Mediating Disputes Between Chinese and American Businesses: Chapter 3 - Basic Forms and Agreements

3.1 Introduction 3.2 Mediation and Retention Agreement 3.3 Billing Arrangements 3.4 Confidentiality Agreements

3.1 Introduction

Written agreements concerning retention and other basic process issues afford the parties and mediator an opportunity to clarify their expectations of, and approaches to, the mediation process and thereby avoid misunderstandings. In many cases, the written agreement will determine the applicable rules of the mediation, either where there is no applicable governing law or where the law permits parties to contract for relevant issues, such as confidentiality.

3.2 Mediation and Retention Agreement

Comments: Often, the agreement to retain a mediator is part of an overall agreement between the parties to resolve disputes through mediation. An agreement to retain a mediator typically addresses some or all of the following items:

Duties and Obligations of the Parties and Mediator

  • Mediator’s assurance of availability to conduct proceeding expeditiously.
  • Participation of appropriate business representatives of the parties.
  • Factual disclosure or other discovery obligations.
  • Role of parties’ insurers.
  • Confidentiality obligations, exceptions and any applicable statutes. (This topic also can be addressed in a separate agreement, see Section 3.4 (Confidentiality Agreements)).
  • Indemnification provision for mediator (e.g., parties will indemnify mediator for legal and other related expenses in the event the mediator is called before an arbitrator or a court).

Procedural Arrangements

  • Applicable procedural rules (e.g., U.S.-China Business Mediation Procedure).
  • Need for any agreement to toll the statute of limitations.
  • In the event mediation is unsuccessful, identification of next steps to resolve the dispute. See Section 4.8 (Other ADR Processes If Mediation Unsuccessful).
  • Appropriate “Hold Harmless” provision for mediator (e.g., to protect the mediator from claims for any acts or omissions other than for willful misconduct).

Disclosure of Mediator’s Prior and Current Relationships with Parties

  • Disclosure should include any relevant prior and current relationships of the mediator and the mediator’s affiliated law firm or association with parties or their representatives or experts (if applicable). See Section 2.5 (Impartiality and Conflicts of Interest Check).

Restrictions on Mediator’s Current and Future Relationships

  • Restrictions on current or future relationships should address the mediator and the mediator’s affiliated law firm or association. See Section 2.5 (Impartiality and Conflicts of Interest Check).

Compensation Arrangement for Mediator

  • See Section 3.3 (Billing Arrangements).

Practice Tips: Within the boundaries of professional ethics, a mediator and the parties are free to enter into whatever form of retention agreement best suits their needs.

¤ U.S.-CHINA Business Mediation Procedure

The U.S.-China Business Mediation Center has developed a retention agreement, entitled “Form of Engagement” for Parties and the Mediator which addresses engagement, disclosure and mediator compensation. It appears at Appendix 1C.

For those readers interested in the CPR Mediation Agreement including mediator retention issues and disclosure, compensation and confidentiality issues used in the U.S., see Appendix 3: CPR Model Mediation Agreement.

3.3 Billing Agreements

Comments: When the mediation occurs through an ADR provider, such as the U.S.-China Business Mediation Center, billing is often accomplished through the provider institution. Mediators who deal directly with the parties find that billing agreement can be very straightforward. For example, the retention agreement can provide that the mediator will bill at an agreed time charge, and that the fee will be evenly divided between the parties. A mediator should be aware of the issues that can arise in the course of negotiating a billing arrangement:

  • Whether the fee will be structured on an hourly basis, a daily flat fee, or other arrangement.
  • Whether a retainer will be requested prior to the commencement of the mediation and, if so, whether the retainer is refundable and under what circumstances.
  • Whether the fee will be allocated evenly between the parties or on a different basis, and whether the mediator will be informed of the allocation formula that the parties agree upon.
  • Whether any rescheduling fee will be charged if the date of a session is changed.
  • Whether any cancellation fee will be charged if a session is canceled in its entirety.
  • Whether payment for preparation time and travel time is part of the fee structure.
  • Whether fees will include reimbursement for mediator expenses for clerical support, travel expenses or other disbursements.

¤ U.S.-CHINA Business Mediation Procedure

See the U.S.-China Business Mediation Center Procedure, “Fee Schedule” at Appendix 1B for information on fees at the Center.

3.4 Confidentiality: Protections and Agreements

Comments: Confidentiality is a central hallmark of mediation and participants in U.S. mediations expect mediation communications to be confidential. It is a powerful component of mediation because it allows the parties and the mediator to discuss the dispute, case weaknesses, their interests and settlement options frankly, during private caucuses, without fear that such information will be revealed to third parties or to the other party to the mediation. Such confidentiality consists of two basic levels: (1) protection of discussions and information exchanged during the mediation from disclosure to the outside world; and (2) protection of information conveyed by one party to the mediator from disclosure to the other party. Both aspects of confidentiality are essential features of the mediation process.

