disallowing evaluations. Mediators need to be aware of such requirements and adjust their style accordingly. See Section 4.10.2 (Using Evaluations in Mediation).

One example of how a mediator might progress from a facilitative style to an evaluative style begins with a mediator’s posing questions about elements of proof and ends with a mediator-proposed settlement. In such an example the mediator:

  • First poses questions about the parties’ case and elements of proof;
  • Asks each party to respond to the other side’s arguments;
  • Engages the parties privately in testing their assumptions about the likelihood of success in another forum (using risk analysis, best case/worse case predictions, decision-tree analysis, etc.);
  • If appropriate, offers opinions about elements or issues of a party’s case;
  • If appropriate, offers opinions about the strengths and weaknesses of a party’s case;
  • Offers opinions about the range in which the case might settle when money is the sticking point;
  • Offers opinions about how an arbitrator or a court is likely to rule on the entire case;
  • Proposes some settlement options (including monetary, performance and other creative options);
  • Helps to convince each party to accept a specific settlement arrangement;
  • As a last resort, and only with the parties’ agreement, places the mediator’s own proposed settlement on the table and persuades the parties to accept it leaving the final decision to the parties.

(Evaluation Continuum concept, above, courtesy and copyright of Margaret L. Shaw, ADR Associates, New York, NY, supplemented by Carrie Menkel-Meadow, Georgetown University Law Center).

Practice Tips: Potential mediators should discuss with the parties whether they might be asked to place a broad-based settlement proposal or monetary settlement amount on the table and under what circumstances they might do so (for example, only if both parties agree). Similarly, mediators should be prepared to discuss whether they would be able and willing to provide an evaluation of the disputed claim and under what circumstances they might do so (for example, on the mediator’s own initiative or only at the parties’ request; would they use an oral or written evaluation statement; would the evaluation be provided in private or joint session). Otherwise, a mediator and the parties may find themselves at an impasse in the event that the parties request a settlement proposal or an evaluation and the mediator declines to provide one. See 4.10.2 (Using Evaluations in Mediation for a fuller discussion).

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The U.S. China Business Mediation Center Procedure (Appendix 1, Para. 7) permits mediators to issue evaluations and settlement proposals that are non-binding if the parties consent to such issuance.

2.5 Impartiality and Conflicts of Interest Check

Comments: The independence and neutrality of a mediator is a key component to the integrity and success of the mediation process.

Impartiality and conflicts of interest raise a myriad of issues for the mediator, including the extent of a conflicts of interest inquiry; disclosure obligations of actual or potential conflicts of interest to the parties; the continuing nature of those disclosure obligations; handling of future relationships with the parties; and imputation issues for a mediator’s law firm or other associations. That is, does the mediator’s current engagement prevent the mediator’s law firm or other organization from doing various levels of future work, for or against any party to the mediation?

When considering these issues, lawyer and non-lawyer mediators need to consult applicable ethical codes that govern the standards of conduct for mediators and any ethical rules of the ADR Center in which they serve as a mediator.

Lawyer mediators have additional ethical obligations to consider. In America, lawyers serving as mediators need to stay abreast of changes in statues and case law affecting their role as mediators and must consult relevant ethical professional codes promulgated for lawyer-neutrals (See CPR/Georgetown Model Rule at and selected excerpts below). They also need to consult applicable lawyer’s ethical professional codes that may impact the mediation process.

Typically, mediation centers will also make their mediators aware of legal changes that may affect their practice of mediation. Key ethical issues include:

2.5.1 Impartiality & Disclosure

The CPR/Georgetown Model Rule of Professional Conduct for the Lawyer as Third-Party Neutral, which addresses impartiality in the provision quoted below, applies only to American lawyer mediators. However, it itemizes the types of disclosure requirements required to maintain neutrality, impartiality and the absence of conflicts of interest. The Model Rule’s basic approach is one of broad disclosure, coupled with the possibility of party waiver of potential or actual conflicts. It can therefore serve as a useful guide to non-lawyer mediators seeking to foster a truly neutral and impartial mediation.

CPR/Georgetown Model Rule 4.5.3: Impartiality – The Model Rule provides that the lawyer acting as mediator “should be impartial with respect to the issues and the parties in the matter.” Understanding that absolute neutrality is not obtainable even under the best circumstances, the Model Rule establishes a broad and continuing standard of disclosure by lawyer-mediators with the possibility of waiver by the parties. The scope of disclosure includes: any financial or personal interest in the outcome; any existing or past financial, business, professional, family or social relationship with any of the parties, including but not limited to any prior representation of the parties, their counsel or witnesses, or service as a mediator for any of the parties; as well as “any other source of bias or prejudice concerning a person or institution which is likely to affect impartiality or which might reasonably create an appearance of partiality or bias.”

