October 24, 1997, Geneva, Switzerland
Recent Developments in Mediation/Conciliation Among Common Law and Non-Common Law Jurisdictions in Asia
Ms. P.G. Lim
Director, Kuala Lumpur Regional Centre for Arbitration
(Kuala Lumpur, Malaysia)
In this paper, the words "mediation" and "conciliation" are treated as synonymous and interchangeable. Although there are differences in perception regarding their respective functions, in practice there is a very fine line of distinction between the two.
2. Is There a Growth and Use of Mediation in the World?
I would say that the answer is in the affirmative as regards the developed countries of North America, Canada, Australia, New Zealand and the United Kingdom where its popularity is gaining ground. However, a caveat has to be entered here in respect of certain views expressed in European circles where the ADR concept has been met with more than a dose of skepticism. One writer (1) has described the European reaction as being rather "cool" to the concept of ADR which "has been born out of disenchantment with the costs and duration of the US Court systems."
The growth and use of mediation is being promoted in Asia, which has been caught up in the rising swell of Western style mediation in its more structured form. All over Asia workshops are being conducted by mediation experts and practitioners, not forgetting advisers, to show how mediation works according to the Western mould. Mediation, it is said, works well in Asia since Asians prefer compromise to confrontation, though it is often overlooked that there are differences between Western and Asian practices and concepts in the field of mediation. The Kuala Lumpur Regional Centre has also been involved in this exercise conducting workshops on mediation in Malaysia.
Common Law jurisdictions in Asia will find no difficulty in adjusting to Western style mediation. These countries have a colonial past, sharing similar legal and administrative systems and common concepts with regard to justice and the rule of law. It is in the non-Common Law countries such as China, Korea and Japan - which have been influenced by Civil Law systems - that ways will have to be found to accommodate Western style mediation to Asian philosophy and practices in the field of mediation. Whereas there exist procedural rules governing mediation/conciliation in Common Law jurisdictions, no such rules seem to apply in conciliation in countries like China, Korea and Japan, where it is said that the existence of procedural rules does not seem to matter, so long as a system is adopted that is fast, efficient, fair and impartial and that is consistent with standards of trading (2). The use of conciliation has existed for a very long time in these countries, so while one can talk about its use, one cannot talk about its growth there unless it is in the context of international disputes whose success cannot be foretold at this time.
On the other hand, if, in the Common Law jurisdictions in Asia, conciliation or mediation in international disputes did not seem to be making much headway, it was because parties had not had the time to know how it worked. It is somewhat ironical that Western advocates of arbitration having at last won over their Asian partners - who are late starters in the field of international arbitration - to play the game according to Western concepts are now recommending and marketing mediation as a panacea for dispute resolution. Asian players who are just getting into their stride in the international arbitration arena are now being encouraged to resort to mediation, as a desirable step in the dispute settlement process. There was a great deal of confusion as to how mediation would work in the field of international arbitration.
The workshops, conferences and, not least, the expert advisers in mediation/conciliation seem to have succeeded in putting these doubts to rest. Somehow some Asians have come to believe that conciliation is part of their culture and that it suits them best. Some of the Asian countries have embraced the mediation/conciliation option, taking it to their hearts by incorporating it into their laws, combining conciliation with arbitration as another method of dispute settlement and, furthermore, making it legally possible to do so in arbitration proceedings by enacting legislation to that effect.
These moves are part and parcel of the tidal wave of legal reform in arbitration which is sweeping the world. Engulfing also the Asia Pacific Region, this reform will incorporate features of the Model Law into their legal systems. I would describe this movement for law reform as a complete and unreserved accommodation by Asians of Western concepts in the interests of expanding trade and investment with Western partners.
