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COMMERCIAL MEDIATION AND CONCILIATION IN CHINA

Mediation or conciliation: Are they two different dispute settlement mechanisms or are they the same? Our international arbitration specialist Eric Jiang covers some critical details when considering mediation and conciliation in China. He addresses how they are used and perceived across the Chinese legal landscape and how the Singapore Convention could impact the future of international commercial mediation. 

About The Singapore Convention on Mediation

On 20 December 2018, the General Assembly of the United Nations adopted the United Nations Convention on International Settlement Agreements Resulting from Mediation (known as the “Singapore Convention on Mediation”) (hereinafter the “Singapore Convention”). 

A signing ceremony was held in Singapore on 7 August 2019, which witnessed the signing of the treaty by many major economies in the world, including the United States, the People’s Republic of China, India, and South Korea. The EU, the UK and Japan have not signed the treaty, but it is likely that they will sign it in the future. The Singapore Convention went into force on 12 September 2020. As of 5 September 2021, the Convention has 54 signatories, of which 6 have deposited their ratifications.

Like the New York Convention on arbitration (the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958)), the Singapore Convention on mediation was intended to be a uniform and efficient framework for the enforcement of international settlement agreements resulting from mediation. It promotes mediation, inter alia, to a status as important as arbitration.

Are Mediation and Conciliation the Same Thing?

Many have argued that conciliation is different from mediation. Upon careful examination, however, you will notice two important differences: 

(a) They have different statutory bases in certain jurisdictions; and 

(b) Conciliators are considered capable of playing more active roles than mediators.

If my observations are correct, there is no difference between mediation and conciliation in China. For one thing, mediation has a deep rooted and long history in China and mediators in China have always been capable of playing all active roles necessary for working out a resolution to the dispute at issue. 

In contrast, mediation started late in certain foreign jurisdictions and the roles of mediators have always been carefully watched and intentionally contained. Even if the roles of conciliators in certain foreign jurisdictions may still be subjected to more restrictions than those of the mediators in China.

Additionally, there is only one Chinese word for mediation or conciliation, which is “Tiaojie” (调解). When Hong Kong drafted the Mediation Ordinance, the drafters tried to, but were unable to find two ostensibly different Chinese terminologies respectively referring to mediation and conciliation.

Even in English, “mediation” and “conciliation” are at times used interchangeably. When the UNCITRAL first adopted its model law on mediation in 2002, the model law was called the Model Law on International Commercial Conciliation. By the time the Singapore Convention was adopted in 2018, the UNCITRAL changed the name of the model law to be the Model Law on International Commercial Mediation and International Settlement Agreements Resulting from Mediation.

Mediation Everywhere and Without a Uniform Mediation Act

Mediation is a tradition and it’s everywhere in China. 

Chinese tradition prefers morality over law, harmony over confrontation, and mediation over adjudication. Even with the reestablishment of a legal system in 1979, mediation has always been an important part of dispute settlements in China. Government officials conduct mediation for labour disputes. The police conduct mediation for neighbourhood disputes. The People’s Mediation Committees conduct mediation for civil disputes in their communities. Arbitrators conduct mediation in the arbitration process. Judges conduct mediation in the trial, appeal and enforcement process. In the 1980s and 1990s, judges were even encouraged to avoid judgments and to mediate as many settlements as possible.

Surprisingly, there has been no uniform or framework mediation legislation in China. The law concerning mediation is scattered in many statutes, including the Civil Procedure Act and the Arbitration Act. There is one uniform People’s Mediation Act, but this Act relates only to mediation of civil (as opposed to commercial) disputes by the People’s Mediation Committees which are organised by the lowest level of government.

Most, if not all mediations in China are very closely related to governmental, judicial or arbitral authorities. Mediators on their own have no authority to empower the mediated settlement agreements for enforcement. The parties to such settlement agreements have to rely on the contract law to sue for breach if the settlement agreement is not performed.

The Rise of Commercial Mediation Centres

The Singapore Convention and the discussions leading to the signing of the convention have made the Chinese rethink their approach to mediation. Professional commercial mediation centres have since been on the rise. As early as 1987, the China Commission for the Promotion of International Trade (“CCPIT”) set up a commercial mediation centre, which was called the “Beijing Mediation centre”. The CCPIT has since renamed this centre as the “CCPIT/CICC Mediation Centre”, and spread such mediation centres to all of its local branches. It is reported that the CCPIT mediation centres received around 3,000 cases in 2019, 514 of which being international. In the 2000s, the Supreme People’s Court of China initiated a “Diversified Dispute Settlement Mechanism Reform” project, and propelled the setup of many commercial mediation centres in China, with the Shanghai Commercial Mediation centre inaugurated on January 8, 2011, which has since become a Member of the US-based JAMS, an internationally well-known mediation services.

Some Chinese arbitral institutions have since started to create commercial mediation centres. In 2006, the China Maritime Arbitration Commission established a maritime mediation centre. In 2018, the China International Economic and Trade Arbitration Commission set up a mediation centre. The Beijing Arbitration Commission and other arbitration commissions have set up their mediation centres as well.

With the publicity of the Singapore Convention in 2018, more and more commercial mediation centres have been set up in many Chinese cities, especially those with special economic development zones, such as Shanghai, Shenzhen and Haikou.

The Future of Commercial Mediation

As discussed, mediation has always been popular in China, but its effective use, to a large extent, relies on the governmental, judicial or arbitral authority in a particular case. Stand-alone mediation, directly enforceable at the court, is rare, if at all, in China.

The Singapore Convention, once ratified by the national legislature in China, has the potential to boost international commercial mediation in China and other countries. Although the EU countries and the UK are not signatories to the Singapore Convention, the EU and UK companies operating in a signatory country however may still make use of the enforcement mechanism under the Singapore Convention.

The Singapore Convention may inspire more domestic commercial mediation in China. Because there is currently no direct enforcement mechanism for settlement agreements resulting from commercial mediation in China, such agreements must be litigated for enforcement or entered as an arbitral award or judgment before they could be directly enforced. If the Singapore Convention can be ratified in China, with the principle that mediated settlement agreements may be directly enforceable at the courts, settlement agreements resulting from domestic commercial mediation in China may also become directly enforceable at the Chinese courts. That would make mediation a true dispute settlement mechanism paralleling arbitration and litigation.

In summary, the Singapore Convention is changing the perception of mediation and may soon lead to substantial changes in commercial mediation in China. 


About the Author

Eric Jiang advises and assists clients in matters relating to customs and international trade, international investments and transactions, and international arbitration. He is licensed to practice law in New York/USA, in Ontario/Canada and in all the Provinces in mainland China. Eric studied and researched law for fourteen years in three well regarded law schools, achieving an LL.B. and M.Jur. at Peking University, an LL.M. at Queen’s University, and a J.D. at York University. He was a full-time faculty member of the School of Law at Peking University, but has since been practicing law within and outside China. Over the years, in addition to other international work, Eric has represented many companies in antidumping, countervailing and other trade remedy cases and has developed solid expertise in customs and trade laws, FTA and WTO laws.

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy, infrastructure and natural resources  sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and other technical experts.

This article remains the copyright property of Prospect Law Ltd and Prospect Advisory Ltd and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way.

For more information or assistance with a particular query, please in the first instance contact Eric Jiang on +44 (0)20 7947 5354 or by email on ejj@prospectlaw.co.uk.

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