3.4.1 Protection from Disclosure to the Outside World

At the current time in the U.S., a variety of laws at the national and state level exist to protect against disclosure of mediation communications to the outside world. These laws vary substantially from state to state and include:

  • Mediation statutes that provide for confidentiality; or that grant a privilege to the mediator or the parties, or both, not to testify about mediation communications; or that create broad evidentiary exclusions of mediation communications from use in subsequent litigation or arbitration in the event the mediation does not produce an agreement. Federal statutes also address confidentiality when the federal government is a party to mediation. Communications that are generally protected include communications between parties, communication with the mediator, oral settlement terms, mediator notes, and mediator comments. States impose various conditions to protect confidentiality. Some states protect confidentiality only if the mediator in the case has satisfied certain training requirements. Other statutes protect confidentiality only if there is a written agreement to enter into mediation. The statutes also vary in the exceptions they permit.
  • Rules of evidence at the state and at the federal level (e.g., Federal Rule of Evidence 408) that prevent the admissibility in court proceedings of offers to settle a claim if the offer is used to prove liability or invalidity of that claim. However, these provisions allow use of settlement discussions for other purposes and are narrow in the protections they afford. These evidentiary rules apply to mediation discussions since mediation is a facilitated form of settlement.
  • Court rulings interpreting these provisions which vary from state to state and vary in the federal courts as well.
  • Court ADR rules that vary from court to court and apply to court-connected mediation.
  • Ethics Codes that contain specific prohibitions on disclosure of mediation information given the importance of confidentiality to the process such as the CPR/Georgetown Commission’s Model Rule 4.5.2. (See www.cpradr.org for more details.).
  • Given the variety of statutes and their differences, parties often clarify their expectations of confidentiality by entering into confidentiality agreements between themselves and the mediator which can enhance existing confidentiality protections.

In an attempt to bring uniformity to the diffuse legislative scene, in 2001, the U.S. National Conference of Commissioners on Uniform State Laws promulgated the Uniform Mediation Act as a model for states to adopt (with or without modifications) in order to make confidentiality protections for mediation uniform throughout the states. The Act has not been enacted in each state and may be enacted in each state with modifications. Nonetheless, the UMA protects mediation communications from party use in subsequent adjudication and from third-party access with limited exceptions. These exceptions tend to fall into the following categories:

  • Use of a signed written mediation agreement to prove the existence of such agreement;
  • Mutual party consent to use the confidential information;
  • Requirements of courts to access the information, particularly where matters of public policy are at issue that, in the court’s view, outweigh the benefits of protecting mediation confidentiality;
  • Lack of protection for information which pre-existed the mediation process;
  • Lack of protection for communications evidencing threats of bodily injury or violent crimes; and
  • Lack of protection for evidence of intentional professional misconduct by the mediator.

For an excellent review of mediation confidentiality as of 2002 in the U.S., the comments to the Uniform Mediation Act are most illuminating.

No consistency in confidentiality protections exists for international mediation. Consequently in 2003, the Uniform Mediation Act was amended to address international commercial mediation. The Uniform Mediation Act now contains an amendment to facilitate the application of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Commercial Conciliation to mediation or conciliation conducted internationally. Consequently, the current Uniform Mediation Act applies to domestic and international mediation and retains the confidentiality protections of the Uniform Mediation Act and the beneficial provisions of the UNCITRAL Model Law to bring uniformity to expectations on mediation and conciliation confidentiality internationally.

3.4.2 Protection from Disclosure to the Other Party

American statutes and rules do not usually address the second major confidentiality concern – protection from disclosure to the other party of information provided only to the mediator that a party signifies is not to be shared with the other party. Rather, the method for protecting such information is usually set forth in the relevant ADR Provider’s mediation procedure, addressed in mediator ethics guidelines, or determined by a mediator’s practice style. Mediators should strive to protect confidentiality of mediation communications since confidentiality is a hallmark of the process. The parties also can address this concern in their mediation agreement or in a separate confidentiality agreement.

Practice Tips: Set forth below are models and checklists for confidentiality agreements for the mediator and the parties as well as one for non-party participants.