Both emerging markets in the Asia Pacific Region and economies in transition from centrally planned economies into market driven economies have seen the need to open up their markets and to liberalize trade. Expanding trade gives rise to trade disputes which have to be resolved. Hence the need for reform in the law and the rules for arbitration. It was also in the national interest to provide a favorable venue and an internationally acceptable framework for dispute resolution within the countries themselves. This accounts for the number of arbitral institutions which have been set up in quick succession in the region since 1978. Most of these institutions adapted the UNCITRAL Rules for Arbitration which were promulgated in 1976 for their own use.
The first arbitral institution in the Asia Pacific Region to do so was the AALCC Centre at Kuala Lumpur, which was established in 1978. Then followed in quick succession the Australian Centre (Sydney and Melbourne), the British Columbia International Arbitration Centre (BCIAC) at Vancouver and other centers at Hawaii, Hong Kong SAR of China, San Francisco, Singapore, Thailand and Viet Nam. To improve the arbitration environment further, the arbitration laws had to be revised and brought up-to-date. For this purpose, the UNCITRAL Model Law, promulgated in 1985, provided a useful model.
In the process of law reform, Common Law jurisdictions in Asia, recognizing the importance of mediation/conciliation in the dispute resolution process, have gone one step further by enacting legislation to incorporate conciliation in the course of arbitral proceedings. This novel move to combine conciliation with arbitration is now part of the legal framework in Hong Kong SAR of China, India, Singapore and Sri Lanka. It is of recent origin and reflects the philosophy behind this move for a more simple, flexible and cost-effective means of resolving disputes. To quote some examples:
Both the Sri Lanka Arbitration Act 1995 (S.14(1)) and the Indian Arbitration and Conciliation Act 1996 (S.30(1)) provide that it is not incompatible with arbitration proceedings for an arbitral tribunal to encourage settlement of the dispute and with the agreement of the parties the arbitral tribunal may use mediation, conciliation and other proceedings at any time during the arbitral proceedings to encourage settlement. These provisions are practically on all fours with the British Columbia International Arbitration Act (Ch. 14). It is interesting to note here that British Columbia has a large Asian population and it is likely that this legal provision was prompted by this factor. It is interesting to note that the UNCITRAL Conciliation Rules have been incorporated in the new Indian Act, almost in toto.
The Hong Kong Arbitration Ordinance (Ch. 345-S.2B(1)) and the Singapore International Arbitration Act 1994 (S.17(1)) provide that an arbitrator or umpire may act as conciliator if all parties consent in writing.
The Kuala Lumpur Regional Centre has revised its Conciliation Rules, which are basically those of the UNCITRAL Conciliation Rules, to provide that the conciliator may act as arbitrator in the same dispute with the parties consent. The WIPO Rules have a similar provision (Art. 18(iv)).
Elsewhere in the non-Common Law jurisdictions in Asia, the same thing is happening. For example, in China itself, as opposed to Hong Kong SAR of China, the revised CIETAC Rules (Art. 46) allow for conciliation in the course of arbitration proceedings. So also in the China Maritime Arbitration Commission Rules (Art. 37). Here, a compromise has been reached to combine Western-style arbitration with Chinese-style conciliation. As arbitration was until recently unknown in China, Japan and Korea, this formula of combining conciliation with arbitration allows for conciliation to be retained as a feature of the dispute resolution process. In the Chinese concept, the arbitrator becomes a conciliator and when conciliation fails he reverts to his adjudicatory role in what has been described by a Western writer as a "rolling arbitration."(3) According to information obtained from Chinese sources, after arbitration proceedings have been filed, the arbitral tribunal may also undertake conciliation as a preliminary step, as well as during arbitration proceedings.
Another variation is found in the Conciliation Rules of the Beijing-Hamburg Conciliation Centre located in Hamburg, Germany. There, two parties may appoint two conciliators to handle the dispute. If the formal conciliation proceedings are unsuccessful, the conciliators can be appointed arbitrators in subsequent proceedings. A similar agreement has been entered into with the New York Conciliation Centre (4).