Under the Model Rule, what constitutes reasonable inquiry and effort by the lawyer-neutral to uncover interests or relationships requiring disclosure depends on the circumstances. Typically, in matters where the parties are represented by lawyers, this will involve the prospective lawyer-mediator’s obtaining a complete identification of the parties, their representatives, insurers, lawyers, witnesses and attendees at the mediation and submitting that list to the mediator’s own firm to undergo a conflicts systems analysis.

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The Professional Ethics Code of the Mediation Procedure of the U.S.-China Business Mediation Center (at Appendix 1D, Section 2) stresses the need for any mediator, whether a lawyer mediator or non-lawyer mediator, to affirmatively disclose any circumstances that may affect ”their independence and impartiality or which may give rise to the perception of partiality or lack of neutrality.” Such provisions contain comments stressing the mediator’s obligation to assure the absence of any business or personal links to any of the parties as well as subjective attitudes that could cause the mediator to favor one party over another.

In addition, at Appendix 1C, Form of Engagement, under the paragraphs labelled “Disclosure of Prior Relationships,” the mediator’s obligations to disclose prior relationships for five years and current relationships specifies the framework for addressing disclosure issues in a specific mediation. It provides that these disclosures be made in writing to the parties and similar disclosures by the parties be made to the mediator and other parties. These disclosure obligations continue until the mediation is concluded.

Under these Rules, the parties are generally free to waive any disclosed conflict and may elect to retain a mediator after the mediator’s disclosure of reasons why the mediator reasonably might be perceived not to be neutral. The mediator nevertheless has an obligation to decline to serve – regardless of party consent – if the mediator believes that the matters disclosed would compromise the integrity of the process since the mediator must be satisfied that he or she is impartial.

2.5.2 Conflicts of Interest arising from Present and Future Relationships

Central to impartiality is the issue of present and future relationships with the parties to mediation. Once again, the CPR/Georgetown Model Rule on conflicts of interest, applicable to lawyer-mediators, provides useful guidance to non-lawyer mediators.

The CPR-Georgetown Model Rule addresses past, concurrent, and future relationships with parties to the mediation, as well as imputation of conflicts. Section (a) of the Rule proscribes certain concurrent and future relationships and protects confidential information revealed during the mediation. (Proscribed past relationships are covered in the CPR/Georgetown Impartiality Rule, 4.5.3., discussed above.) Section (b) of the proposed Rule addresses the imputation of disqualifying conflicts to the mediator’s law firm in representational relationships. The Model Rule provides for screening or isolation from representation by the neutral lawyer-mediator who is otherwise disqualified when the firm engages in representation of mediation parties in unrelated or substantially related matters, but not the same matter. This screening permits other attorneys in the firm to proceed with the subsequent representation. This Rule continues to impute disqualification to the whole firm where the potential future representation by the firm involves the same matter handled by the lawyer-mediator.

CPR/Georgetown Model Rule 4.5.4: Conflicts of Interest:

(a) Disqualification of Individual Third Party Neutrals

(1) A lawyer who is serving as a third party neutral shall not, during the course of an ADR proceeding, seek to establish any financial, business, representational, neutral or personal relationship with, or acquire an interest in, any party, entity or counsel who is involved in the matter in which the lawyer is participating as a neutral, unless all parties consent after full disclosure.

(2) A lawyer who has served as a third party neutral shall not subsequently represent any party to the ADR proceeding (in which the third party neutral served as neutral) in the same or a substantially related matter, unless all parties consent after full disclosure.

(3) A lawyer who has served as a third party neutral shall not subsequently represent a party adverse to a former ADR party where the lawyer-neutral has acquired information protected by confidentiality under this Rule, without the consent of the former ADR party.

(4) Where the circumstances might reasonably create the appearance that the neutral had been influenced in the ADR process by the anticipation or expectation of a subsequent relationship or interest, a lawyer who has served as a third party neutral shall not subsequently represent a party to the ADR proceeding in a substantially unrelated matter for a period of one year or other reasonable period of time under the circumstances, unless all parties consent after full disclosure.

(b) Imputation of Conflicts to Affiliated Lawyers and Removing Imputation

(1) If a lawyer is disqualified by section (a), no lawyer who is affiliated with that lawyer may knowingly undertake or continue representation in any substantially related or unrelated matter unless the personally disqualified lawyer is adequately screened from any participation in the matter, is apportioned no fee from the matter and timely and adequate notice of the screening has been provided to all affected parties and tribunals, provided that no material confidential information about any of the parties to the ADR proceeding has been communicated by the personally disqualified lawyer to the affiliated lawyer or that lawyer’s firm….