3.4.3 Checklists for Confidentiality among the Parties and the Mediator

Comments: Among the items to include in a written confidentiality agreement between the parties and mediator are the following:

  • Explicit statement providing for confidentiality and nondisclosure of all information regarding the mediation – for example, contents, settlement terms or outcome of the proceeding – or stating exceptions (for example, a written settlement agreement can be disclosed for enforcement purposes).
  • Explicit statement that the mediator will not transmit information received in confidence from one party to another unless authorized to do so.
  • Explicit statement providing that the entire process is a compromise negotiation subject to U.S. Federal Rule of Evidence 408 (which brings into play negotiation protections in the U.S.) and all Chinese and American state counterparts; explicit statement encompassing any applicable statutes protecting the confidentiality of mediation.
  • Explicit statement providing that the exchange of any tangible material shall be without prejudice to any privilege, work-product claim or other legal objection to its production or admissibility as evidence.
  • Explicit statement providing that neither the mediator, nor any documents and information in the mediator’s possession, will be subpoenaed, and that all parties will oppose any effort to have the mediator or those documents subpoenaed. An additional statement can be added that, in the event an attempt is made to compel the mediator to disclose information received during the mediation, the mediator will promptly advise the parties.
  • Explicit statement acknowledging an exception to the confidentiality obligations when disclosure is required by law or court rule (e.g., evidence of domestic violence or criminal activity).
  • Identification of other exceptions to blanket confidentiality protections (for example, if all the parties and the mediator agree that disclosure of confidential information will be permitted by a party to its tax adviser, insurers, spouse, or manager under specified circumstances, such as a settlement’s being reached).
  • Explicit statement providing that otherwise admissible or discoverable information or documents shall not be protected solely as a result of their presentation or use during mediation.
  • Explicit statement addressing the treatment of documents provided by the parties to the mediator, such as submission statements, and to each other, notes taken, or other written information.
  • Inclusion of a remedy in the event of a breach of the agreement by either the parties or the mediator.
  • Explicit statement identifying when the mediation is deemed to begin and end, for confidentiality purposes.

¤ U.S.-CHINA Business Mediation Procedure

The U.S.-China Business Mediation Procedure at Appendix 1, Section 10 addresses a number of these confidentiality protections, including:

  • Declaring the entire process confidential.
  • Barring parties and the mediator from revealing to any third party or court any information, contents, settlement terms or outcome of the mediation unless agreed by the parties or required by law in a judicial proceeding.
  • Allowing parties to use a written settlement agreement for enforcement purposes.
  • Protecting all communications and actions by anyone in the mediation pursuant to negotiation cloaks arising from U.S. evidentiary codes and Chinese law as well as any Chinese or American statutes protecting mediation confidentiality or creating a similar legal privilege.
  • Barring admission or discovery of materials created for the mediation except where such material is otherwise discoverable, even though it was used in the mediation. (The mere use at mediation of otherwise discoverable material will not shield such pre-existing material from discovery.)
  • Requiring the mediator, upon the request of a party, to return all documents received from that party without retaining copies or to certify as to destruction of such materials.
  • Requiring all parties and the mediator to oppose subpoenas and requiring the mediator to report receipt of a subpoena to the parties.

Additional confidentiality protections appear in Appendix 1D, Section 7, requiring mediators to maintain confidentiality of all information including the fact that the mediation has taken place, unless compelled by law or public policy to disclose this information. This section also addresses the mediator’s obligation not to disclose confidential information from one party to the other unless authorized to do so or unless compelled by law.

Practice Tips: The parties and the mediator can memorialize their confidentiality agreement within a retention agreement. For example, an explicit statement within a retention agreement that the mediation will be conducted pursuant to the U.S.-China Business Mediation Procedure incorporates the confidentiality provisions set forth in that Procedure. Alternatively, the parties and their mediator can execute a separate confidentiality agreement.

By way of guidance, CPR has developed a Model Confidentiality Agreement for parties wishing to execute such a separate document.

3.4.4 CPR Model Confidentiality Agreement

AGREEMENT made ___________, _____ between (date) (year) _______________________ of _____________________ represented by ____________________________ and ________________________ of ____________________ represented by ______________________; and ____________________________. (the Neutral)

A dispute has arisen between the parties. The parties have agreed to attempt to resolve their dispute through mediation. The parties have chosen the Neutral to assist them in the resolution of their dispute. The parties and the Neutral wish to protect the confidentiality of the process.

Accordingly, the parties and the Neutral agree as follows:

1. COMPROMISE NEGOTIATION

The entire ADR process (the “ADR”) is a compromise negotiation for purposes of the American Federal Rules of Evidence and all other Chinese or American counterparts and applicable rules of evidence.

2. SCOPE

All transcripts, documents, things and other information produced and the testimony given in or attendant to the ADR shall be maintained in confidence by the parties and the Neutral and shall be used only for purposes of the ADR. The parties will insure that their respective agents, employees, attorneys and experts agree in writing to be bound by the provisions of this agreement.