In China, there seem to be no rules governing the conduct of the conciliation. However, should conciliation fail, any statement, opinion, view or proposal raised and accepted or rejected by one or other party or the arbitral tribunal in the process of conciliation, cannot be invoked in any claim, defense and/or counter-claim in subsequent arbitral, judicial or other proceedings (Art. 51 CIETAC Rules).
Under the Rules of the Korean Commercial Arbitration Board (KCAB), conciliation takes place upon the request of one or both parties after arbitration has been filed (Art. 18) and, if conciliation fails, arbitration proceedings will resume. As in China, if the conciliation succeeds, the settlement is incorporated into an arbitral award (5). In Korea, conciliation is regarded as a preliminary step to arbitration. There have been no recent cases of conciliation at the KCAB (6).
In Japan, the Rules of Maritime Arbitration of the Japan Shipping Exchange revised in 1996 (S.28) allow mediation in arbitral proceedings, and the tribunal may, at any stage of the proceedings, mediate between the parties for the whole or part of the dispute. Under the Japan Commercial Arbitration Association (JCAA) Rule 49.2, if a settlement is reached during arbitral proceedings the arbitral tribunal may set out the terms of the settlement in its award. There seems to be no rule similar to S.28 of the Rules of Maritime Arbitration in the JCAA Rules.
In the Arbitration Rules of the Viet Nam International Arbitration Centre (Art. 35), if direct mutual conciliation takes place in the course of arbitral proceedings the parties will request the President of the Centre to confirm the conciliation in writing and such confirmation is valid as an arbitral decision.
In this context, I should refer to a Japanese writers view that in Asian countries, especially in Japan and China, "an arbitrator does not hesitate to settle the disputes before him through conciliation or mediation during the arbitral process. However, in Western countries, an arbitrator is not always active in doing so."(7)
All the signs are there to show that in Asia the mediation/conciliation bandwagon is on the move. It would be interesting to watch its future progress, as mediation/conciliation is still in its adolescent stage. Although ADR is a "born-in-America"(8) concept, it is not clear yet whether it has made an impact on international commercial disputes involving American corporations. It seems that in China more successful conciliation cases are conducted by arbitrators in the process of arbitration (9). On the other hand, it seems that the majority of ICC cases before World War II were conciliation cases, whereas their current share is less than five percent.
3. The Courts and Mediation
A profound change is also taking place in the emerging economies of Asia for, simultaneously with law reform in arbitration, the Courts are leading the way to encourage mediation in dispute settlement. The trigger factor here is the heavy caseload of the Courts and the high cost of litigation.
Among the other Common Law jurisdictions in Southeast Asia, the Courts in Singapore have taken the lead to encourage parties in litigation to consider the mediation option at the preliminary stages of a suit. In this they are following the example set by Courts in Australia, the United Kingdom and the United States of America which encourage Court-attached mediation, and have opened the way for countries in the Asian region to follow suit.
In Singapore, the Courts actively encourage resort to mediation in appropriate cases, as recommended by the Registrar of the Court in a Court-based mediation called Court Dispute Resolution (CDR). Although mediation is not mandatory, there is probably some judicial leaning to encourage parties to take the mediation route. The trial Judge himself is not involved in the process, as mediators will be appointed from a panel. At the Subordinate Court level, it seems that he is involved as mediator in neighborhood disputes as well.
The Singapore lead may well be followed in other Common Law jurisdictions in Asia, which are looking into these new developments.
It does help the mediation process that the Courts have taken the lead to promote settlement of disputes by mediation. This should also act as a spur to private dispute resolutions, encouraging parties and their lawyers to follow the example of the Courts. We may, therefore, see a surge in commercial disputes being referred to mediation in the future in the Common Law jurisdictions in Asia.
However, in the non-Common Law jurisdictions in Asia as for example, China, Japan and Korea, where the thread of conciliation runs through the fabric of their societies, the trial judges have long been involved in settling disputes and may advise the parties to settle. In these countries, judges are empowered to conduct conciliation to settle disputes in the course of legal proceedings. To give some examples:
In Japan, judges may even make proposals for a settlement in the course of legal proceedings. The Japanese Code of Civil Procedure (Art. 136) provides that the Court may, whatever stage the suit may be in, attempt to carry out compromise or have a commissioned judge or entrusted judge try the same.
