Commercial mediation in the People’s Republic of China
Mediation will be conducted either by a court or arbitral tribunal, in which case a judge or arbitrator will be the mediator, or by professional commercial mediation institutions. There is no obligation on parties to mediate, even if the parties agree to mediate contractually. Failure to mediate does not attract costs sanctions. However, the courts do encourage mediation. Parties may request a confidential mediation. Settlements reached through mediation conducted by a court or arbitral tribunal can be enforced as if they were court judgments or arbitral awards. Settlements reached through other mediations are usually enforced as contracts but the parties can ask the court to recognise the judgment, meaning it will be enforced as a court judgment.
What is the status of mediation in this jurisdiction?
How is a mediation conducted?
During the course of court proceedings, PRC courts are permitted to carry out mediation unless any of the parties refuse. Typically, before the normal trial proceedings commence, the court will encourage parties to attempt mediation if it considers that the dispute could potentially be resolved by way of a mediation settlement. The judge(s)/court clerks who specialise in mediation may take the role of mediator(s) and may also invite individuals and institutions with specific expertise relevant to the matter in dispute to assist in the mediation process.
Alternatively, the court may refer the case to a professional commercial mediation institution for mediation. If the matter is settled in the course of a mediation, the parties may request the judge(s) to issue a settlement statement, which can be enforced by the court at the request of either party if the other party fails to comply with its terms. If any party refuses to refer the matter to mediation or if no settlement is reached, the court will assign the case to the judge(s) for normal trial proceedings. However, if a judge participates in a pre-trial mediation process as a mediator, he is generally not allowed to continue as judge in the trial of the same matter unless the parties agree. During the normal trial proceedings, the judge(s) may still conduct mediation if the parties so wish.
Referrals to mediation during an arbitration process are dealt with in a similar way. However, generally the arbitrator would act as a mediator.
As an alternative, parties can submit disputes to a professional commercial mediation institution, such as the Mediation Centre of China Council for the Promotion of International Trade, before commencing legal or arbitral proceedings. Generally, a mediator is appointed by the parties, or the mediation institution, from a panel of mediators maintained by the institution. The mediator may take any steps that he considers will be effective to facilitate the parties to reach a settlement, including, but not limited to: conducting the mediation in plenary session; having separate meetings with each of the parties; and seeking expert opinions.
Mediation conducted by a court does not give rise to any additional costs beyond the original costs of the court for the legal proceedings. If a dispute is settled by court mediation, the court will reduce its costs to 50% of the court fees. The costs of a mediation conducted by a mediation institution will vary depending on the value of the matter in dispute and/or the time spent on the mediation.
Is there any obligation on litigants to mediate?
There is no statutory obligation on litigants to mediate a commercial dispute. In addition, even if there is a contractual agreement to mediate a dispute, any party may bring court proceedings or initiate arbitration proceedings without going to mediation. Technically, it could be argued that the right to initiate legal proceedings cannot be precluded by agreement.
Lawyers are not required to advise clients of the option to mediate and its applicability to the dispute in question. A court will not impose any cost sanction on any party who rejects a court’s suggestion for mediation and seeks adjudication.
Does the court have powers to support a mediation?
Whilst courts cannot generally compel parties to mediate a commercial dispute, they increasingly encourage parties to attempt mediation. Under the Civil Procedure Law, mediation is conducted solely on a voluntary basis.
In the past few years, the Supreme Court of the PRC (“SPC”) has emphasised the need for ADR and the courts’ role in supporting ADR (particularly mediation) as an effective method of resolving a dispute. For example, to better provide judicial service for the Belt and Road Initiative, the SPC has established the China International Commercial Court (“CICC”) in 2018 to hear major international commercial disputes. As for the cases heard by the CICC, unless the litigants object, the standard procedure is to first have a pre-hearing mediation. At litigants’ choice, such pre-hearing mediation would be conducted either by the member(s) of the International Commercial Expert Committee of the SPC or the designated mediation institutions. Only if the litigants fail to reach a settlement agreement, would the litigation procedures proceed.
Are mediations confidential?
The parties to court proceedings may request a confidential mediation and the court will allow such a request. Mediation conducted in arbitral proceedings or by a mediation institution is normally confidential in any event. The parties may also include an express confidentiality provision in an agreement to mediate to reinforce the confidential nature of the mediation.
Mediations are conducted on a “without prejudice” basis, meaning that submissions made in an attempt to reach settlement will not usually be admissible in later court proceedings relating to the same subject matter, subject to some limited exceptions (such as agreement of all the parties or a legal obligation to disclose the information).
Does failure to mediate attract adverse cost consequences?
How are settlement agreements enforced?
A settlement reached by the parties and confirmed by a court or arbitral tribunal as a result of mediation conducted in a court or arbitral proceedings can be enforced as if it were a normal court judgment or arbitration award.
A settlement agreement entered into following mediation conducted by a mediation institution creates a contractual relationship between the parties and must therefore be enforced as a contract. However, the parties may, by mutual agreement, request a PRC court to recognise the settlement agreement within 30 days after the settlement becomes effective, so that the agreement can be enforced as a court judgment should one party fail to perform its obligations under the agreement.
Is there a system of accreditation and/or regulatory body for mediators?
Likely future scope and development?
It is unlikely that the courts’ attitude towards mediation will change in the near future.