3. TERMINATION

The obligations of paragraph 2 hereof shall terminate with respect to any particular portion of the confidential information when a receiving party (including the Neutral) can document that such portion:

  • (a) was in the public domain at the time of its communication thereof to such party,
  • (b) entered the public domain through no fault of the receiving party subsequent to the time of communication thereof,
  • (c) was in the receiving party’s possession free of any obligation of confidence at the time of its communication thereof,
  • (d) was rightfully communicated to the receiving party free of any obligation of confidence subsequent to the time it was communicated by the Party to this proceeding,
  • (e) was developed by employees or agents of the receiving party, either:
    • i. independently of and without reference to any information that was disclosed in confidence by the other party; or
    • ii. when it is communicated by the transmitting party to a third party free of any obligation of confidence; or,
  • ( f ) in any event, [ ] years after termination of the ADR.

4. DISQUALIFICATION OF NEUTRAL AS WITNESS

The Neutral and his/her agents, employees, and experts shall be disqualified as witnesses, consultants or experts in any pending or future action relating to the subject matter of the ADR, including actions between persons not parties to the ADR.

5. THIRD PARTY REQUESTS FOR DISCLOSURE

Whenever a party or the Neutral, or their agents, employees, experts or attorneys, is requested, pursuant to a subpoena, a request for production of documents or things, a civil investigative demand, or other legal process, to disclose to persons or entities not party to this ADR, any information regarding the process, including all offers, promises, conduct and statement, whether oral or written, or any transcripts, documents, things or testimony in the ADR, prior to responding thereto such party or Neutral shall, within five days after receipt of the request, notify the other party, or in the case of the Neutral, both parties, of the existence and terms of such request. If a response to such request is due in ten days or less, such notice shall be given within 24 hours after service of such request.

6. RETURN OF MATERIALS

Within 30 days after termination of the ADR, each party and the Neutral shall, at the election of the party furnishing the same, destroy or return all documents, transcripts or other things, and any copies thereof, as well as all summaries or other materials containing or disclosing information contained in, or directly related to, such documents, transcripts or things. Each party and the Neutral shall so certify under oath.

7. SURVIVAL

This confidentiality agreement shall survive the termination of the ADR, whether by breach, unilateral withdrawal, mutual agreement of the parties or settlement, subject to the provisions of paragraphs 2 and 3 hereof.

8. ENFORCEMENT

The parties, the Neutral and all other participants to the ADR agree that damages are not adequate, and no adequate remedy at law exists for any threatened or actual disclosure or use of information in violation of the provisions of this confidentiality agreement. Accordingly, each consents to the entry of an injunction against threatened or actual disclosure or use of the information in violation of any provision of this agreement.

IN WITNESS WHEREOF, the parties by their attorneys have executed this agreement as of the date first above written.

  • Party to ADR: _________________________________________
  • By Party’s Attorney: ____________________________________
  • Party to ADR: _________________________________________
  • By Party’s Attorney: ____________________________________
  • Neutral: _____________________________________________

3.4.5 Checklist for Confidentiality with Non-Parties

Comments: In the event that non-parties (e.g., expert witnesses) will be attending the mediation session, the parties and mediator may take the precaution of having them sign an agreement that binds them to the parties’ confidentiality agreement.

Practice Tips: By way of guidance, CPR has developed a Model Non-Party Confidentiality Agreement:

CPR Model Non-Party Confidentiality Agreement

I have read the [Confidentiality Agreement or Mediation Agreement] (“Agreement”) between ____________________ and _______________________ and have received a copy of it, and by my signature to this document, I acknowledge and agree that I am fully bound by each and every provision of the Agreement, and that I am fully obligated to abide by each of its provisions. I further acknowledge and agree that I will not in any manner violate any of the provisions of the Agreement. I acknowledge and agree that I am subject to all provisions, limitations, and prohibitions provided for in the Agreement to the same extent as the attorneys or participants in the litigation. I acknowledge and agree that I will be subject to the same penalties as all other signatories to the Agreement or those represented by them should I violate any of the Agreement provisions. I further recognize and understand that any violation of the Agreement by me may subject any attorney or party hereto who has invited me to attend the mediation proceedings to the same sanctions and penalties as if the violations had been committed by those attorneys or parties.

Name: ___________________________________________

Affiliation: ________________________________________

3.4.6 Court Mediation Programs

Comments: In the United States, China and other jurisdictions, courts may direct mediation of certain claims. In such a case, applicable court rules typically address the scope of confidentiality and whether any written confidentiality agreement is appropriate or required. In such settings, relevant court rules need to be consulted prior to any mediation session.

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