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The Form of Engagement of the U.S. China Business Mediation Center Procedure (at Appendix 1C, labeled “Future Relationships”) addresses the scope of future relationships that a mediator serving in the Center can have with the parties. The Agreement provides that:

  • Neither the mediator nor the mediator’s firm shall undertake any work for or against a party regarding the mediated dispute at any time.
  • Neither the mediator nor any person assisting the mediator with the mediated dispute shall personally work on any matter unrelated to the dispute for or against a party for six months after the termination of the mediator’s services.
  • The mediator’s firm may work on matters for or against a mediation party during the pendency of the mediation sessions if such matters are unrelated to the dispute. If this occurs, the mediator must establish appropriate safeguards to insure that other members and employees of the firm working on the unrelated matters do not have access to any confidential information obtained by the mediator.

Practice Tip: “Repeat Players.” Parties who frequently use mediation may seek mediators who possess a particular substantive expertise, including familiarity with industry standards. If the pool of mediators with a particular subject matter expertise is limited, or if a party or counsel have had a good experience with a particular mediator, it is not surprising for that mediator to be invited to mediate other disputes involving that party or counsel. A tension arises between the use of the same mediator by one party or by the same counsel (“repeat players”) and the need for both perceived and actual neutrality on behalf of the mediator. Mediators should evaluate each dispute they accept to assure their neutrality and disclose prior work as a mediator for a particular party or counsel to the non-repeat player.

2.6 Mediation Fees

Comments: When mediators are hired privately, they should discuss their billing practices and fee arrangements with the parties. In mediation, fees generally are set based upon a range of factors, including the mediator’s experience and the relevant market rate for professional services. In some instances, a mediator may be requested to share a portion of the fee with an ADR provider organization whose operations include such fee sharing. In certain instances, third party funding may be available to pay the mediator’s fees (e.g., in some employment or environmental disputes, the company pays for all or a portion of the costs of the mediator to encourage use of the process). In some arbitration or court programs, mediation fees may be waived or provided by public or administrative funds.

Practice Tips: When parties are hiring a mediator without the assistance of an ADR Provider, the mediator and the parties can negotiate an appropriate billing arrangement, and agreements can take a variety of forms. For a fuller discussion of billing arrangements and related issues, see Section 3.3 (Billing Arrangements).

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In the case of the U.S.-China Business Mediation Center, fees are set forth in Appendix 1C, Schedule of Fees, and include the administrative fee of the Center and the initial deposits required for the mediator’s fee. Mediator fees are determined by the Center and are split equally by the parties.

2.7 Mediator Liability and Immunity

Comments: Statutes have been enacted in most American States that address the issue of mediator immunity in varying degrees for mediator conduct. Some are broad and give the mediator full judicial immunity as if the mediator were a judge in court. Others are narrower and limit immunity to certain circumstances or specific mediation programs.

Court programs often grant immunity expressly to their mediators. Hypothetically, parties could file a claim against a mediator for negligence in revealing confidential data, for providing inaccurate evaluations based on erroneous law, or willful misconduct.

Practice Tip: In private mediation settings, mediator’s should consider negotiating an appropriate contractual waiver of civil liability and indemnification for the mediator, his or her employees, partners and any relevant mediation center under which they are operating in the retention agreement. Typically, such waivers of liability do not include a waiver for willful misconduct.

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The U.S.-CHINA Business Mediation Procedure contains a “Hold Harmless and Indemnification Agreement” at Appendix 1A, Submission Form at Para. VIII in which parties agree to indemnify the mediators for any loss they may bear from good faith performance of their duties. It also protects the Center. Appendix 1C, Form of Engagement, also waives liability for any act or omission of the Center, its agents or employees except for willful misconduct.

2.8 Other Retention-Related Issues

Comments: Other issues that the parties may seek to discuss with a potential mediator include procedural rules that the mediator will apply to the process, the mediator’s availability, confidentiality, and other process issues. When one hires a mediator through a mediation center, many of these issues are typically addressed in the center’s procedures.

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In addition to providing procedural rules and confidentiality protections, the U.S.-China Business Mediation Procedures require that prior to appointment, a mediator will assure the parties of the mediator’s availability to conduct the proceeding expeditiously.

Practice Tips: See Chapter 3 (Basic Forms and Agreements) for additional issues.

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