In China, the Chinese Civil Procedure Code provides that in conducting court proceedings, the Courts shall carry out conciliation on the principle of "voluntariness" of the parties and in accordance with law (10). Article 6 of the Chinese Code of Civil Procedure states that in trying civil cases, the Peoples Court should stress mediation and when mediation efforts are not effective, the Court should issue its decision in a timely manner (11).
In Korea, it seems that many judges take the initiative at some stage of the judicial proceedings to question the parties about the prospects for settlement of a law suit. A judge has no coercive power to bring about a compromise, but he has "suitable means of persuasion."(12) In general, parties are quite receptive to the idea of amicable settlement once a judge describes his impression of the strength and weakness of a case. However, it seems that the rate of compromise in litigation disputes is less than ten percent (13).
In Thailand, Civil Court regulations on "Mediation for leading to the dispute settlement" were recently published in November 1994 and a new division was established with responsibility for mediation cases, in order to facilitate settlement which would result in the reduction of outstanding cases and to promote a more rapid disposition of cases before the Court. The trial Judge selects the cases suitable for mediation. He may act as mediator on authorization from the Chief Justice of the Civil Court. It seems that this project, if successful, may serve as a guidance for other Courts to follow (14).
There seems to be a convergence of attitudes within Common Law and Non-Common Law jurisdictions in the Asia Pacific Region with regard to combining mediation with arbitration in the same dispute. There is a leaning in favor of mediation/conciliation brought about in the main by growing dissatisfaction with arbitration, mainly because of the cost factor and discovery process. A few years ago, a Japanese writer advocated the use of conciliation or mediation during the arbitral process "as a better way of resolving disputes."(15) A Chinese writer advocating a combination of arbitration and conciliation said that "it is the Asia Pacific Region that initiated the combination of arbitration and conciliation and the other means of dispute resolution such as ADR, which will become a great contribution of the Asia Pacific Region to the World."(16) In the opinion of another writer, the combination of the two procedures has more advantages than keeping them apart as it saves one procedure (17).
These are prophetic words when these writers could not have foreseen the recent developments which would occur in this field a few years later in Hong Kong SAR of China, India, Singapore and Sri Lanka.
In the years ahead, both East and West will be actively contributing to the search for appropriate methods for the peaceful settlement of international commercial disputes. In the last resort, parties should be at liberty to fashion for themselves a system for dispute resolution which suits them best, whether by unadulterated arbitration or conciliation, or a combination of the two.
The question of whether mediation, Asian or Western style, is to be preferred, or a combination of both arbitration and mediation, will not be settled by argument alone. Pragmatic considerations will dictate the appropriate methods of dispute resolution that best suits the business interests of the consumer.
6. KCAB Arbitration Journal No. 284, 1997, p. 108. There is mediation, however, in which a neutral staff member of the KCAB acts as the mediator where an arbitration agreement does not exist. Mediation is treated as distinct from conciliation in Korea. The KCAB handles 600 cases annually which includes both domestic and international disputes.
11. Chinese Civil Procedure Code, Art. 97 "if a civil case which has been accepted by a peoples court can be mediated, the court should, based on examination of the facts and on distinguishing between right and wrong, conduct mediation and urge the parties to understand each others positions and reach an agreement." Art. 101 "when an agreement is attained through mediation, it must be based on the willingness of both parties: compulsion is not permitted." See Johannes Trappe, Vol. 5, Journal of International Arbitration, p. 180
14. Voravuthi Dvadasin, "Application of ADR Processes of the Foreign Court to the Thai Court of First Instance," Ho Chi Minh City Conference on "Dispute Resolution in the Emerging Economies of Asia," January 1996.